The Pros and Cons of an Allowance

          When I was growing up, the concept of an allowance was foreign to me and a lot of my friends. Parents giving free money to kids? Where are these amazing people and where can I get my weekly stimulus check?!

          Like many Americans, we lived paycheck-to-paycheck in our house. My parents made tough decisions all the time and I’m thankful everyday for how much they taught me the value of a dollar. Though it wasn’t often, my parents would reward my hard work in school. When I brought home straight A’s on a report card, my parents would drive me over to a toy store and I’d get to pick a video game. They couldn’t always afford to reward me, but I was always appreciative for the things I did get because I knew I’d earned them.

          Many families lucky enough to be in better financial situations than most often give their children a weekly allowance. The allowance may be based on the child’s age, or the number of chores they completed, or may be tied to how well they do in school. But the act of giving kids an allowance does stir debate among many parents. Is it appropriate to give children money? If so, should they earn it first? How should they earn it? And most importantly, what are we teaching them by giving them money?

The Case for an Allowance

          Financial management is one of the most important skills to have as an adult and it’s always best to teach kids how to manage their money at a young age. But without money of their own to manage, it’s tough to teach a subject like financial responsibility to kids who are flat broke. Here are a few reasons why parents should consider an allowance:

• The Experience: Providing children an allowance allows them to experience what it’s like to use money at a young age. It provides them an opportunity to learn how to use it in a store, how to save it for something they really need, and at the very least, helps the youngest of kids learn basic math skills. Though we live in a digital age, making change is still a skill most people should have, even if they never have a retail job.
  
  
• The Value: Having money also teaches kids the value of money itself. When you’re a kid, getting a dollar feels like you’ve won the lottery. Getting $20 made you feel like you could buy a small island and become king of the penguins; not that I wanted an island filled with penguins. But as they start to see what items cost, they understand quickly that a dollar simply isn’t as much money as they make it out to be. Sure, it’ll buy them some candy or a snow cone on a hot day, but it won’t buy those bigger things they want that are much more expensive like video games, toys, and clothes.
   
• The Mistakes: Making a financial mistake as an adult can hurt as much as stubbing your pinky toe, but worse. Maybe it was an important investment or you placed a few bucks on your favorite sports team when you thought there was no way they could lose. Whatever the case, adults try hard not to lose money if they’re being financially responsible.
  
  Kids, on the other hand, don’t feel the same pain of making a financial blunder, at least not right away. When kids spend all of their money on something pointless, they learn fairly quickly that once money is gone, it’s gone for good, at least until they get more. Spending money is an important lesson in having money and it’s a hard lesson to learn if you don’t have any. When you give your child an allowance, and they understand that’s all the money they’re getting for a while, the hope is they’ll be more careful how they spend it. For them, it’s important they hear the old saying, “Don’t spend it all in one place.”

The Case Against an Allowance

          Right now, there are parents all over the country reading this all saying the exact same thing: “I didn’t get an allowance when I was young. Why should my kids get one, Joey!? Have you cleaned your room yet?!” 

          I know many parents who would likely say the same thing. An allowance is something many kids take for granted. They don’t realize that for every one kid getting an allowance, there are probably ten times more kids who aren’t. While there are skills they would benefit from having money in their pocket, is it really necessary to just give them money? Here are a few reasons why an allowance might not be a good idea:

• A Penny Earned: Just like with my video games, I had to do something worth what I was getting in return for all that hard work. Imagine if kids were simply given money at the end of the week for just being kids. There is no real value in money that’s not earned somehow. By giving kids money, they’re getting the impression that mom and dad will always just give them money at the end of the week so there’s no point in working for it. Giving kids money doesn’t help them to build a work ethic and it sure doesn’t teach them the value of “an honest day’s pay for an honest day’s work.”
  
  
• Entitlement: Give kids money often enough for a period of time, they’ll begin to feel like they’re always going to get it. The second you stop giving them money for whatever reason, they’ll resent the fact that they aren’t being paid what they’re supposed to be paid. Kids who feel entitled to things they didn’t earn and don’t see having an allowance as a privilege can make them grow up to be selfish adults.
  
  
• No Drive to Earn: If children are simply given money for doing nothing, they have no drive to go out and earn it for themselves. This creates children who grow up with a poor work ethic. They know mom and dad will always give them money, so what’s the point in going out and getting a job or leaving the house at all? Kids need to learn the satisfaction of truely earning something from hard work. Simply giving them things teaches them nothing.

A Better Plan of Action

          At the base of the allowance discussion is the important matter of a family being able to afford to provide an allowance without a financial strain. Can your family afford to do this and would you simply give money away for nothing? Perhaps an allowance can be a great tool for teaching kids financial responsibility, but also a few other things in the process if they’re having to actually earn the money. Consider the following:

• Making the Grades: Kids making great grades and doing well in school deserve to be rewarded a little bit. Ask any parent with school aged kids and they’ll tell you school is not as simple as it was for them. It seems like everything kids are learning today is foreign to the rest of us. And if they’re managing to do a great job at learning it all and have the grades to prove it, slipping a few bucks their way for a job well done is perfect.
  
• Adulting for Kids: If rewarding kids for good grades isn’t for you, getting chores done around the house is another great option. Washing dishes, folding laundry, sweeping, mopping, and other daily housekeeping has a couple of benefits. Not only does it teach your kids they have to work to earn something, it also gives them lifelong skills they’ll need to know when they’re eventually on their own. Mom and dad won’t be there to make dinners, mow the lawn, walk the dog, or do anything once it comes time to make it on their own.
  
  
• Only When It’s Needed: Some parents may go the route of only giving kids the amount of money they need when they ask for it. They may tie it to the other suggestions mentioned of making good grades or doing chores to make providing the money worth it. While this may sound good on the surface, it’s not a good long term strategy. Though the kids did earn it, they aren’t learning anything about budgeting and truly earning money. If they merely do enough to get enough, they aren’t seeing the point in putting in extra effort to actual work. They simply need to hit a goal you’ve set for them.
  
  This strategy may work in a pinch if your child really wants something, they’ve worked hard, and they simply don’t have the money for something. But don’t make it a habit. While we all want our kids to be happy, especially if they’ve worked hard, you’re not an ATM. We don’t get a bonus just because we ask for one when we think we’ve worked hard and want something nice. If you do this for your kids, make them pay it all back.

What’s the Answer?

          Still on the fence with the allowance debate? Here are a few websites to read up on to help you figure out what would be best in your house. And if you have any suggestions or comments, please feel free to leave them in the comments section. We’d love to hear from you!

• https://money.usnews.com/money/personal-finance/family-finance/articles/the-pros-and-cons-of-giving-your-kids-an-allowance
• https://www.quicken.com/children-and-finance-pros-and-cons-giving-allowance
• https://www.marketwatch.com/story/5-mistakes-parents-make-when-giving-kids-an-allowance-2016-05-06
• https://money.cnn.com/pf/money-essentials-kids-allowances/index.html
• https://www.parents.com/kids/teens/make-money/should-i-give-my-kids-an-allowance-for-doing-chores/