Giving your child an allowance serves many purposes. Besides letting them finance their needs, it teaches children about financial management early on. 

If your child is ready for an allowance, there are several important considerations to make before they receive it. This guide to allowance for kids will outline them and answer the most common questions parents have:

• What is an allowance, and why should your child get one?
• How much allowance should you give?
• What is the best way to give an allowance?

What Is an Allowance for Kids?

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This question might seem superfluous at first glance, but there isn’t a consensus on a specific definition of an allowance. In a broad context, it’s an amount of money your child receives on a predetermined basis, typically once a week.

Still, there’s a lot of debate on whether an allowance is something a child should receive by default or a form of payment they get for chores.

Many parents believe their child should earn an allowance to understand the value of hard work. While there’s certainly a strong logic behind this, research shows rewards might not be the best way to motivate children. Besides, a chore-based allowance may lead to the child expecting a payment each time you ask them to do something.

There’s no correct answer to whether your child should get an allowance as a reward or without any chores—this mainly depends on your parenting style. Regardless of the motivation behind the allowance, your child can benefit greatly from it.

Why Should Kids Get an Allowance?

There are two main arguments in favor of giving your child an allowance:

1. Increased independence and decision-making skills
2. Better financial literacy

When your child receives an allowance regularly, they can manage their own money instead of having to ask you for every purchase they want to make. This is an excellent step toward independence, and it teaches your child to be responsible with money.

An allowance will likely be your child’s first opportunity to learn about saving, budgeting, and numerous concepts they’ll need throughout adulthood. They can learn to make sensible decisions instead of falling into the trap of instant gratification.

Such first-hand experience with money will also improve your child’s financial awareness and literacy. This is a significant benefit because your child may not have any other source of financial education. A nationwide survey grading each state’s ability to ensure financial literacy in high school graduates showed that only five states got an A:

1. Utah
2. Missouri
3. Tennessee
4. Alabama
5. Virginia

There are numerous ways to teach your child about money, but theoretical knowledge might not be enough. An allowance lets children apply what they’ve learned and build healthy spending habits early in life.

How Much Allowance Should You Give Your Child?

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The allowance amount depends on several factors, most notably:

• Your financial situation
• The child’s age
• Their weekly needs

Still, there are some reference points you can use to determine the exact amount. The following table breaks down the average allowance by age group based on Greenlight’s data:

Age	Weekly Allowance
5–10 years	$7.23
11–15 years	$11.99
16–19 years	$22.00

The allowance amount increases with age, which makes sense because your child’s needs grow with time. A common rule of thumb parents rely on to calculate the allowance is $1 per child’s age, so you can use this as a starting point.

Tips for Giving Your Child an Allowance

After deciding how much allowance you want to give your child, it’s time to see how you’ll approach it. To maximize your child’s financial and educational benefits, take the following steps:

1. Choose between cash and cards
2. Set spending rules
3. Encourage saving

Decide How You’ll Give the Allowance

Cash allowance seems like a go-to option, especially if your child is young and you won’t give them a significant sum. As they grow, you might want to consider switching to a prepaid or debit card.

When your child is eligible for a checking account, you can open one for them and get them a debit card. If you want to start with cards sooner, a prepaid card can be an excellent choice. You can load the card each week with the agreed-upon amount, and your child can use it for payments and withdrawals.

Many prepaid cards also come with money-management apps, which are quite useful. They can introduce your child to the banking system and gamify the learning experience.

Define Allowed Purchases

While the point of an allowance is to give your child more independence, you should still set some rules—at least in the beginning. They should learn the difference between justifiable purchases and unnecessary luxuries that hurt their budget.

It’s important to closely monitor your child’s spending behavior when they first get an allowance. If you notice a tendency to spend it all at once or other red flags, teach them how to budget properly.

Help Your Child Save Up

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Long-term thinking is a crucial aspect of financial stability. It’s natural for a child to be impulsive and impatient while they’re young, but take the allowance as an opportunity to ensure they don’t carry these traits into adulthood.

You can simulate the savings benefits offered by many banks and reward your child for being frugal. For instance, you can give them a small bonus at the end of the month if they meet the savings goal they’ve set.

Other Ways To Support Your Child’s Financial Independence

As your child grows up, their allowance will be replaced by their wage or salary. At this point, they’ll enter the banking system and might seek financial products like loans and credit cards. By the time this happens, they should’ve already developed the money management skills that will keep them in good standing with lenders.

Besides teaching them healthy spending behavior, you can support your child by helping them build credit. A strong credit profile can be an invaluable asset, so the sooner you start, the better.

Some parents add children as authorized users of their credit cards to help them build credit early. This is because the CARD Act of 2009 doesn’t allow anyone under 21 to own a card unless they demonstrate the ability to repay the debt independently or have an eligible co-signer.

While your child does get a credit profile as an authorized user, this is a risky method for several reasons:

• They inherit your credit history and can damage your credit profile with poor spending habits, as your credit profiles will be connected
• You need to give your child access to the card, which can lead to significant debt because many issuers don’t let you set a limit on authorized users’ spending
• The child only builds credit while they’re an authorized user. When you remove them from the card, they need to start over because all your credit history gets deleted from their report

Luckily, there’s a better way to make your child’s adulthood easier—FreeKick.

Go Beyond Financial Education With FreeKick

While it’s important to provide your child with a financial education, you also need to take solid steps to give them a bright financial future, such as building their credit profile and protecting their identity. FreeKick by Austin Capital Bank is an FDIC-insured deposit account that offers both of these services.

FreeKick’s Credit Building Service

All children aged 13 to 25 can benefit from FreeKick’s credit building service. To reap its advantages for your child, take the following steps:

1. Create an Account—Sign up on FreeKick.bank and choose a deposit that suits your budget
2. Set It and Forget It—FreeKick will start building 12 months’ worth of credit history for your children
3. Keep Growing—After 12 months, either close the account without any fees or continue building credit for your child for another year

With these simple steps, your child can have up to five years of credit history once they turn 18. This will help them save $200,000 during their lifetimes as they’ll be able to secure loans on favorable terms.

FreeKick’s Identity Protection Service

Credit building is incomplete without identity protection. Child identity theft occurs every 30 seconds, and if your children fall victim to it, their credit profiles can suffer significant damage. This is why it’s a good idea to invest in FreeKick’s identity protection service, which offers the following features for minors:

• Credit profile monitoring
• Social Security number (SSN) monitoring
• Dark web monitoring for children’s personal information
• Up to $1 million identity theft insurance
• Full-service white-glove concierge credit restoration
• Sex offender monitoring—based on sponsor parent’s address

FreeKick also offers identity protection for adult children and parents via the following features:

• Credit profile monitoring
• SSN monitoring
• Dark web monitoring for personal information
• Up to $1 million identity theft insurance
• Full-service white-glove concierge credit restoration
• Lost wallet protection
• Court records monitoring
• Change of address monitoring
• Non-credit (Payday) loan monitoring
• Free FICO® Score monthly
• FICO® Score factors
• Experian credit report monthly

FreeKick Pricing

FreeKick has two pricing plans:

FDIC-Insured Deposit	Annual Fee
$3,000	$0 (Free)
No deposit	$149

With both plans, you get:

1. Credit building for six children aged 13 to 25
2. Identity protection for two parents and six children aged 0 to 25

Secure your child’s financial future through good credit and a protected identity—sign up for FreeKick today.

Featured image source: Karolina Grabowska