Allowance - how much?

[Hula Hoop]

I've been thinking about starting to give my kids an allowance, mainly as a way for them to learn to budget and understand the value of money.  I'd like for it to be enough to that the kids can save for thing but not so much they can just buy whatever they want.  Older kid is a bookworm and want to use the money to buy books.  Younger kid (7) would probably just buy junky toys. 

I was thinking 2 euro a week for older kid (11) and 1 euro a week for younger kid (7).  A book costs around 8 euro so older kid would have to save for 4 weeks to buy one.  Younger kid can save her allowances for a few weeks to buy a cheap toy.

Or should I give them both 2 euro a week?  What have others with more than one kid done re allowances?

[Blue Skies]

I did $0.50 per year of age.  So, for an 8 year old the allowance would be $4 per week. 

Honestly, my kids are savers and not very materialistic.  They get the toys they want as birthday/holiday gifts and don't really have much else they want to spend it on right now.  They buy candy now and then, but otherwise it just sits.

I have seen recommendations to give a much larger allowance and then make the kid pay for their own activities and clothing.  I can see the value of that, but don't think I will actually do it.  I'll just try to make them more aware of how much we spend when we buy them things.

[Chris Pascale]

My most consistent wage has been $1/year-old. I once tried the commission system, but it was like a second job for my wife, and we nixed it.

More recently, my two teens have been doing a really terrific job, so when I have the cash, I pay them $20 each week, and the younger ones, who do a really good job, too, now get $10 each.

I have added the following a la carte payments: $2.00 for every load of dishes (empty and load the dishwasher), and $0.25 for taking out any full bag of trash and replacing it (whether kitchen or bathroom or office; if it's full, take it out, and grab a quarter from the change bowl).

One daughter heavily embraces the dishes option. She'll tally them up and cash in some for a $20. One of the younger ones has been taking out the trash nearly every day.

[TVRodriguez]

I did $0.50 per year of age.  So, for an 8 year old the allowance would be $4 per week. 

Honestly, my kids are savers and not very materialistic.  They get the toys they want as birthday/holiday gifts and don't really have much else they want to spend it on right now.  They buy candy now and then, but otherwise it just sits.

I have seen recommendations to give a much larger allowance and then make the kid pay for their own activities and clothing.  I can see the value of that, but don't think I will actually do it.  I'll just try to make them more aware of how much we spend when we buy them things.

I'm pretty much doing it this way, too.  Fifty cents per year of age.  Books are plentiful at our library, which offers e-reader books, too, so our kids have used their allowances for things they want that we don't find necessary...candy, their own snack choices, and video games are some examples.  I still buy them clothes, but if they wanted something that I wouldn't choose (if it's over my budget or they have other similar things) then they would use their allowances.

[Nick_Miller]

OP, have you considered having them do chores to earn money? They seem plenty old for that sort of thing, if you chose to go that route.

We have never given our kiddos an allowance. We do, however, pay them for tasks they perform around the house. So we tie $ to helping the family get $hit done!

Examples:

Older daughter (13)

Does dishes all week - paid $7/week
Does about 1/2 the lawn mowing - paid $11/week

Younger daughter (9)

Does garbage - paid $2/week
Cleans up table after dinner each night - paid $3.50/week
Vacuums/sweeps house once a week - paid $3/week
Does about 20 percent of the lawn moving - paid $4/week

Trust me, when you have kids who do the dishes, vacuum, clear the table nightly, take out the trash, and do a fair amount of the lawn mowing, it makes the household run a little smoother. And they are learning that money is earned.

We also require them to allocate their earnings on a 40/40/20 basis:  40% for spending, 40% for saving, 20% for gifts/charity.

[erutio]

We don't do money for chores, because we expect our son and daughter to perform these chores as part of their role in the family.  They will be expected to complete the chores whether they get an allowance or not. 
Giving money for chores sets up the situation where the kid doesn't want the money this week and then decides not to do chores.

On the allowance front, when my son started first grade, we thought $1 for each year of age per week would be a good starting point.  Started at $5 per week, and now it is up to $7 per week.  Both of our kids are natural savers though, and are crafty enough to figure out how to get the grandparents to buy things for them if they really want it.  The result is that my wife and I will have to talk about it soon and recalibrate our allowance rate.  $7/week is way too high for a 2nd grader!  He's got over $400 saved up already.

We also do the MMM thing, where our kids can keep cash in their wallet or at "Bank of Dad", where it earns interest. 

