Parents, you may be doling out your kids’ allowances all wrong.
Roughly seven in 10 parents give their children an allowance, according to a recent survey of more than 1,000 parents by The American Institute of Certified Public Accountants. On average, kids in the U.S. get $67.80 per month ($814 per year), up from roughly $65 per month in 2012, and roughly one in four kids gets $100 or more per month.
Mistake #1: You’re obsessed with how much you’re giving the kids
arents tend to get hung up on how much they pay their kids, but “the amount matters less than that you are using an allowance as a chance to talk about money and how to manage it,” says Kimberly Palmer, the author of “Smart Mom, Rich Mom: How to Build Wealth While Raising a Family.” Indeed, “the most basic tool for teaching your kids about money is by offering an allowance.” Kathleen Grace, the managing director of United Capital and author of “Prince Not So Charming.” Palmer says you should use it to “get them used to handling and talking about money so it’s not so much the amount as the conversation around it — how they can save or spend it.”
Mistake #2: You start giving the allowance too late
Roughly half of parents still aren’t giving their kids an allowance by age eight — and experts say that’s a mistake. Palmer recommends doing it “as soon as they grasp the concept — around 5 years old or when they start kindergarten” and Falco says you should do it “as soon as they can count money,” which is around four or five years old. This way, money — and an appreciation for things like saving it and what it is used for — become a part of their lives very early on. “The sooner they learn, the more likely it will stick when it matters most,” says Eric Pucciarelli, the vice president of oXYGen Financial in Atlanta.
3. You give an allowance to your son differently than you do your daughter
While nearly two in three men say they got an allowance growing up, only about half of women says the same, the AICPA survey found — and experts say they still sometimes see this. But all the experts we spoke to agreed that this is unfair. “Boys and girls should be treated the same,” says Falco.
4. You give the money with no strings attached
When you give your kids an allowance, you should make them save at least part of it, says Pucciarelli. This will teach them to “save over time for items that they want” and delay gratification, says Grace. It will also help them develop saving as a habit, says Pucciarelli. Falco recommends having your children save roughly one-third of their allowance each week.
5. You tie all the money to chores
Most parents make their kids work for their allowance, by doing an average of about six hours of chores per week, according to the AICPA survey. But some experts (and this one is a bit controversial) say that’s not always the best approach. “Kids should do chores and take on household responsibilities because they are part of the family, and being part of the family means contributing,” says Palmer. “They are not being paid to contribute — it is expected as part of their family role.” Financial columnist Ron Lieber also says if you peg an allowance to chores, kids will simply stop doing their chores once they have enough money.