Want an allowance, kids? Be ready to earn it

May 21, 2013

| MoneyRates.com Senior Financial Analyst, CFA

If you're a child who wants an allowance in 2013, you're probably going to have to earn it. That's according to a new study conducted for MoneyRates.com by online survey firm Op4G.

The survey asked 1,000 parents about their approaches to awarding allowances to their children. The answers revealed that the vast majority of parents make allowances contingent upon doing household chores or performing academically -- and often both.

A look at how other parents manage allowances can be a good reality check for parents who are unsure about how to set up an allowance for their own children -- particularly for those who don't know whether to tie that allowance to certain tasks.

Trends in allowances

Here are five notable outcomes of the survey:

  1. Allowances are by no means universal. While a 56.5 percent majority of parents pays their children an allowance, a significant 43.5 percent minority does not.
  2. Allowances between $5 and $9 per week are the most common. Among parents who pay their kids an allowance, 39 percent pay an amount in that $5 to $9 range. An amount between $10 and $15 was the second most common response, at 29 percent, while 22 percent of respondents pay less than $5, and 10 percent pay more than $15.
  3. Allowances are usually tied to performing household chores. An overwhelming 87 percent of respondents expect their children to earn their allowances by doing chores.
  4. Many parents also tie allowances to academic performance. Seventy-one percent of respondents make allowances dependent on academic performance. With such large numbers tying allowances to chores and academics, it is clear that many parents make allowances dependent upon both.
  5. Men are more generous with allowances -- but also more demanding. The survey found that men are slightly more likely than women to tie allowances to household chores, and significantly more likely to tie allowances to academic performance. In return, men are more likely to award higher allowances.

Benefits of pay-for-performance allowances

The clearest conclusion from the survey is that parents overwhelmingly believe that children should do something to earn their allowances. Here are five reasons this approach makes sense:

  1. It demonstrates that money comes from effort. When they grow up, kids will have to earn their pay, so they might as well get used to this concept at an early age.
  2. It creates a personal perspective on the value of money. Being able to connect a sum of money with what it takes to earn that money can help children develop a clearer understanding of its value. For a child who has developed this understanding, buying something is no longer as easy as handing over a few dollars -- thoughts of the time and effort that went into earning those dollars may come into play. Recognizing this can make children more discriminating about what they choose to buy.
  3. It teaches that performance is generally rewarded in the workplace. Effort is important, but employers tend to pay for results. Introducing an element of this into an allowance system can encourage children to become more results-oriented.
  4. It helps children develop responsibility for their possessions. The better children understand the effort that goes into being able to buy things, the more likely they are to look after those things responsibly.
  5. It can be a springboard toward other financial lessons. Once a child starts to save some money, it creates opportunities to teach other financial basics such as budgeting, balancing a checking account and shopping for better savings account interest rates.

Requiring your children to earn their allowances does not guarantee that they will learn the right lessons about money. However, it may help prevent them from developing a sense of entitlement -- a trait that can prove self-destructive later in life.

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