[ontheway2]

I do 2x age/month for my oldest. I started it once he began having a social life and wanting to do things with friends. This requires him to budget and not ask for money for skating, movies, football games, etc. I set the amount figuring it equates to two decent outings/month or several cheaper ones. I am willing to pay for some entertainment but not all.
We have required chores that are done because they are part of the family, but there are also chores that can be done to earn money. Both kids have that option.
Kids are 14 and 7

[Jenny Wren]

Starting sometime in late elementary school, we gave the kids $20/month regardless of age. We never raised it because we didn't want them to see us as their primary income source once they entered the teen years. They weren't paid for chores, but for doing their chores without complaint. Whining meant they still did the chores, they just weren't paid. If they were paid on the 1st and spent it all on the 2nd, then they had no pocket money until the next month. Oddly enough, they both eventually got the idea independently and without our input to build up a $100 buffer so they never had to worry about being broke if a cool opportunity presented itself before payday.

If they wanted extra money for something, they could pitch ideas to us but we wouldn't come up with ideas for them. For example, once a kid offered to digitize the scrapbooks we inherited from a deceased relative. He requested the funds for a scanner (denied, he was unaware we had one in the home office) and $25 for his time. We actually paid him more, if I remember correctly, because he did a nice and thorough job.

[La Bibliotecaria Feroz]

I also expect chores and do not specifically tie that to allowance. As they get older and more competent, I will probably give them more opportunities to do extra, less daily-type jobs for extra $$.

My kids get $1/year of age but only every OTHER week. That goes back to when they were with their dad every other weekend. He has moved away but I still do it that way. (I work every other weekend, so it is easy to remember.) It still seems like a lot of money for them. I make them have envelopes for saving and giving (minimum of $1 each, each allowance day) and they can put the rest in their wallets for spending. They mostly use it for things like buying frozen yogurt when we go to Costco. I also make them pay for anything they break around the house. (If they are screwing around. I mean like when they pull the curtains out the wall and break the bracket, not like when they drop a bowl on the floor.)

I often use pieces of paper with dollars written on them instead of actual dollars, especially for save and give. (For spending, I try to give real dollars.) This reduces the temptation to "accidentally" move money from their giving envelope to their wallet.

[Nick_Miller]

Well when the kiddos do a crappy job, they are forced to do it again the right way. And they are not allowed to beg off chores so that doesn't happen. I call it "docking" them. They both understand what it means, so it encourages them to do a good job the first time, and to be efficient.

It's interesting to see all of the different approaches.

[EricEng]

I was thinking 2 euro a week for older kid (11) and 1 euro a week for younger kid (7).  A book costs around 8 euro so older kid would have to save for 4 weeks to buy one.  Younger kid can save her allowances for a few weeks to buy a cheap toy.

This seems a bit low to be effective.  It will be so little so slow that they'll either forget about it or ignore it.  Needs to be enough that they can accumulate enough for a purchase within a month or two depending on expense.

My parents were on the generous side and did around my age per week.  So at 10 got $USD 8/week.  At 14 it was $12/week, etc.  This allowed me to make a small purchase of $30-40 every 1-2 months and still put some into savings account. 

[Christof]

Our six year old is getting no money from us. He is supposed to do some chores, but doesn‘t have a schedule or anything similar yet. He is making money from collecting bottles which is sufficient to let him buy the occasional treat we wouldn’t buy. Right now he wants to save money to give it to the poor. So we keep waiting until he demands an allowance and can explain it, too.

[EngineerOurFI]

Starting sometime in late elementary school, we gave the kids $20/month regardless of age. We never raised it because we didn't want them to see us as their primary income source once they entered the teen years. They weren't paid for chores, but for doing their chores without complaint. Whining meant they still did the chores, they just weren't paid. If they were paid on the 1st and spent it all on the 2nd, then they had no pocket money until the next month. Oddly enough, they both eventually got the idea independently and without our input to build up a $100 buffer so they never had to worry about being broke if a cool opportunity presented itself before payday.

If they wanted extra money for something, they could pitch ideas to us but we wouldn't come up with ideas for them. For example, once a kid offered to digitize the scrapbooks we inherited from a deceased relative. He requested the funds for a scanner (denied, he was unaware we had one in the home office) and $25 for his time. We actually paid him more, if I remember correctly, because he did a nice and thorough job.

My kids are at the stage where one is a toddler and the other one is in the womb -- but I'm definitely going to borrow this concept that sure you've got an allowance - but chores are an expectation as a member of the household regardless of anything and the allowance is for doing the chores without complaint/whining/forcing you.  If I've got to remind you to take out the trash and browbeat you for it, why on earth would I pay you for it?  Totally makes sense.  I've been trying to plan for future and figure out how to balance chore expectations with helping kids on the path to learn how to manage money and I love this idea.

We also require them to allocate their earnings on a 40/40/20 basis:  40% for spending, 40% for saving, 20% for gifts/charity.

