When Is a Child Ready for an Allowance?

This question has been on our minds quite a bit recently, as our three and a half year old son continues to grow and mature. We’ve long planned on giving our children small allowances that are not tied to household chores, and now we’re actually faced with a child that’s nearing the maturity level to understand it.

He understands that money is used to buy things. In order to get an item, you have to exchange some amount of money for it.

Similarly, he understands that there is only a limited supply of money. There is not an infinite amount of money – in fact, in his world, there’s not much money at all. Thus, you can’t simply buy everything you want.

He also understands that different items have different prices. You don’t have to give much money for some things. However, you have to give quite a bit of money for other things. Not all items have the same price. He also understands that saving your money is worthwhile, though this lesson has been guided greatly by Mom and Dad.

Finally, he can count to twenty with ease and count quite a bit higher with some coaxing and concentration. He can not only count abstractly, but he can also count items: coins, chocolate chips, and so on.

From my perspective, this means he’s ready for an allowance (though my wife and I are still discussing it). On the other hand, I know other parents of children as old as six who don’t feel their child is ready for an allowance.

Our goal with giving an allowance is straightforward: we want to teach him the value of saving, charity, and money management through his own experiences.

Questions to Ask When Considering A Child’s Allowance

1. How big should his allowance be?

There’s a fine balance to achieve here. It needs to be enough so that it’s relevant, but not large enough so that he’s spoiled. I’m leaning towards an allowance equal to his age in dollars – so, $3 now, $4 when he turns 4, and so on.

2. What kind of restrictions should we put on it?

From my experience, an allowance given with no restrictions often winds up being spent on bubble gum, which kind of defeats the purpose.

I’m leaning towards the Money Savvy Pig philosophy. To put it simply, it has the child split his or her allowance into four piles: spend, save, donate, and invest.

The “spend” pile is straightforward – that’s his money to do with what he chooses. If he wants to take his money and buy a Hot Wheels car with it, he can. If he wants some bubble gum, he can buy it.

The “save” pile is similar – he can spend it on whatever he wants, but it has to be a defined large goal. Perhaps he wants another track set for his wooden railroad, for example, or maybe he’d like to buy a Christmas present for someone with his own money. This would build up over many weeks, and if he chose, he could contribute more from his “spend” pile towards it.

The “donate” part allows him to choose every so often (once every three months or so) to give the money to a cause of his choosing. This would open the door to a lot of discussion about others in need and allow us to introduce charities to him. I know a child who saved for two or three years and donated a whole heifer via Heifer International, for example.

For his purposes, the “investing” part will be a very long term thing – he can watch it build and build and build, then when he’s older, we can use that money to begin learning how to invest it for the future. I’d love it if he took some of the quarters he saved when he was three, invested it somewhere, and used all of the proceeds to buy a house when he’s a young adult.

If we go down this path, we may start the allowance by giving him such a “savings pig.”

3. What about his younger sister?

There’s also a twenty one month old girl in our home, one who doesn’t have the foggiest idea about money yet. Before long, though, she’ll become aware of it – and she’ll be aware that her big brother is getting an allowance.

We’re not sure how to handle this. Should we give her a very small “spend”-only allowance for now, changing it when she reaches age three or so? Or should we just wait entirely until she’s old enough to understand the ideas? We’re leaning towards no allowance for her for now, making it clear to our son that he’s getting the allowance because he’s older.

Our goal in the end is to teach our children why it’s awesome to save and plan ahead. Your comments and thoughts on this plan are greatly appreciated.

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  1. Colin says:

    How far would you go for things like clothes, shoes, sports equipment, etc.?

    Instead of just buying these things outright for them you could go down the path of having them save up for things known in advance (and include increase in allowance).

  2. Amy says:

    This seems a very sensible (no pun intended) approach. As far as the little one goes, I think it’s only fair to wait until she’s three also, and start with the allowance=age thing there. Of course, I imagine you’d also be willing to buy her a small treat now and then. But I don’t think it’s fair to start them both off at the same time.

    I too like the idea that your son might save (in your words invest) a little at his age that will contribute to his long-term future.

  3. bethany says:

    I think children deal fairly well with statements like “that’s something that happens when children are four”. But I say this as a childless oldest sibling, so what do I know?

  4. pex says:

    This seems like it’s starting way too young. What is a three year old going to buy? I understand the need to teach kids good money habits, but it seems that a parent can pretty much take care of a three year old’s wants without forcing him to think about budgeting.

  5. Elizabeth says:

    My parents gave me a weekly allowance equivalent to my age, starting at 5 years old — they also allowed me to do certain chores (age-appropriate, obviously) for additional cash if I wanted to buy something badly enough.

