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Resources > Financial Literacy > To Give or Not To Give—Should Parents Give Their Child an Allowance?

To Give or Not To Give—Should Parents Give Their Child an Allowance?

When it comes to parenting, one of the common questions is—should parents give their children an allowance? Many parents also wonder if they should merely hand over the money to their children or have them do chores to earn it.

If these are the questions on your mind, you’re at the right place. We’ll answer whether it’s a good idea to give allowance to children, what the pros and cons of this practice are, and how to make children financially responsible.

Should Kids Have an Allowance?

Most American families believe children should have an allowance. According to a survey by the American Institute of CPAs, 86% of the surveyed Americans believe children should get an allowance. What’s more, 75% of the surveyed parents believed the most important reason for giving their children an allowance is to teach them the value of money. But at the same time, only 3% said their children actually save their monthly allowance.

The survey also found that American children receive an average allowance of $30 per week, which is enough to save about $1,500 in a year. If you’re not sure how much allowance you should give your child, consider the following strategies for coming up with your ideal amount:

  • Paying $1 to $2 per week for each year of your child’s age—For example, a 10-year-old would receive $10 to $20 per week, and so on 
  • Using a goal-based approach—If your child wants to save up to buy an expensive item (like a gaming PC), you can decide on an appropriate allowance amount that will help them purchase that item over a set period

Why Should Kids Get an Allowance?

The goal behind giving your child an allowance should be to teach them the value of money and the importance of saving and responsible spending. 

Research has shown that many U.S. adults struggle with saving money. The personal saving rate in the U.S. was only 4.1% in November 2023, and 37% of Americans report that they can’t cover a $400 emergency in cash. Giving your child an allowance is a good way to prevent such situations in the future.

Here are some of the most common reasons parents give their children allowance: 

  • 59% want their children to understand the importance of working to earn money
  • 35% want to teach their children how to manage money
  • 3% want their children to stop asking them for money
  • 2% give an allowance because their child’s friends receive theirs

Pros and Cons of Giving Your Child an Allowance

Before deciding whether to give your child an allowance, you should weigh the pros and cons of this practice to come up with a choice that works best in your case.

The benefits of giving your child an allowance include:

  • Teaching your child how to budget effectively—Once your child realizes that their allowance is the only money they’ll receive during a particular period, they may start learning from their spending mistakes and become more effective budgeters
  • Giving your child a sense of responsibility and independence—Children with allowances report feeling more confident about managing their finances 
  • Providing your child with an incentive to help around the house—If you want your child’s allowance to help them learn the value of work, you can agree to give them money based on the number of chores they complete per week. Example chores include mowing the lawn, washing the car, doing dishes, or vacuuming

There are also possible cons of giving your child an allowance, such as:

  • Creating a sense of entitlement—This is especially true if you don’t combine the allowance with proper financial education. For example, some children may refuse to do anything if there’s no money involved
  • Leading to harmful spending—Children may fall into harmful habits if their spending isn’t monitored. You want to keep a close eye on your child’s spending habits and encourage them to share their spending decisions with you
  • Causing self-esteem issues—If a child receives less allowance than their peers, they might struggle with low self-esteem. You want to encourage them to avoid allowance-related discussions and comparisons with their peers

Tips for Giving Your Child an Allowance

If done right, giving your child an allowance can help them build important financial skills early on in life. Here are some tips to achieve that:

  1. Start early and remain consistent
  2. Help them set goals
  3. Keep track of their spending
  4. Educate your child on financial concepts

Start Early and Remain Consistent

Research suggests that children may be ready to receive an allowance and start learning about money when they begin kindergarten, which is usually at the age of five to six. The earlier you introduce them to the concept of money, the quicker they’ll get better at finances.

You also want to remain consistent to help your child adjust to allowance rules more easily. Whether you pay them weekly, biweekly, or monthly, always do it on the same day and give them the same amount so they understand the value of making their money last.

Help Them Set Goals

Teaching your children to set long-term spending goals will help them see the value of skipping immediate wants in exchange for bigger returns in the future. When helping them set goals, one model you can follow is requiring your child to:

  1. Set aside one-third of their allowance for savings (such as a college fund) or investments
  2. Give one-third to a charity like an animal or homeless shelter
  3. Use the remaining money for immediate spending

Children mostly learn from observing their parents, so if you’re spending beyond what you can afford instead of sticking to a budget, your child will follow suit.

Keep Track of Their Spending

One way to make sure your child is held accountable for their spending is to introduce them to banking. Consider opening a custodial savings account on behalf of your child and encourage them to deposit a part of their allowance into the account. Teach them how to check their balance online and point out how interest accumulates over time.

Depending on their age, you might also want to get your child a debit card and encourage them to make most of their purchases online. This way, it will be easier to track their spending. If that’s not possible, think about adding your child to your credit card so they have access to an online spending method.

Educate Your Child on Financial Concepts

Merely giving your child an allowance isn’t enough for them to learn financial literacy. Take the opportunity to teach them about other aspects of money handling, such as taxes, credit scores, and credit and debit cards.

As they start understanding financial concepts better, it’s a good idea to go beyond an allowance and take measures to set your child up for tangible financial success in the future. One way to do this is to help them build a good credit profile early on in life, which will help them secure better loan terms and job opportunities in the future. 

Unfortunately, the CARD Act of 2009 prohibits issuing credit cards to anyone under the age of 21, meaning building credit for children can be tricky. That’s where FreeKick comes in—a credit building platform that helps parents build credit for children as young as 13.

FreeKick—The Ideal Solution for Child Credit Building and Identity Protection

FreeKick is a deposit account offered by Austin Capital Bank. Insured by the FDIC, it helps you build credit for your children and keep their identity secure. FreeKick’s identity protection services are not just for children—they help you keep your entire family safe, including you and your spouse.

Building Credit With FreeKick

You can use FreeKick’s credit building service if your children are between 13 and 25 years of age. It’s a great way to establish credit in three simple steps:

  1. Create an AccountSign up for a FreeKick account and choose a deposit
  2. Set It and Forget It—FreeKick will start building 12 months’ worth of credit history for your child
  3. Keep Growing—After 12 months, you can close the account without penalties or continue building credit for your child 

This way, your child will get up to a five-year head start and a 24-transaction payment history when they become an adult. They’ll also be able to save up to $200,000 during their lifetime due to the more favorable loan terms they’ll be able to qualify for.

Identity Protection With FreeKick

Good money habits won’t save your children from financial struggles if they become victims of child identity theft.

This vicious crime happens every 30 seconds and can seriously damage your child’s credit—they might even face serious charges like credit card theft, which is why it’s essential to do everything you can to protect them.

Enter FreeKick’s identity protection service, which ensures your family remains safe. Here’s what the service includes:

Services for MinorsServices for Adult Children and Parents
Social Security number monitoring
Credit profile monitoring
Up to $1 million identity theft insurance
Full-service white-glove concierge credit restoration
Dark web monitoring for children’s personal information
Sex offender monitoring—based on sponsor parent’s address
Social Security number monitoring
FICO® Score factors
Credit profile monitoring
Dark web monitoring for personal information
Up to $1 million identity theft insurance
Lost wallet protection
Court records monitoring
Change of address monitoring
Non-credit (Payday) loan monitoring
Free FICO® Score monthly
Experian credit report monthly
Full-service white-glove concierge credit restoration

FreeKick Pricing

FreeKick has two plans to fit different budgets:

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

Both plans protect the identities of up to two parents and six children (ages 0 to 25) and offer credit building for six children aged 13 to 25. 

Go beyond a monthly allowance—build your child’s credit and protect their identity. Sign up for FreeKick today.