Love this idea as well - I like the notion that a certain savings % is just considered expected/required and that kids have to budget for gifts for family, friends, etc.  And maybe I'll tack on an interest rate system to it as well to start teaching the value of compound interest (not sure if I'd want to do it tied to actual market index funds/rates or if it would be a daddy-subsidized rate).

[NonprofitER]

We do much of what other people do too. I'll add a couple money rules that we include:

• 9 yo gets $4/week for allowance. This is not tied to chores (per some studies I read that indicated this would be counter intuitive). We see the purpose of allowance as teaching money management. I think she started getting it at age 5.
• Like others, her allowance is allocated between spending, saving and giving. Her spending jar is labeled/discussed as "Budget Jar" rather than spending - we didn't want her to feel like she *has* to spend it.
• We have veto rights over any purchases.
• No more than 50% of Budget Jar funds can be spent at one time. IE, she can't spend down to 0 on one big purchase. Likewise there's no borrowing from Future Allowance (debt).
• No impulse buys. Full stop. Meaning, if we're at the store and she sees something she just can't live without but didn't know existed prior to entering the store, we will ignore her desperate attempts for us to temporarily loan her funds or use her allowance to buy said spontaneous desire. If she still wants the item 24 hours later, we will gladly return to the store with her funds to get it the object after its passed the cool down test. She's used to this rule and handles it very well. We also model going into stores with predetermined lists.
• She decides where to give her charity funds to each year and we usually make an experience out of her donation. IE, we tour the facility of the Animal Shelter, or hospital, or whatever and have her physically hand over the funds, talk to the leaders there about what the funds actually buy, etc. so that it becomes more memorable. We have allowed her to "roll over" funds for 2 years to make a more substantial donation this year. We also match it ourselves.

Those are our live by allowance rules. They sounds strict when I write them all out!  We both got very little in the way of financial education, so we're eager to provide more than we got.

[RFAAOATB]

While we all have similar answers, I wonder when the common $1/year/week needs to raised due to inflation. Besides us, another important data point is your kid’s peer group.  What are they getting for allowance?  I would prefer they not have much less or much more than their friends.  This could be influenced by choosing to live in a low income or high income neighborhood.  I really don’t have a concrete plan on what I’m going to do, and probably won’t have to worry about it until my daughter understands arithmetic.

[Christof]

We wait until our son realizes there is no Santa Claus, because right now he has correctly determined that everything that is too expensive to buy, he just needs to wish from Santa Clause, because then it‘s free and not costing us (or him) a dime. Until then he keeps collecting bottles to make some money which he mostly saves for the poor. There have been a few times where he has been wast... sorry... spending his money on “interesting” things, like magazine or some toy.

[jpdx]

We don't do money for chores, because we expect our son and daughter to perform these chores as part of their role in the family.

Exactly! Children should contribute to the family while developing a sense of helpfulness, participation, and purpose. Otherwise, you're instilling the wrong motivation -- you're telling your kids that they should only help if they can expect a dollar. Nah.

[Sugaree]

I have a six year old and he gets $20 every other week (he gets paid when I get paid).  He's required to save at least half of it in a "saving savings" account and can choose to either spend the other half immediately or put it in his "spending savings" account for bigger stuff.  He has a binder with pages to keep up with each balance as well as pages where he can write down/draw what he wants to buy as well as little thermometer-thingies to track his progress towards those things.

We've started talking about investing and he's finally seeming to grasp how a stock works.  So, we'll be adding some pages to his binder for that.  When that happens, he'll be able to use some of the money in his "savings savings" account to invest.

[NextTime]

We wait until our son realizes there is no Santa Claus, because right now he has correctly determined that everything that is too expensive to buy, he just needs to wish from Santa Clause, because then it‘s free and not costing us (or him) a dime. Until then he keeps collecting bottles to make some money which he mostly saves for the poor. There have been a few times where he has been wast... sorry... spending his money on “interesting” things, like magazine or some toy.

A little off topic, but you just sparked a childhood memory:

When I was a kid, I asked my mom why families with less money got cheaper/less presents while those with more money got nicer/more presents. To keep they myth alive she told me that the parents have to pay Santa Claus for the presents. I'm not sure if that was brilliant or completely messed up.

[ericbonabike]

We also do 0.50 per year every week.  So, my 14 year old gets $7 a week. 
This covers what we consider "basic" chores. 
cleaning bathroom, cleaning floors, kitchen chores, etc.

We also pay by the job for extra work to include:
scooping up dog poop ($5)
yardwork (mowing & weedeating entire yard = $10)
Pressure washing
Watching baby brother when duration exceeds about an hour. (i.e.  babysitting).
etc



I think it's been a great thing.   I've also stopped buying a lot of things for kids. 
basically any luxury or convenience comes out of their pocket.

Has it been effective?
Yeah, I think so.  They've started budgeting.  They've started understanding the concept of "opportunity cost".