Making Kids’ Allowance Count: The Key to Teaching Financial Literacy

Kids' allowance: Girl putting money into a piggy bank

Not surprisingly, opinions about how, why and when to give kids an allowance vary widely. Many articles, particularly those on sites devoted to personal finance, tout the benefits to helping kids gain an early grasp of financial literacy. When done right, they argue, teaching kids to manage their own money, to earn, spend and save it, can give them a sense of agency over their own affairs, an autonomous role in the family and the opportunity to hone good financial habits that can last a lifetime

Others, such as this article by children’s author and financial education specialist Daniel Britton push the downsides. Allowances can prompt children to equate money with parental approval or love, he argues, particularly if they compare their allotted allowance to that of a friend. Britton also argues that an allowance risks instilling an attitude of entitlement in children: “Where else in life do people regularly get money for nothing as a right? The answer is social security or unemployment benefit. Do the majority of parents consciously seek to set their offspring on the path to a life of hand outs and benefits?” Others argue that allowances—when done wrong—risk demotivating children and result in an “aversion to work.”

As with most parenting choices, the real issue is whether or not the activity is established, communicated and maintained effectively. Thankfully, plenty of resources exist to steer parents in the right direction. Assuming you’re willing to uphold your side of the bargain, below are tips and resources to ensure an allowance results in a positive outcome for you and your children.

When to start kids’ allowance?

Some sources say children don’t understand how to manage money until middle school, but teaching children to handle money earlier can prepare them for this next step. Other sources say children are “developmentally capable” of saving by age five and can start receiving an allowance as soon as they can differentiate between coins (around ages 6 or 7, for example). The general idea is to make an allowance part of a household routine and adapt the financial parameters to the developmental stage of the child.

How much should kids’ allowance be?

One rule of thumb is that the amount of allowance earned mirrors a child’s age. A 5-year-old, therefore, would receive $5 while a 10-year-old would receive $10. With the goal of financial literacy in mind, however, the actual sum of money is not as important as some may assume. It’s fine to adapt that rule of thumb to whatever works within your household budget.

How often should a child receive an allowance?

Due to child development, younger children would do best to receive weekly sums of money while middle- and high-school children, learning to delay gratification, can benefit from receiving monthly allowances. At that age, increasing the time between payments can reinforce responsibility to stretch the dollars they do have.

Be clear about what chores earn an allowance

When it comes to both earning and spending their money, children only benefit when expectations are clear from the outset. Decide and communicate clearly what chores in the household are simply expected as contributions to the family. Picking up toys or clearing dishes, for example, should not be a matter of negotiation or reward. Larger chores, say yard work or washing windows, may be something they earn their allowance for.

Another option is to consider all household duties part of a child’s contribution and instead have them earn their money (from you or others) by helping an elderly neighbor take out the garbage or offering yard work to others on the block.

Be clear about what expenses children are responsible for

Likewise, for an allowance to be an effective financial learning tool, children should know what spending choices it gives them. These expenditures will likely change with age. For example, young children may choose to spend their allowance on candy or an app they want to download. Middle- or high-school children may wish to add an extra pair of jeans to their school wardrobe or spend it on a movie or dinner with friends. The Mint offers a useful worksheet to help parents steer this conversation with teens.

Emphasize spending and saving an allowance

While spending our money serves to immediately reward hard work, teaching children to save and/or share their earnings is an invaluable skill that many adult Americans still struggle to adopt. Consider implementing a rule of thumb about their earnings. For example, children may spend 1/3 of their allowance but must save another 1/3 and donate the last 1/3 to those in need. By middle school age, you can help them negotiate this formula for themselves.

Above all: Be consistent

The key to making allowances count is to let your children make mistakes about what they purchase and to not run in and purchase something when they fail to reach their goals. After all, when they have their own spending money, you need not approve or deny their purchase (unless it is dangerous or illegal, of course). If they run out of money or are disappointed with their purchase, finding it less exciting or durable than they had hoped, they will eventually learn to make different choices, without you intervening. In time, as they learn to set purchasing or savings goals and work to achieve your children will gain invaluable sense of agency. Remind yourself that you serve them much better by helping them grapple with disappointment and supporting them as they learn from their mistakes.

Online Resources to Help you Make Your Kids’ Allowance Count


Games, activities and information for kids and youth about shopping, saving and planning.

Federal Deposit Insurance Corporation (FDIC)’s Money Smart for Young People

This site is available in English and Spanish. More curriculums are for educators of young people but with age-specific exercises and online games/tools that reinforce the concepts.

Office of the Comptroller of the Currency

From the U.S. Department of the Treasury, this site features information on financial literacy resources, issues and events that are important to bankers, organizations, and consumers of all ages.

Youth programs:  https://www.occ.gov/topics/community-affairs/resource-directories/financial-literacy/index-financial-literacy.html#YouthPrograms

The Mint


Check out The Mint for parents looking to help their children think about money and manage it wisely.

Consumer Financial Protection Bureau

This material is for teachers, administrators, and community leaders who help students build financial knowledge, skills and habits.


This site features “Money as you grow” guidance for conversations and activities plus insight into research on youth and financial literacy, for parents of children of all ages.


This article has good suggestions for financial milestones for kids based on their age.

University of Minnesota Extension: Youth and Money 

This site features free and paid interactive financial education resources for adults and students.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *