Introducing Mindful Money: Allowance

By Mir
January 3, 2008

Good morning! Might I just say that you are all looking ravishingly pretty today? Have you lost weight? You look marvelous.

Thanks to everyone who took the time to chime in on this post to let me know what you’re hoping to see here in the future. I love getting your feedback and I promise that I’m going to be addressing many of your requests/concerns in the coming weeks. One of the topics I saw come up several times, though, was one that I was planning to work on this month, anyway, so say hello to a new category here at Want Not: Mindful Money. There’s a lot of stuff that will go in here, over time, but I thought with a new year and all—and with so many of us being parents—I’d kick things off with a review of one of my favorite money topics: Giving kids allowance.

Many of you asked how to help kids realize the value of money and/or escape from the “gimmes.” And I’ve noticed that a lot of people feel that allowance is “free money” for kids and yet another way to spoil them. To my mind, allowance is all about teaching kids to recognize the value of a dollar and to start practicing good spending habits. Done correctly, giving your kids allowance can become an invaluable tool in shaping their relationship with money.

So here’s what I believe about allowance:

Any child old enough to count is old enough to receive allowance. Starting allowance early makes it a way of life. I’m not suggesting you shower your preschooler with money, but a quarter a week for a 4-year-old—while not an amount that’s going to make him wealthy—is great “practice” for when he’s actually old enough to want to start spending on things.

Allowance is not payment for chores, although I do believe in deducting from weekly allowance for transgressions (per a clear and predetermined penalty system). Your child is not your slave, and no one gets paid to be a part of your family. I think it’s important for kids to do chores, but I think it’s equally important for them to understand that that’s simply part of being in the family. You don’t get paid for doing the laundry, so why should they be paid to clean the bathroom? Chores are a part of family life. Allowance is something different. On the other hand, have a clear discussion about what infractions will cause them to lose part of their allowance. Allowance is a privilege, in my house, contingent on ability to abide by house rules. My kids know that if I need to correct them three times in a row for a behavioral issue, they’re going to end up owing me a quarter.

Any allowance plan—regardless of the amount of money—should include mandated portions of money set aside for charity and for savings. When I first started doing allowance with my kids, they each received $1.75 each week. Of that, $.25 went to charity and $.50 went into their savings accounts. (There’s nothing magical about those numbers; in terms of helping them understand it seemed to work well—one quarter to charity, two quarters to savings, and four quarters to do with as they pleased.) Each child has a three-compartment container to keep money in. Periodically I have them give me the money in the savings compartment and I deposit it to their savings accounts. They’re pretty good about remembering the charity money, themselves, and either putting it in the plate at church or dropping it in the Salvation Army bucket or whatever. Any time they lose money to an infraction, it comes out of their discretionary fund—the savings and charity money must remain static.

Be clear about what allowance should be used for. I buy my children everything they need. They will never have to use their allowance for necessary clothes or food. (The exception being that perhaps when they’re teenagers I will give them a separate clothing allowance to manage themselves.) So there’s nothing they will have to buy for themselves. But if my daughter wants fancy hair pretties or my son wants his very own pack of gum, they are welcome to dip into their allowance for those items. I have also started having them buy each other holiday and birthday gifts with their own money and have been pleasantly astounded at how generous they are with each other. This tells me that I am doing something right.

Be clear about what allowance is not. Right now, I still get some say on how my children choose to spend. I think that probably once they’re in high school I will zip my lips and allow them to spend on anything and make their own mistakes, but right now they’re still learning and I still get to participate. So when my son wanted to blow all of his money on silly putty so that he could make an imprint of the entire comics section of the paper? That was a Mama Veto. Likewise, my daughter is not allowed to purchase anything made by Bratz or other skanky inappropriate items.

Part of giving allowance is modeling good habits and talking to kids about spending. If you’re just forking over some money every week and mismanaging your own money, or if you give them money and expect them to use it well but refuse to talk to them about your own habits, you’re missing the point. I’m not saying that Junior should be privy to all of your bills and your checkbook, but I am saying that you need to practice what you preach. Don’t tell kids to save some and donate some unless you’re doing the same. And talk to them about how you do it. My daughter once asked me why people give money at church every week but I only do it once a month; that was a great opportunity to explain to her that I find it easier to keep track if I only write one check a month, but I am figuring my donations based on both my income and what period of time I consider. We then talked about how not giving every week means having more money to give later, and the pros and cons of saving up a bit before making a donation.

Pay attention and praise accordingly. When your child makes good financial decisions, praise her! Maybe she decides to bank more than the mandated amount. Maybe she deliberates over an item at the store and decides she really doesn’t need it. Kids want and need your approval, and staying active in the process—not considering it over after you’ve handed them the cash—is all part of teaching them.

