Allowance for Kids: How to Teach Kids About Money

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Are your kids asking to buy things left and right at the store? Giving your kids allowance may be the answer to eliminating tantrums and teaching your kids how to be financially responsible.

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You are at Target, trying to grab a birthday present for one of the many birthday parties coming up. Your strong-willed preschooler saw a toy that his friend has, and HE MUST HAVE IT. You calmly said no and tried to explain that you are at the store to buy his friend a present, but too late … he has already exploded into a tantrum of epic proportions.

Does this sound way too familiar?

Around the age of 3.5, kids start to ask for toys and do not take no for an answer. Instead of dealing with a screaming kid failing about in the middle of the aisle, I have the perfect solution for you – an allowance.

When Should You Start Giving Allowance to Your Kids?

As soon as your kid starts asks for something and gets upset at you for not giving it to him, it’s time to start implementing allowance. This occurs around the ages of 3 to 5.

I know what you are thinking – how is my 3-year-old going to understand the concept of money? The truth is, he may not. But we can start introducing the basics of money management to our kids.

They need to understand that:

  • You need money to buy things.
  • Mommy and daddy’s money are not your money.
  • You may not always have enough money to buy what you want.

If you do not feel comfortable handing your 3-year-old cash, then start with a rewards chart. For example, for a toy that is $5, you can have a chart with 5 boxes. For each week that pass, your kid gets one sticker or tick mark in a box. After 5 weeks, your child will have all the boxes checked off, and then he will be able to go to the store and buy that $5 toy.

For older kids, you can use the free allowance tracker printable to start keeping track of the money in his piggy bank.

How Much Allowance Should I Give My Child?

You might have heard of the general guideline that you should give $1 per week for each year of the child’s age. For example, a 6-year-old would receive $6 per week. You might have also heard 50 cents per week for each year of the child’s age, so $3 per week for a 6-year-old.

The answer is that how much allowance you should give to your kids all depends on what you want them to do with their allowance money.

If you want your 4-year-old to be responsible for only purchasing his toys, then $4 a week may be excessive. However, if you want him to be also responsible for buying his own choice of snacks for lunch, for example, then perhaps $4 a week is just right.

Another consideration is your family’s financial situation. If you are barely able to pay off the bills, perhaps shelling out $6 a week isn’t such a great idea.

Talk with your spouse and use your judgment to decide the amount that is right for your family.

Set the Guidelines for Allowance

You should set your guidelines for what your kids can use their allowance for, but here are some recommendations for you to think about:

  • Mommy and daddy will buy presents birthdays and Christmas (or whatever other holidays you celebrate by exchanging gifts).
  • Mommy and daddy will pay for clothes and shoes when the seasons change (i.e. purchasing long-sleeve shirts for the winter).
  • Mommy and daddy will pay for back to school supplies.
  • Mommy and daddy will be responsible for any medical expenses, including paying for glasses and necessary medications or supplements.
  • You must bring your wallet to the store. If you do not have your wallet, then we will come back another day with it to buy the toy. This gives your child a chance to rethink his purchase decision and perhaps by the time he returns to the store, he no longer wants the item. A great guideline to implement to eliminate impulse buys!
  • There are NO loans. We tried lending our 5-year-old $2 at the store and asked for the $2 that night, and guess what? He experienced spontaneous memory loss and did not recall ever asking for the $2. And when we got close to his piggy bank? It was as if Hell had descended on earth.

Setting clear guidelines is so important to avoid any confusion and tantrums. If the guidelines are not clear, then your child might expect you to be paying when the financial responsibility is on him. Needless to say, this will lead to power struggles and “it’s not fair!” type of arguments that we just love so much.

Just put yourself in your kid’s shoes. An allowance is like getting a stable monthly salary at your workplace – you expect to receive it every month, and you don’t expect more of it unless you get a promotionYou know what expenses your company will cover and what expenses you are responsible for paying with your own money.

If all of a sudden your salary is reduced or stopped completely, that will throw your financial situation into chaos. And if you use the company’s money in situations when it’s not permitted, then you are committing embezzlement and will be in major trouble.

