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When our daughter started pulling out teeth so the Tooth Fairy would come, we decided we needed to jump aboard the allowance train. Until that point, we had no system in place. An allowance was inconsistent. Sometimes it was based on chores being completed. Other times it was based on guilt that we were falling behind on what every other parent was doing. Sometimes it would be doled out weekly. Often, weeks would go by with nothing. It was one of those things in parenting that quietly festered, rearing its head every now and then but then, just as quickly, was shuffled aside.

Then came the day that our daughter’s relentless obsession with the Tooth Fairy and her monetary rewards resulted in me anxiously checking in with Dr. Google to find out which teeth are permanent. Seriously. My poor heart couldn’t take anymore. Something needed to be done.

What was the going rate for an 8-year-old?

And so began the research. I quickly realized that allowances are complicated beasts. It’s not just about the dollar amount. It’s about teaching kids to be money-wise.

There are a number of financial experts who do not believe that an allowance should be tied to chores, grades or behavior. Ron Lieber, Gail Vaz-Oxlade, and Gordon Pape, among others, recommend that an allowance be given on a regular basis. No strings attached.

But then there is the opposite camp, consisting of Dave Ramsey and Suze Orman. They both believe that an allowance is compensation for work done. Period. Ramsey refers to it as “commission,” while Orman calls it “work pay.”

Pick a side. Any side. If it motivates your kids to finally clean up the toys so you can see the long-forgotten color of the carpet in the playroom, more power to you. If you agree that chores are an expected part of being a family and an allowance is more to do with teaching kids responsibility with money, great. If you fall somewhere in the middle and have a set of nonpaying chores and a set of paying chores, fantastic.

Regardless of whether or not there are strings attached, here are some tips when it comes to an allowance.

  1. Decide on an amount. This can be a lump sum, $1 a week per year of age, or $1 a week per year of grade. For us, doling out $20 per week for three kids seemed really steep. We opted to go with the $1 per grade.
  2. Set up an allowance schedule. When will you pay it and how often. We have found that giving it early in the week works best. There is little chance of impulsive spending. By the time the weekend rolls around the kids have forgotten about the package of gum balls their very existence depended on for survival.
  3. Divide the money up into 3 parts. Saving, spending and giving. This teaches kids how to manage their money. They learn budgeting, wants versus needs and the importance of gratitude and generosity. Some experts say to split the money evenly between the three. Others say to do it by percentage. For example, 25% to savings, 25% to charity, 50% to spending. You can either use jars or envelopes to help keep the money separate.
  4. Help your kids set realistic goals. Make a list. Do some window shopping. Flip through the toy store flyers. They need to be able to afford their heart’s desire without needing to save for 5 years to get it.
  5. Allow your kids to spend their money on what they want. Yup. Even when you don’t agree. Even when the last thing your child needs is another Beanie Boo. This will be difficult. You will want to try to talk them out of it. Don’t. Trust me on this. I have experience. The first time I took my daughter shopping with her hard-saved cash in hand I tried to gently steer her away from the stuffed animals and towards the books. She promptly informed me, “Mommy, you’re raining on my parade! It’s my money!” Thing is, she was right.
  6. Once the purchase decision is made, so be it. If, after 5 minutes of playing, your child decides she made a mistake and would prefer to have spent her money on something else, oh well. Sometimes we make good choices, sometimes we make bad. After a couple of poor purchases, our kids have learned to put a lot of thought into what is worthy of spending their cash on. They have spent hours poring over toy store flyers and perusing toy store shelves in search of the golden egg.
  7. As kids get older, increase their allowance and responsibility to include more planned spending. Give them control over managing some of their own needs. For example, have them buy their own bus passes, school supplies and clothes, without the safety net of handouts. Money is finite. They will make mistakes. They will fail. They will come begging to do whatever it takes to buy the latest fashion trend. But by the time they move out they should have a good handle on managing their money.

Giving an allowance is so much more than just handing out some dollar bills each week. It is setting the foundation and giving kids the tools they need later in life to be financially independent. Which, as a parent, is one of the greatest lessons I can teach my kids. For their sakes, as well as my own.

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Heidi Hamm

Heidi Hamm is a writer, wife and mom of twin boys who are nothing alike, and their older sister, who won’t admit that she really does like 80s music. She loves bookstores, Starbucks and peanut butter. You can find her on Facebook

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