It doesn’t matter how much money you give in allowance. It matters how you handle it and what you’re teaching along with it. And I guarantee you that a child who is mindfully receiving and managing an allowance will experience a sharp decrease in the “gimmes” as he learns the value of money.


  1. Excellent, excellent advice. I think you are spot on with your allownace philosophy. My husband and I are debating over raising Drama Queen’s allowance (from $5 to an amount yet to be determined) and letting that be her entertainment budget as well as discretionary funds. Now that she’s going to the movies and shopping with friends, her spending has skyrocketed and I’m not sure just handing her money every time she goes out is teaching her wise money management. I know you’re not there yet, but do you have any thoughts?

  2. Jennielynn: This is exactly the right way to be thinking about this stuff. Here’s what I would do, personally… I’d figure out what a typical outing costs (movie ticket and a slice of pizza, or whatever she normally does) and then determine how often you think she should be able to do that off of her allowance, while keeping in mind other things you expect her to pay for. Also, if she’s old enough to babysit or whatever, that factors in as well. As I said, there’s really no set formula, but you’re on the right path. If you’re feeling very brave, involve her in the discussion. (Heh.) Another thing to keep in mind with older kids is that it’s a great idea to make additional chores available (above and beyond the normal expectation) to them to earn extra money. So if she wants to go out every weekend and allowance will typically only cover 2 outings a month, well then, I guess she’ll need to figure out how to make the money for the shortage, right? 😉

  3. You have pretty much outlined my future plans for allowance. My problem is related to the NOW. My daughter is not yet 2, so she obviously has no use for money. Frankly, she doesn’t need ANYTHING. So, I put all money that she receives for birthdays/Christmas/etc. into her savings account. Some relatives caught onto this and thought it wasn’t fair of me. They wanted their money spent on toys (but weren’t willing to pay for shipping, thus, the cash). They have started to give her gift cards instead of cash in order to force us into getting her toys and clothes. I get what they are trying to say but know she will much more appreciate their money when she’s older (and needs a car or to pay for college, for example), but it’s ridiculous that she has over $300 to spend at Toys ‘R Us. Any suggestions on how to politely help them see the light?

  4. Excellent! Your house sounds just like our house allowance-wise.

  5. Wow, I’m glad OUR relatives don’t pitch a fit about putting their money gifts into savings for our daughter, Burgh Baby’s Mom. I don’t know how you’d handle that, unless you’re willing to just do without rather than blow the Toys R Us money on stuff your daughter doesn’t need, perhaps by buying items that local charities need and donating them, or maybe the gift cards can be donated directly.

    Of course, that raises the issue of whether or not to let the relatives know what you did. 🙁

  6. Burgh –
    I too see your family’s point in wanting your daughter to have a tangible gift. But like you, I put the money into the bank. The thing about a gift though, is that the giver cannot tell the recipient how to use it. Can you buy a small toy from TRU, write a thank you note for that and then buy the gift card from your daughter? By “buy” it, I mean put the remaining value of the card in her bank account and then use the card whenever you need to purchase a birthday gift for another kid, or her later in the year? Or purchase the clothes later in the year when you’re suddenly short sleeveless dresses and then write a more lengthy thank you note to the giver? In our family there is much frustration since MIL wants to give the kids something they “need”, but I feel it’s my responsibility and right to take care of those needs. Grandmas are for “wants”. Small, easily stored, age-appropriate wants 🙂

  7. Burgh Baby’s Mom –

    When my kids were little, I had the same problem. My compromise is this. I put half away (savings, or if they are less than 8 years old, savings bonds (this way they’ll be mature by age 18)), and spent half on the child. Sometimes it’s clothes that I ordinarily would have spent that much money on (some impractical but cute shoes, something from the Disney store, a team jersey, etc.), sometimes it’s an outing (ice cream at their favorite place, a movie that they’ve already seen once, but want to see again), sometimes it’s a shopping spree at our favorite book store, and sometimes , yes, it’s toys. When it’s early March, and the bloom is off the rose from the Christmas toys, and the weather is cold and miserable, a new toy or two can save your sanity. I figured this made everyone happy – me, for putting some away for savings, the kids, because they got something new, and the giver, because their gift will be appreciated twice – now, with the toy/clothes/book, etc., and later, when it’s time for car/college/trip to Europe, etc. Maybe it will work for you – I know it’s tough! Good luck!

  8. I’m wondering how much to give as an allowance? Do you base it on age? Does the older one get more than the younger one? How often do they get a “raise”?

    My 10 yr old is very careful and responsible with her money, but giving her an allowance is hit or miss. I will, however, pay her 50 cents to clean a bathroom or $1 if she does the tub too! I will sometimes give her $1 a week but since she is so good at saving and not blowing it on junk, maybe she deserves more (and consistency). How much do you recommend?

