Kids Allowance

How to save money by giving allowance to your children.

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Kids Allowance - Giving Allowance Tips and Ideas

frugal piggy bank giving allowance

What, did I just say you could actually save money by implementing an allowance for kids? Yep. Sure did.

The truth of the matter is, whether you realize it or not, you are already spending money every single month on your children's “want” items. Whether this is little treats or toys in the grocery store, ice cream from the ice cream truck, movies with a friend, or fun, stylish clothing, your children are already part of the family budget.

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Why Pay Your Kids Allowance

Do you pay attention to how much money you spend on your kids on a monthly basis? (If you're using a budget you should be!) It really adds up over time.

How many times have your kids asked for the following:
  • A new shirt they don't need
  • Money for movies with their friends
  • School lunch when they could brown bag it
  • Candy in the check-out line
  • A new toy or video game while you’re shopping at Wal*Mart
  • A Redbox rental
  • A new stylus for their Nintendo DS because they just lost the one you bought last week
  • Hello Kitty toe socks
  • Kids know that the only way to get what they want is to hit up Mama Moneybags. And mama knows the kids deserve a treat once in a while. The problem is it can get quite expensive - fast. In most situations, an allowance for kids is the solution. This way you can add these expenses to your budget and your kids can learn some valuable life lessons.

    On a side note, in our family, even mom and dad get a monthly allowance. (Strangely, it is smaller than the kids'!) This "mad money" is our little way of splurging on ourselves, guilt free.

    Types of Allowance for Kids

    If you had a child allowance when you were a kid, and you'd like your own child to have about the same amount that you did, check out this calculator here.

    It will compare the rate that you got with inflation and tell you exactly how much your child would need to have the same buying power you did at his age.

    Cash for Chores - There is great debate on whether you should pay your children for chores. On one hand, it teaches that working is rewarded and failing to work hard may mean that you are not rewarded. But on the other hand, chores are more of a contribution to the family's lifestyle, and tying them to money may send mixed messages.
  • The child may get the idea that the pursuit of money is more important than contributing to the family
  • The child may think that making money is tied to unpleasant tasks, as opposed to finding something he enjoys in life and making money with it
  • The child may think that if no one is paying him to do chores, they are not worth doing
  • When the child is older and gets a part-time job, they may feel chores are not worth doing anymore
  • We personally do not practice giving allowance for kids chores. Everyone in our home does chores. We all cook, we all do laundry, we all clean. And we aren't paid for it. If the kids don't do their chores as they are supposed to, a privilege is taken away such as computer time or playing outside with friends. Their kids allowance is given no matter what because for us, money management is a totally separate lesson.

    $1 a Year - Children as young as three can participate in kids allowance. A popular method of handing out cash is the $1 a year plan. This is a very simple plan that gives each child cash each week based on how old they are. A three year old gets $3. A 10 year old gets $10. It makes birthdays even more exciting!

    Peer Pressure - Many parents look to the surrounding community to see how much they feel they should give their children in allowance. Kids in urban areas might need a little bit more cash than those in more rural areas, so it might be a good idea to ask other parents how much giving allowance is costing them.

    I spent my teen years in two different places: South Florida and rural Montana. When I wanted to go to a movie with friends in Florida, it would cost us about $10 in those days, plus another $6-8 for popcorn or food. In Montana, the closest movie theater played the movies as they were leaving the theaters and was only $4, and for an extra $2 you could get popcorn. That's a drastic difference! And a reason that this method might be a good choice for your family.

    Of course, if you are more frugal than your child's friends parents, this idea might not work, but it's a starting point.

    Salary - Some parents go all out when it comes to kids allowance, and actually pay a salary. Basically, these parents pay their older children on a weekly or monthly basis one set fee and have their child allocate expenses. For example, the parent may give the child $100 a month and have the child pay for school lunches (or buy ingredients and pack their lunch instead), field trips, school clothes and shoes, school supplies, etc.

    This can be a great way to teach a responsible child about budgeting. But, for a child that is not as responsible, it may set them up for failure as they spend the money not on necessities, but on wants. If you decide to implement this system, I recommend you read Mary Hunt's Debt Proof Your Kids. And start small.


    Some parents, instead of taking the salary approach year round, pay a regular kids allowance most of the year but give an extra salary for things like back to school clothes, allowing the child to make their own budgeting choices on big purchases.

    Conditions for Kids Allowance

    The primary reason that we pay our kids allowance is for them to learn money management skills that we did not learn when we were kids. Yes, my parents paid my sister and me a child allowance for some of our growing up years (unless finances were tight, and then we went without). But it was just handed to us with a "have fun!" And fun we did!

    But I wanted to make sure that my children learned about money in a much different way, so we have implemented a plan for them to separate their funds as they get them (including birthday and Christmas money - everything) to plan for the future.

    30% Spending Money - 30% of the cash they get they can do anything they want with. This usually results in ice creams from a local gas station or buying gum in the grocery check-out line, though I am seeing more and more clothing items being purchased by my daughter. I don't judge and I don't interfere. If they want to go to a movie with a friend, they pay for it. If they want new shoes when they already have shoes that fit them, they pay for it. A new video game? Go for it.

    30% Big Purchase Money - 30% of the cash we make them save off to the side for a big purchase, such as a new computer or a bike. This teaches the concept of delayed gratification. My daughter bought herself an American Girl Doll with the money she saved for almost 9 months. Not only was this her most treasured toy, she took better care of it than any of her other things.

    30% Savings - 30% of everything they get is put away towards savings. This could be for college, for a car or trip abroad, or just for real life once they're out on their own. More than anything, this concept is one we want our children to learn, that part of everything we get is put aside for US. Not for bills, not for playing or having fun, but for our own security and our future. They should have a nice nest egg to start their lives with. It adds up over time.

    10% Giving - Learning to give back is a very important thing. If you are involved in church, your children can give their own money to the offering. In our home, we allow our kids to spend their giving money on a cause of their own choice. They have bought food for homeless people, and their favorite thing to do is to save up to buy chickens or rabbits from Heifer international. This is a charitable organization that works world-wide to help families get farm animals to raise for food and income. The whole "teach a man to fish" mentality.

    This is our personal method. This may or may not work for your family, and that's OK. Alter these methods to find what works best for you.


    Sneak Peak at Next Week

    Like this section on budgeting kids expenses? Next week we'll talk about living off the land. We'll go over frugal ways to save money on expenses by utilizing your backyard, and growing some of your own food, and more.

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    How Much Will These Kids Allowance Tips Save You?

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    What is your family's method to kids allowance?

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