    When I was 8, I wanted an American Girl doll (which were $80 each just for the doll and book in 1988). With shipping, it was going to take 12 weeks to save up for the doll, assuming I didn’t want sweets or something from the Scholastic book club at school. I was firm in the idea that I could go without spending a dime for 12 weeks, but when that first book club flyer came home in the mail, I immediately volunteered to rake leaves for an entire afternoon for $10.

    In the end, it was still 10 weeks (I added my Christmas money to the pot) until I got the doll, but it taught me a more valuable lesson about looking for work instead of handouts when I need more cash…something I still do as an adult when I want to take a vacation or make a major luxury purchase (like a new TV).

  6. Erika says:

    Personally, I think 3 is way too young for an allowance. As a former early elementary educator now turned stay-at-home mom, in my experience even six year olds have just the most basic understanding of money. That said, every child is different. If you decide to start an allowance, one potential pitfall might be that you’re planning to divide $3 into 4 piles. A child that young cannot do fractions or deal too much with coins. My guess is that if you asked your son, which is more: 3 nickels or 1 dollar, he’s going to say the nickels because it is more.
    That said, I like the concept of the money saving pig and might try it with my 3 year old at the next time she gets a cash gift with evenly dividing amount of dollars. Perhaps practicing it at this age occasionally will get her ready for an allowance in a couple of years.

  7. torrilin says:

    Why on earth would you restrict how he spends it? He shouldn’t be getting candy or junk food at home, and once he has an allowance, he shouldn’t be getting toys or books from you guys except on his birthday and Christmas. And as he gets older, if he wants a meal out, he should be paying for it. Same for school supplies and school lunches. Eventually, he should be deciding on how to spend the money for his clothing too.

    If you enforce a budget, he will have no motivation to budget on his own. If he spends a few years doing nothing but buying a candy bar a week with his allowance (and hopefully sharing with his sister), that’s fine and healthy. It’s his money, and his decision to make.

    I’d set his allowance at about a dollar, maybe two for now. That means the decision between a candy bar and a new toy is a big deal. There’s no way I’d go with a dollar per year of age… that gives him too much money right now, and makes it too easy for him to save up for toys. An annual raise is good, but it should not be large at all.

    Instead, when he gets to school age, he gets his allowance, and lunch money for school. He can choose to get school lunches, or bring a packed lunch and save his lunch money. As he shows his ability to be responsible, he gets more say over the other household money set aside for his care.

  8. T'Pol says:

    My parents recall that I used to make budgets with my allowance even when I was 6-7 and they still laugh at the fact that there was a “pleasure” category in the very small budget that I had. Well, I still do have that category in my budget only it now reads entertainment and travel:)

    I guess starting to give an allowance to your son now makes a lot of sense. I agree with Amy on starting your daughter when she reaches the same age as your son.

  9. eden says:

    I never had an allowance, so I can’t help you there.

    However, I agree that you should hold off giving your daughter an allowance until she’s the same age as your son. I still remember how much I resented my brother after my first communion. I put every single dollar that I had been given into opening my first saving account (back then there was a $200 limit, a lot when you’re in 2nd grade.) Then my parents gave my two-years-younger brother $200 to open his account.

  10. Evangeline says:

    I took a different approach for my now-ten year old and it worked beautifully. At 4, he was obsessed with Star Wars characters so his allowance was the price of the item–about $5. The goal was to learn how to make choices so if he chose gum (and he did) or a duplicate character (did that, too). I simply commiserated with him and suggested next week was a new opportunity. This helped teach decision making. Next he wanted more expensive items, so he’d have to save until the next week. Lessons learned here were savings and patience. At 8, he saved enough for his own video gaming system. Not bad for a little fellow. Now the lesson is in sharing/giving. He is quick to purchase for his little brother or help a friend and even understands that he owns part of the credit union because he is a member and he is understanding the power of interest. It’s basic but I started young and let him make a few mistakes and now he is quite capable of making very wise choices.

  11. Anastasia says:

    Disclaimer: I don’t have any kids.

    It seems to me that if you force him to give money to charity, then it’s not really giving. It’s the same as if you gave more money to charity.

    If I wanted a child to give to charity I’d instead talk about how wonderful it is to help others, and try to help the child learn internal motivation in that area.

  12. Sophie says:

    Trent, using your criteria, many adults would not qualify for an allowance : )

    I’m not a parent, and didn’t get an allowance (or pocket money as its known locally) as child, I only had money when I started a supermarket job while in high school. I guess this doesn’t really qualify me to comment, but I can only say that I wish my parents taught me about money (budgets, banking, investing, spending, etc) as a child, but maybe we don’t appreciate PF until we’ve learnt it the hard way!

