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Should You Give Your Child an Allowance?

Geoff Williams

It's a question parents face at one time or another: How much money should I give my child for an allowance? Five bucks a week? Ten? Zero? Then, the next question: At what age should you give that allowance, and should it be tied to chores?

Obviously, the right answer is whatever the parent feels is correct. Still, it can take awhile to come up with your own right answer. So for parents who would like some guidance, here are the allowance-related questions you're probably asking yourself - and some possible answers.

Since I already buy my child plenty of things, why should I be handing out money, too? You might experience a whiff of nostalgia remembering how you ran out and bought candy or toys with your own allowance. But, really, the main reason personal finance experts support this practice is that an allowance is a good educational tool.

If your offspring manages his or her money successfully someday as an adult, you'll know it all started when you began handing out the green stuff on a weekly basis. In fact, Paul Golden, president of the nonprofit National Endowment for Financial Education, says an allowance should be used "only as a means of teaching money management - not as a source of reward and punishment or as a means of control."

[Read: 3 Signs Your Child Could Be a Future Financial Disaster.]

How old should my child be when I start giving an allowance? Most experts say it can't hurt to start around kindergarten.

"Children begin to learn what money is - like how the different denominations work - during their pre-kindergarten years, but their understanding of the concept and value of money does not emerge fully until 6 years of age or older," says Lorraine Breffni, director of early childhood at Nova Southeastern University's Mailman Segal Center for Human Development in Fort Lauderdale, Fla. She says 6 is a good age to start. If you want to open a savings account, age 9 is a good time to do that, and by 12, children generally understand the concept of using an allowance for longer-term investments.

If you're uncertain of whether your kid is ready for an allowance, you might want to follow the lead of Tracy Bagatelle-Black, a public relations professional in Los Angeles and mother of a 6-year-old boy and a 12-year-old daughter.

Before giving them any cash, Bagatelle-Black says she first gave her children a money test. She asked them questions like: How many quarters are in a dollar? How much is a dime worth? And she expected correct answers back.

"For me, it didn't make sense to give a kid an allowance when they don't even know the value of the money or how to make change and use it," Bagatelle-Black says. "Both of them seemed to get it at the end of kindergarten. In fact, my son just passed the money test a few weeks ago."

Bruce Helmer, co-founder of Wealth Enhancement Group, a financial consulting firm in Minneapolis, and author of "Real Wealth: How to Make Smart Money Choices for What Matters Most to You" also recommends starting around kindergarten or first grade. He says his kids got an allowance when they were around 6.

"I don't think at 6, you are too young to learn about money," Helmer says, adding that his children were expected to use one-third of their allowance for short-term spending, another third for savings and the final third for charity.

Should I only give an allowance in exchange for chores? Plenty of parents think so. Tim Elmore, founder and president of Growing Leaders, a nonprofit that aims to help young adults develop leadership skills, agrees with the chores-for-money approach, especially once children reach age 10. "Chores are a great means for teaching those lessons so that one day they will be prepared for a life and the workforce without the constant presence of mom and dad," Elmore says.

[Read: The Smart Way to Pay Kids an Allowance.]

Steve Siebold, author of "How Rich People Think" also feels kids should get an allowance tied into chores, so they don't grow up believing money will be handed out to them.

Should I just give an allowance - and not attach it to chores? Again, plenty of parents think so. "Children should learn that they need to contribute to the family without getting paid because that's part of being in a family. Parents need to be consistent in ensuring the chores get done," says Mary Kelly Blakeslee, a recently retired psychologist based in Summit, N.J.

Besides, Blakeslee adds, "It just doesn't work. Parents often don't keep track of the chores. Yeah, sure, most start out with charts and stars or stickers, or perhaps a spreadsheet, but very few keep up with it after the first few weeks."

Helmer is also in the just-give-the-allowance camp. "My personal philosophy is that an allowance should not be tied to chores. My children were expected to clean and help out around the house. You shouldn't pay children to do what they are supposed to do. The purpose of their allowance was to show them the value of a dollar and how to handle and manage their money."

"Parents think differently on this subject," Golden says diplomatically. "Many reach a compromise, giving the child a base allowance whether he or she has earned it or not, while continuing to expect the child to do basic household jobs as part of the family, and then paying extra money for larger chores."

[Read: The Best Children's Books for Money Lessons.]

Dovetailing nicely with these thoughts are those of Clare Levison, a certified public accountant in Blacksburg, Va., and author of "Frugal Isn't Cheap: Spend Less, Save More, and Live Better." "Rather than paying kids for chores at your house, I believe encouraging them to be entrepreneurial on their own is better," she says. "They can cut grass, cat-sit, babysit and that sort of thing, to make money from the neighbors. Then they have to learn negotiation and a work ethic."

How much allowance should I give my kid? What you can afford and not a cent more. Alas, Helmer says: "There is no formula on how much you should be giving your children for their allowance. It has to be driven by the cash flow of a particular family."

In other words, when George Alexander Louis, the latest addition to the British royal family, hits his kindergarten years and his parents dole out the allowance, boy, is he going to be sitting pretty.

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