For Parents

When Should You Start an Allowance?

As a parent, when is the right time to start your child’s allowance? What are the benefits of giving an allowance, and how should you change the amount based on their age? Come learn all these things and more below!

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We’ve been over the pros and cons of giving your child an allowance, and we’ve offered tips on how an allowance can help with goal setting. Today, we’ll delve into the topic a bit more as we share some helpful insight into the ideal age to start your child’s allowance program. 

To help you navigate this important milestone, we’ll also discuss how to come up with the allowance amount and whether or not you should have a say on how your child spends their money. It’s everything you need to turn your kid’s allowance into a tool that helps them learn great money habits from an early age.

What Are the Benefits of an Allowance?

After much deliberation, you’ve decided to give your child an allowance. Well done! Providing your kids with the freedom to manage their own spending is an excellent decision that offers many benefits to their financial education. Some of these include:

  • Gaining firsthand experience on how to make sound financial decisions
  • Teaching your kid how to plan and budget for whatever their heart desires, once they know they can count on a certain amount of money each week
  • The opportunity to donate to charity or causes they care about
  • A chance to make money mistakes and learn the impacts of impulse shopping

What’s The Right Age To Start?

The more you think about it, the more you realize that giving your child an allowance is the right choice. But what’s the best age to start? Is it when they’re in elementary school, once they become tweens, or until they’re teens?

There isn’t a hard and fast rule for this one. But experts agree that if your child is old enough to know what money is, they’re old enough to start getting some allowance.

Of course, a child may know what cash is from watching you pay at the store or when you go out to dinner. But do they really understand what money is? 

If you’re unsure, here’s one way to find out: next time you and your child go shopping, ask them if they know how many quarters are in a dollar.

If they answer correctly, you could follow up with this question:

“If you have 3 dollars and you want to buy something that costs 1 dollar, how much money will you have left over?”

If your little one responds with the correct answer, they have the math skills to receive an allowance. In most cases, this happens around 5 or 6 years old – which is also the age when most kids are mature enough to grasp the value of money. And trusting them with an allowance will allow them to better understand that value.

The important thing is to start early. The more practice opportunities your child has, the more chances you provide them to create good financial habits. Some of these include budgeting, saving, charity work, and spending. Letting your child handle money from an early age will help them avoid financial anxiety when they’re adults.

When giving an allowance, please remember that it’s best to make this money independent of grades or chores. Household chores are family responsibilities that everyone needs to help with; no payment required. Good grades should be maintained for their own improvement and development, not because they’re getting money for it.

Allowance Amounts Per Age Group

Congrats! You’ve raised a mature child, and you’re confident they can manage an allowance. The million-dollar question now is: How much should you give your kid an allowance? And how often? 

OK, those are two questions. But they’re very important ones. The rule of thumb here is $1 per week for each year of your child’s life.

Remember that this is the average allowance, but whatever amount you agree to must also be doable and feel appropriate on your end. If paying an allowance for multiple children in your household causes a strain on your budget, it’s best to come up with your own rates.

It’s also important to keep your local cost of living in mind. If you’re in a metropolitan area, you may need to give your child a bit more for them to cover their expenses. By the same token, if your town is affordable and your child doesn’t have too many places to spend their money, a bit less may do.

Finally, you may want to consider your child’s expenses to see if the $1 per year is actually enough. While it may work when you have a 7-year-old, it may require adjustment as your child gets older. For example, if you have a teenager at home who goes out to lunch with friends and shops for their own clothes, they’ll probably need more than $15 a week.

Spend, Save, or Donate?

Once you’ve come up with a set figure that you can commit to giving your child each week, it’s time to gently guide their choices once the dollars start rolling in.

Beware of giving them money with no conversation attached. Each time you give your child their allowance is an opportunity for a money lesson or conversation about what they plan to do with it. Are they saving? Are they donating? Don’t miss the chance to strengthen their grasp of finances and setting goals. 

Need some ideas on how to guide these convos? Allowance day is a perfect time to introduce your kid to budgeting. Share your family’s budget first, and then help them create their own using a workbook like Piggy Bank Balance Book: Budget Planner for Kids.

This is also the time to teach your kid that giving to charity is important. Kids learn from example, so taking them along with you to drop off donations to local homeless shelters or taking supplies to the dog pound will make them feel great. Charity Navigator is a great resource to help your kids learn about giving opportunities and choose the causes that resonate with them.

Check out the adorable story of Money Ninja: A Children’s Book About Saving, Investing, and Donating (Ninja Life Hacks). Part of the Ninja Life Hacks series, these books are geared to kids ages three to 11. In this book, Money Ninja takes a friend on a journey of saving, investing, and donating. It helps readers cultivate self-confidence, be able to deal with difficult emotions and feelings, and prepare them for life’s challenges.

Allowance Management Methods for  Kids of All Ages

Instilling a three-jar system for your child’s allowance will allow them to clearly see how much money they have. In addition, the three clearly labeled jars (“Savings,” “Spending,” “Donate”) will allow your child to see how far they’ve come in their savings goals, and they will be able to see that they have enough money in the “Donate” jar to take it to the charity of their choice, give it to a homeless person, or buy cleaning supplies for a family in need. 

The recommended split is roughly:

30% savings

10% charity

60% spending

However, it’s important to point out that the exact split should be their decision. This is where the money lessons come in and where you show your child that you trust their decision-making skills. There’s no doubt that your child will make mistakes. But, by allowing them to learn from these mistakes, you’ll gift them the best financial education they could hope for.

If your family is a bit older and/or more tech-savvy, you might prefer using an allowance app like Homey, which allows you to transfer allowance and extra money kids earn directly to their savings or checking account and even allows you to communicate with everyone in the family through the chat feature, and will allow you help your child set long term money goals.

When To Stop Giving Your Kids An Allowance

The purpose of giving your kid an allowance is to teach them about savings, budgeting, and planning for their long-term goals. You gave them money so that they could have extra spending money. So, as your child ages, it’s only natural to ask yourself when is the right time to stop?

Well, if they can make money for themselves, you may stop supplementing their income with an allowance. Once your child has a part-time job or a side hustle, just be sure to give them a couple of months’ notice if you’re planning on ending their allowance. This will allow them to prepare and budget accordingly. 

Whether or not you end your child’s allowance is, of course, entirely up to you and the dynamics of your family. Some parents don’t mind extending the allowance through college, to give their kids a bit more cushion before they graduate. To read more on this subject and make the best decision for your family, check out our article on when to end your child’s allowance.

Setting Your Family Up For Success

When it comes to allowances, the idea is for parents and children to feel empowered by their decisions. While there is no universally correct age or dollar amount, the objective is to give your child the opportunity to practice managing their money. 

Our final advice? Start early and give your kids a reason to want to save and donate to charity. Along the way, remind your children that having money is a responsibility and guide them to make the decisions that support their goals and their individuality.

About the Author

Lucia Caldera

Lucia Caldera is a writer who specializes in personal finance. Her goal is to create approachable content that sparks financial wellness and unlocks personal growth. Lucia's work reflects her passion for financial education as the key to reducing the wealth gap for future generations.

Last updated on: July 18, 2022