How Earning An Allowance Helps Kids Learn About Money

Written By Darin Ryburn

Next time you are in a group of your peers, preferably those with elementary-age children, try this for a conversation starter: “Do your kids get an allowance?” Chances are you will be on the receiving end of an entire range of opinions, from “No way! It is their job to help out in our household!” to “Of course! They should be able to earn money!”

The argument of whether or not to pay children an allowance has many sides. Ultimately, it is a personal decision; that is, every parent needs to decide what works best for their household. Here are a few reasons supporting the idea of allowances for children that just might make the decision easier for you to make.

1. Allowances can be for specific chores that are above and beyond normal, personal responsibilities.

This is a great way to accomplish two lessons at once: First, everyone in a household has certain responsibilities and is expected to help out in an age-appropriate way. If everyone pitches in and helps cleans up after dinner, pulls weeds on the weekends, and keeps their rooms tidy, households run smoothly and no one person (mom or dad!) are left doing everything. However, another set of chores could be designated as “earning power” tasks that lighten the load for others: Washing mom or dad’s car, getting up early to unload the dishwasher, or whatever a parent wants to offer up that are completed in addition to what is normally expected.

2. Allowances give children an opportunity to learn to manage money.

Once a child is old enough to understand the basics of money, which is to say, that money is earned by working and then spent on material things, experiences, food, bills, etc., it may be the right time to introduce them to the idea of earning an allowance. An age-appropriate allowance encourages children to think about spending—and what is, and is not, important to them. It also helps children appreciate what their parents are doing: making choices about where to go out to dinner, where to buy groceries, where to go on vacations, etc. Choosing to spend the money they earn around the house or not also exposes children to the pitfalls of spending their hard-earned money on something they regret. Much better to learn this lesson when that something is a candy bar or new toy.

3. Earning money encourages saving.

Many children start receiving money instead of presents from relatives, which is another perfect opportunity to teach children about managing money—in this case, a savings account. Birthday or holiday gifts of cash from relatives can come with a rule: some portion of the money received must go into a savings account. The same thing can be encouraged with allowances. Putting money away for a rainy day, a new bike or baseball mitt, is a valuable life lesson. In fact, having a “nest egg” is something that everyone needs, regardless of how old they are.

As soon as children are old enough to understand how money works, they are likely old enough to start learning about earning some of their own. Opportunities to illustrate to younger children the importance of managing and saving money can be found everywhere: as parents plan for holiday vacations, while helping older siblings choosing a college, and even organizing grandparents’ retirement! Grandpa and Grandma no longer work, so how do they pay for food, medical bills, or long-term care if they are no longer able to live at home? Since managing money is a lifelong necessity, the earlier kids start learning, the better.

If you have questions about long-term care coverage or how NPFBA can help serve you, feel free to reach out to us via our website, phone, or email!

If you have questions about long-term care coverage or how NPFBA can help serve you, feel free to reach out to us via our website, phone, email or schedule a zoom meeting and let’s grab some face time!

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