According to USA Today, the average weekly allowance ranges from $3.76 for 4-year-olds to $12.26 for 14-year-olds. On average, children received $454 annually from their parents, with age being the main differentiating factor. However, there are other considerations that may determine how parents decide on a dollar value, and like most parents, you have probably wondered, “How much should my child’s allowance be?”
Many parents immediately jump to the process of determining the actual dollar value. Before you do this, one CPA recommends that you first consider the following factors.
1. The Age of Your Children
“Remember when you were a child and $20 felt like all the money in the world? The reason it doesn’t feel like that anymore is we got older and realized that $20 does not change much in the grand scheme of things,” Logan Allec, a parent and the owner of personal finance site Money Done Right, tells Parentology. “As a parent, however, that means one consideration for you is how old your child is.”
2. Grades and Good Behavior
One of the most prominent arguments against giving children an allowance is that it may lead to feelings of entitlement. Parents can work around this by giving children an opportunity to earn their keep.
Allec believes that by tailoring the amount of allowance to how well children perform at school and behave at home, they learn the important role that merit plays in life.
3. Using Allowance as a Lesson
Parents can also use an allowance to teach financial literacy.
“[A] friend pays his kids a sizeable amount for their allowance on the condition [that] 100% must be invested in the stock market until they are 21,” Allec says. “The kids learn about stocks and can pick the stocks to invest, but they have to use their allowance money to learn.”
Maintaining Fairness for Multiple Kids
In households with multiple children, navigating a fair formula for all may become tricky. Not every child can understand or accept why an older sibling gets more than he or she does. Similarly, what happens when a younger sibling is well-behaved and gets straight-A grades, while the older sibling is unmotivated and frequently gets into trouble at school?
Adina Mahalli, MSW, a certified mental health consultant and family care specialist, agrees that differentiating by age is still the safest bet. However, to address the potential problems highlighted above, she proposes another solution to maintain fairness.
She tells Parentology, that parents should “…make a chart in your home with a specific value for each chore … [and] list the dollar amounts that kids can receive for doing tasks, such as taking out the trash and folding the laundry. This way, it’s very clear how each child can earn money, and they have only themselves to blame if they don’t get a large allowance.”
The Bottom Line
Trying to decide how much allowance a child should get is a tricky field to navigate even in a single-child household. Parents should first decide what the real purpose of the allowance is, what traits or lessons they want to pass on to their children, and then create incentives that align dollar values and earning methods with those values.