Should kids get an allowance? Here's what most parents say.

March 29, 2024

In an ever-evolving financial landscape, it's crucial for parents to equip their children with the tools and knowledge to navigate money matters confidently. A recent survey conducted by T. Rowe Price sheds light on the current trends and practices adopted by parents to teach their children about financial literacy. Let's take a deeper dive into their findings:

The Importance of An Allowance

According to the survey, a significant portion of parents are recognizing the importance of introducing financial concepts to their children from a young age. Over 70% of parents reported discussing financial topics with their kids, ranging from saving and budgeting to investing and credit.

Nearly 80% of parents also pay their children an allowance, with the majority of parents requiring children to earn the allowance to teach them the value of working to earn money.

But how much should you pay your child for an allowance? The below chart illustrates what U.S. parents are paying their kids in allowance money per week.

 

 

The average allowance is: $19.39 per week for kids across the U.S. Understanding these trends can help parents make informed decisions about how they approach financial education with their children. It's evident that many parents view allowances as an opportunity to teach valuable lessons about money management and the rewards of hard work.

Where to Start:

1. Start Early (Age 6-7): Research shows kids grasp basic money concepts by age 7.  A great place to start is by exposing them to the value of money through simple activities like grocery shopping and explaining costs. You can also teach them about money through reading books that teach financial literacy.

2. Allowances for Practice (Age 6+): Allowances help to provide hands-on experience. You can tie the amount to their age initially, and gradually increase it as they get older and take on more responsibilities.

3. Make Allowances Work for You: A great tool for teaching budgeting it using an allowance.  Clearly define what the allowance covers (e.g., small purchases or snacks), and encourage them to save a portion (10% is a good starting point).

4. Incentivize Saving: You can hlep your kids reach larger goals by matching their savings – a homemade "401(k)" for kids!  This reinforces the value of saving and delayed gratification. For a limited time, if you open a kids savings account with SNB, we will give you a $10 voucher to kickstart your child's savings journey. 

5. The Power of Earning (Teens): Encourage teens to get part-time jobs.  Money earned feels more valuable and teaches them the connection between effort and reward.

6. Tough Love Builds Resilience: Letting kids experience the consequences of poor spending is a powerful lesson. We suggest resisting the urge to bail them out financially - this will begin to teach them accountability and the importance of budgeting.

By introducing financial concepts early, emphasizing saving and goal setting, and addressing challenges head-on, parents are laying the groundwork for their children's future financial success. As we navigate an complex financial landscape, empowering the next generation with essential money management skills is essential.

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