    My 8 yr old is the most generous person ever and will give whatever money I give her to her siblings or friends. Or she will just leave it sitting around. When she does manage to save some for herself, she will beg to go to the dollar store or buy candy. I am not sure if giving her an allowance would help or hinder these habits.

    My 6 yr old will play with his money as if it is a toy (especially now that he has his own ATM machine!) Again, not sure how much to give him as an allowance or if it would help or hinder.

    Thoughts anyone?

  9. Kuddos on the “No Bratz” idea. As soon as they came out I told my then 6 year old she would not be allowed to have them. This year at her classroom gift exchange she unwrapped a baby Bratz doll. When I asked her about the gift exchange she was visibly sad and said “I got a Bratz doll” I contemplated letting her keep it, but luckily I remembered the few gifts I had hidden away and asked her if she would like to trade. I was so pleased when she said yes. It’s nice to hear that I am not the only Mom standing up for our girls by letting them know that just because something is popular doesn’t mean it is appropriate or acceptable. Thanks Mir!

  10. Our baby just turned one. Before she was born we decided to participate in a prepaid college fund for her. We let all the grandparents and great-grandparents know we are doing that and that all the money she receives goes to that end. Since we’ve done that, there’s no confusion over what that money will be doing.

  11. Donna: I deliberately did not address amount because I think that’s a highly personal decision, to be based upon your family’s income and morals. I will tell you that my kids are 20 months apart and for simplicity’s sake I give them the same amount. If and when my daughter figures out that her brother stands to make more money over his childhood than she does, I shall tell her that it’s one of the few perks of being younger and she should suck it up. But that’s just me.

    I’ll also tell you that while we could afford to give the kids a lot more than we do, philosophically I feel the (smaller) amount makes more sense, as there is so little they need money for. Again, just a personal decision.

  12. Burgh Baby’s Mom: Emily Post would be happy to tell you that gift givers do not get to dictate what you do with their gifts. You have expressed your preference to your family and they have chosen to ignore you. Either take one of the awesome suggestions given here (buying the gift card from your kid and using it for bday presents and such is a great one) or sell the cards on eBay and bank the cash. Or find a way to get your family to listen to you, and then QUICK write up your solution in a book and make millions, because whose family really listens to them? 😉

  13. Do you have a book? If so, where can I buy it cheap? If not, um, why not?

  14. This was really good. I agree with all of it.

    For what purposes are your kids allowed to use savings?

  15. We actually call our allowance “commission” and they get it for doing their assigned chores and contributing to the household. It’s not really pay for work, but if they don’t work, they don’t get paid (and then they still have to do the work later). We use the money to teach them money handling principles.

    They get a basic allowance of $5 a week. We did this for simplicity sake. We require 10% tithe(.50) $1.50 goes to savings and they get to spend $3 however they choose. The $1.50 savings goes in the bank and we match it. Then at birthday time, they get to withdraw their savings and spend it on something big that they want. We are trying to get them to see the reward of waiting and gaining interest in order to get something of value. I’m sure these rules and amounts will change as time goes on and they make their own money, but it’s easy, simple math for a 10 and 11 year old and teaches them good spending principles. We also have a strict rule–no borrowing money from mom or dad. We use this rule to teach them not to buy on “credit” so if they want something that costs more than $3, they have to save for a few weeks to get it. Since we call our allowance “commission”, we will generally have extra jobs they can do to earn extra money and we price those based on what the job is.

  16. Wonderful guidelines and ideas! I agree very strongly that kids must learn the difference between discretionary and necessary spending.

  17. Well, we have the same ideas that it is essential to teach children about money: a parent must be diliberate in this endeavor.

    However, we do things a bit different here. First off: they get paid for chores. There are jobs which are expected without pay to enforce the idea: we are a family and we pull together to make this all work.

    Yet employing my children has opened many discussions about how a good worker is worth his pay, how to ensure an increase in pay, how to engage in a pay-raise conversation…

    Our children also have different pots to put their money in.

    One which has not been mentioned is a school fund. Not for university, but for actual present-day school stuff. Our children receive from us what they need for school on the first day. If they bring the dwindled pencil stub, I will gladly replace it with a shiney new pencil. However, if they decide to loose thier pencils, then they will need to buy it for themselves. Same goes for books. If my children choose to be sloppy or inattentive and loose things, they will be harder in working to earn their lifestyle…

    Otherwise, we have a tithe, pocket money and longterm savings manditory piggy banks for each child.

  18. Mir, this is really and truly the best commentary I’ve seen about allowances- anywhere. I didn’t see your “what do you want?” post in time to respond, but if this is what’s coming, I’m voting advice!

    My oldest is five. We’re just beginning to think about allowances, and you’ve made good points, thank you.

