Do you give your kid a weekly allowance? If so, you should know the going rate is $30, at least according to 2019 research from the American Institute of Certified Public Accountants. That was a 50% boost from 2017 — though it’s anyone’s guess what that stat will look like in 2020. No matter what, it sounds like a lot of money — but is it really?
That depends, according to Robin Taub, a financial consultant and author of A Parents’ Guide to Raising Money Smart Kids. “The amount that you give for allowance has a lot to do with what you expect them to pay for with it,” says Taub, noting that if your kid has to buy the odd lunch and pay for social outings, $30 is going to run out pretty quickly.
Far more importantly than “how much?” is “how come?” and on that point, the majority of parents questioned are aligned: 75% of them said that the reason they give a weekly allowance is to teach children a sense of financial responsibility. Which is, of course, an excellent idea…in theory.
In reality, though, the same survey suggests that intention and reality aren’t lining up with many young people spending the majority of their weekly windfall on outings with friends (45%), digital devices or downloads (37%) or toys (33%). Just 3% were putting the bulk into savings.
Now, with kids at home and the global economy in limbo, now may be a good time to rethink that. Wouldn’t it be good to have some cash set aside, kids? It’s a real-time lesson in liquidity — one worth walking them through.
A weekly allowance is really an annual plan
“Unless you determine otherwise, kids are going to see their allowance as spending money,” says Taub. In order for a weekly allowance to provide lessons around budgeting, she says, parents need to sit down with their children and establish what that budget looks like. Maybe that’s saving $5 every week for a longterm savings goal and putting another $5 into a savings fund. For older kids it could be paying a portion of their phone bill or contributing to an education fund. “
The key is that you are helping your kid to make a plan,” says Taub. “And then stick to it.”
That second part may be the most challenging aspect. (Who wants to see their 16-year-old sitting out a concert with friends because they blew their money on snacks?) But it’s also essential to forming positive financial habits, which actually form grooves in the brain that become hard to break. And which come in very handy during times like these.