How An Allowance Can Save You Money

As long as I can remember I’ve been doing chores to earn an allowance. When I turned 14, however, things changed.

I still had to do my chores, but I got a substantial increase in pay. My parents would pay for my three basic necessities: food, water and shelter. I was not to tell my parents I needed money, ask for money, or otherwise come to them looking for a handout.

My allowance was to be used on everything from school supplies, clothes, yearbooks, music lessons, student athletic fees/cleats/gloves/uniforms, homecoming dances, Friday night football games, birthday gifts for friends, movies and the likes. Everything that I needed I was to use my allowance for.

National studies show that children actually make better choices when it is their money they are spending, and not their parents.

I quickly learned how to forfeit things I wanted in lieu of things I needed. It is amazing how I began to bring my lunch from home versus buying school lunch everyday. Because brown-bagging was on my parents’ dime and school lunch was on mine.

Giving children an allowance helps you to stay within your budget.

They begin to realize that money doesn’t grow on trees after all, and that there is a finite amount of money in your budget.

Only 27% of Americans give their children an allowance, but people who do give their children an allowance see their household expenses reduced by anywhere from 10-25%.

Creating a new expense (i.e. an allowance) may seem contrary to “cutting back”, but it actually benefits your expenditures in the long run. When your kids want to stop for fast food, say to your kids, “we can stop if you want to use your allowance”.

Give children an allowance and then help them manage their money.

Teach them the 10/10/80 philosophy: 10% tithing, 10% saving, 80% spending. Of the 80%, encourage them to do something for someone other than themselves. This teaches them that money is not just for them, but to use to bless others with as well.
Structure a budget with them and help look into the future for expenses that might be coming up – like the holidays. Use software or apps to help track spending.
Finally, create opportunities besides their regular chores where they can earn additional money for big trips or expenses.

Do you give your children an allowance? Why or why not?

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC.


View Comments (5)
  • At what age do you think children are ready to receive (and spend!) an allowance?

  • Hi Katherine,

    I started taking my son shopping and explaining the buying and selling concept to him at age 3. Now that he is four, he gets chore-based pocket change to give at church. Some important prerequisites are if your child can count, and add/subtract.

    They might still need your help to figure out what ten percent is to give or save, but five is usually a good age to get them started with an actual allowance. If you feel uneasy about the idea of the money disappearing once it is tucked into those tiny little hands, start with monopoly money that they can earn and use to buy candy and other treats from a makeshift home “store”.

    I think it is better to get them started earlier than later. And it really will reduce the amount of your expenditures. Thanks for reading!


  • My 9 year old son does not get an allowance. He is still having a hard time getting his chores done, but we do have an agreement. He picked out 5 chores, and as long as he does ALL of them, he gets $1 a day in allowance. He still hasn’t figured out how easy it is!

  • I love the concept your parents used!! We all can agree that money is a huge part of daily life, yet it’s the main thing we are not taught about managing in school or at home. We have a 6 year old son, so I would probably give him his play money while we’re out until he learns each coin and dollar value (here took $20 to school this year calling it a $2 bill). I’m curious how your parents determined the amount to give you in high school knowing that extra curriculars and a social life had to be factored in? And school supplies? Were there bonuses being given to you when your parents knew special events like prom were approaching?

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