  19. I agree with JenLo — we call it “commission” here, too, and we don’t just give our kids money for sitting their bottoms. They are expected to do their share around the house to help it run smoothly simply because they are a member of the family. But we also give them points throughout the week based on their work and their attitudes. At the end of the week they cash in their points for their pay. Right now only our oldest (6 1/2 years old) is participating in this system. She gets 5 cents per point. This idea came from the book “America’s Cheapest Family” and is also drawn from the wisdom of Dave Ramsey. As she gets older, her pay per point will increase. We also require her to put 10% into charity, 15% into savings, and the rest into her discretionary spending. She has DEFINITELY learned that garage sales are an awesome place for her to look for special toys she wants. She can get them for pennies on the dollar. 🙂

  20. My kids aren’t old enough for allowance yet, but I have to say that my mom created a clothing “allowance/budget” system for my sister and I, starting around age 10-12, that was fantastic.

    We each got a certain amount of money towards clothing per month. A few times a year (back to school, beginning of summer, etc) it was larger. We could spend it on whatever clothing we liked but had to keep to the budget (recording our purchases in a notebook my mom kept for that purpose), and could only “borrow” from the next month after the 15th of the current month. (For example: if I wanted to “borrow” from February’s money, I had to wait until at least the 15th of January to do so.)

    This system virtually eliminated my mother having to referee clothes purchases, kept us to a reasonable budget, and taught us about money all in one fell swoop. I will definitely use it when my daughters get to that age.

  21. I was able to open up a savings account when I learned to sign my name in cursive (bank requirement); I may have been in the second grade. What a huge deal in my life! It felt like such and honor, and made me feel so responsible and grown-up. The end.

  22. Swistle: Great question! The savings account in question is referred to as being their car/college money, meaning that it’s untouchable for many years. When the time actually comes, we may allow them to use it towards a car if they so choose, or towards college expenses otherwise. Unlike JenLo, at this point the money I make them bank is not available for withdrawal. If they want to save up for something big, they can do so with the discretionary funds.

    I’m loving the comments here… Andrea from Germany’s example of replacing pencils used up normally vs. having the kids buy their own if they lose them is awesome. I recently forced my daughter to use her own money on socks (long story involving her managing to “lose” most of her socks), in a similar vein.

  23. I love your ideas on allowances, Ms. Mir! Not only are you pretty, but brilliant! We feel the same way about paying our children to do chores and other things that should just be shared within our family. 🙂 Thanks for the affirmation!

  24. Pretty Mir, I am so happy to hear that your kids are responsible for buying each other gifts. My mother felt that when I was old enough to save my allowance, I was old enough to pay for Christmas presents for my cousins (I am an only child). Of course at first I felt it was unfair but now am so appreciative of the lesson. I LOVE to find the perfect gift and I really credit it to this lesson.
    My MIL signed my husband and my SIL’s names to gifts she’d bought until they were in their mid-20’s and they both still seem to believe that the best part of Christmas is in the getting and not so much the giving. I plan to raise my son to find the joy in giving!

  25. Just chiming in after reading so many great comments. Our system is similar to Mir’s, but I am genetically incapable of having any cash on hand at any time. I don’t know why this is. So I make an “automatic deposit” into the kids’ “accounts” at the beginning of each month. We keep record of their money in a checkbook register and they are responsible for adding and subtracting every transaction. The other benefit to this cashless system is that I keep the bankbook in the car and if we are out somewhere and spot the wii numchuck they’ve been searching for, they can look in the book and see if they have enough cash, “withdraw” it and record it when I pay for the goodie and they don’t owe me later.

  26. What a great discussion! We recently initiated the three-jar system in our house, and the kids get 50 cents per year of age. So our 11-year-old gets $5.50 a week and our 8 year-old gets $4. We dictate the split for spending, savings, and charity. This was our first Christmas when they had their own money, and I made them each contribute to gifts for each other (and gifts for their dad and me from the school holiday store), but I didn’t make them buy the whole thing. They both loved shopping for each other (and us) and seemed to take pride in using their own money.

    A side note: last summer, our 11-year-old played sick to get out of a day of art camp, something that cost us a pretty penny. We divided the cost by five and made him pay for that day. Boy did THAT hurt. Good lesson learned, I think.

  27. When it comes to spending the money, do they have to have the money in hand at the store or will you spot them the cash to be paid back when home?

    Also, if you spot a good deal on one of those divided piggy banks, please let us know!!

  28. Thanks for the tip on ‘fines’. I typed up an allowance contract for dd and I to sign. She’d been asking for a raise in her allowance and the ‘fine’ was just what I needed to incorporate for me to feel good about it. Let me know if you want to see what I came up with.

Bargain Hunt





Want Not Archives

Creative Commons License

Pin It on Pinterest