Do I Pay My Kids to Do Chores?

The quick answer is NO. This might be shocking to some of you because you want to give your child opportunities to earn money. However, remember that he is now receiving an allowance, and doing chores is just something we do as part of the family.

Wouldn’t be nice if we get paid for doing family work? Well, we don’t, and therefore there is no reason that the kids should receive money in exchange for doing house chores. We are all part of the family and thus we all need to contribute to help around the house.

The issue with paying our kids to help around the house is that we create a sense of entitlement. Your child will begin developing the attitude of “unless I get paid, I am not doing anything.” Then when does it stop? Does your kid get paid for brushing his teeth? Or even flushing the toilet? Trust me, this is one slippery slope you don’t want to go down.

Now, if your child is not getting enough allowance to get what he wants, there is a way. HE CAN GET A JOB! Haha! You are probably thinking, how is my 5-year-old going to get a job?

By getting a job, I meant you can pay your child for something that you would otherwise pay someone else to do. For example, you would probably pay someone to pull out all the weeds in your backyard. For a job so simple, why not offer the opportunity to your kids?

Word of caution – do not pressure your kids to take the job. It’s simply an opportunity for them to earn more money, but they don’t have to do it. Your child can decide whether the money is worth the effort and time.

More Expert Tips to Make Allowance a Success!

  • Have a running Wish List on your phone for your child. When he wants something from the store but do not have enough cash for it, then put it on the Wish List. This shows him that you take his desire to purchase the toy seriously and that you will refer to his Wish List for birthday or holiday gift ideas.
  • If you do decide to loan your child money when he doesn’t have his wallet with him, put a reminder on your phone to IMMEDIATELY take the money from his piggy bank when you return home. If you forget a couple of times, your child will start expecting you to start paying for stuff and “accidentally” leave his wallet at home.
  • One highly recommended guideline is to have your child always wait 24 hours before buying anything, even if he has his wallet with him. The reason for this is to give your child time to think if he NEEDS the item versus just WANTS the item. This also reduces impulse buys and gives your child a chance to decide if he needs the item now, or if the item should go on the Wish List (or maybe he will decide he doesn’t need the item ever!).
  • For older kids, you can start teaching them the concept of saving and sharing. You can use a 3-part moneybox with one canister for save, one for spend, and one for share.
  • STICK TO THE GUIDELINES! It’s so difficult watching your kid’s disappointment face when he realizes he does not have the money to buy the toy he has been dreaming of, but he will learn that if he continues to save his weekly allowance, he will be able to purchase it one day. If you violate the guidelines, it’s just an invitation for your kid to resume the old behavior of throwing tantrums in the middle of the store when you refuse to buy him a toy. We sure don’t want to relive that.

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Frequently Asked Questions

  1. What happens if I take my kids shopping for new boots in preparation for the cold weather, and she wants a $200 pair of boots instead of a reasonably priced pair?
    You need to set a limit as to how much you are willing to pay for your kid’s boots. If you set the limit to $80 and your kid is asking for a $200 pair of boots, then she will need to pay the difference ($200 – $80 = $120). If she can, then, by all means, let her get the $200 pair of boots.
  2. I set the guideline that mommy is responsible for back to school purchases, but my kid is going through the store on a shopping spree. What do I do?
    This is a great time to talk to your kid about budgeting. While you are responsible for the back to school expenses, there needs to be a budget and a maximum limit to how much your kid can spend on the supplies. You can start teaching your kids to:
    – Compare prices at different stores (including online stores)
    – Find opportunities to save money (a.k.a. coupons or markdowns)
    The key to this is that your kid gets to keep any leftover money from the budget! If he did the hard work and managed to go under the budget, he should be able to reap the rewards.
  3. Can I take away the allowance as the consequence of my child not doing chores or behaving badly?
    No, you should never touch your kid’s allowance. Going back to the job example. If you happen to mess up a presentation one day, would your boss take away your salary for that month? Most likely not, unless you somehow completely offended the company or committed a felony. There are better natural or logical consequences you can implement.


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