  13. Margaret says:

    I’m with those who say leave sis out of it til she’s 3 (or later, if her number skills aren’t able to handle $ yet). They are different ages, genders and it is still fair to treat them differently because of their differences. After all, we don’t get a driver’s permit for all the younger siblings of the 16-year old the same year they pass the test to get theirs! I also agree that going with the dollar-per-year of age thing isn’t such a good idea. By the time he’s 12, he’ll be getting almost $50/month if he gets a weekly allowance. Plus, you’ll be starting lil sister on the same program. (They just might get the impression you’re made of money by the time they leave High School.):-) I like the idea that if it’s just a dollar, the decision has to be made between the toy and the candy. (or a good plan to get both, just not now) Isn’t that how real life works for the grown-ups?
    Another thought, for the discussion between you and the Mrs. is how long to continue the allowance: will it be in addition to kid-jobs he’ll do when he’s old enough to mow neighbors’ lawns until he reaches legal working age? will you allow him to work while he’s finishing high school? Fortunately, you can take about a decade to decide those things.
    I am curious if you will set up a visual, physical system for the 4 piles you want him to learn to split his money into. It’d be just one more way to get the idea of planning how to use the money into his head.

  14. Mz Ruby says:

    I like Dave Ramsey’s commission idea – no work, no pay. “Work” at age 3 can be very simple – 3 tasks per day such as clear his dishes from the table after each meal, help make his bed, pick up toys, etc. If he knows he gets 3 nickels each day he completes his work (2 nickels can go in a shiny bank for spending and 1 nickel in another bank for saving or giving) but does not get all 3 nickels for incomplete work, he will quickly get the connection between work and money. Make a sticker chart for the 3 chores a day he gets paid for and you are in business. Little kids love things they can see and touch – coins, stickers – and they are great motivators. One dollar he can spend every 10 days seems about right to me.

  15. LaDonna says:

    I’m curious why you don’t want the allowance tied to household chores. No kids here, so I’m not up on all the new parenting practices – just the ones used on me. I had to earn my allowance, which doesn’t really seem to be a bad thing to me. No one’s going to give them free money when they go out on their own, so it seems like it would teach them a work ethic early on.

    As for the sister, I have to agree with everyone else. It’s something to look forward to: “When I’m four, I get an allowance!”

    On the other hand, I don’t see anything wrong with your plan of the four piles. It’s just a different way of doing things and teaches them good practices from the beginning.

    Again, take free advice for what its worth!

  16. Suzanne says:

    Our oldest is 8 and we just started an allowance this year. He has been able to ‘budget’ and handle $ for a while, but our budget didn’t allow for giving him any. He gets $8/month, but it comes in a weekly format.

    We do $1 and 4 quarters @ week. To help him set a good pattern/habit, we require (while he lives in our house) that he puts 10% (one quarter) in savings and 10% (one quarter) in giving. The rest is his to determine how to spend. (After reading your plan of having some go towards long-term investing, we will be adjusting that) He regularly puts 2 quarters in each (saving/giving) and only keeps $1/week for spending. Because we are church-attenders, he brings his giving to church. Friends of ours match what their kids set aside for giving and they pick out a charity to give to – buying goats for poor villages, etc.

    We did not tie allowance into chores, but we have discussed that there will be consequences if his attitude is lacking in that area.

    We have 2 younger daughters (4 & 6) – the 6yr old wants to get an allowance, but we are waiting till we budget for it. We may start earlier than age 8 like we did with her brother, but we have to make sure it’s workable for us.

    All 3 kids have earned $$ for feeding a cat for a friend and we did a similar breakdown. Out of their $5 earned, they had to put $.50 in savings and $.50 in giving. They could decide what to do with the rest. Interestingly enough, my son put $2 into savings and $2 into giving – only keeping $1 for spending.

  17. swampette says:

    Hi! I’ve been reading you for a while, but this is my first time commenting. Also want to add that I don’t have kids yet – but I do have some vivid memories.

    That being said, whatever age you start an allowance with your son, you ABSOLUTELY have to wait until that same age for you daughter. Kids are SO sensitive to fairness – they notice difference more than you might expect.

    From my experience: I had an allowance beginning around age five that increased as I got older. In the beginning, I was required to automatically save 50% of my allowance, and later, 50% of what I earned in my first few jobs. As a teenager (pre-job, especially), I ran into a problem. My mother and I had totally different clothing styles. Fifty percent of my allowance wasn’t nearly enough to purchase clothes, but I wasn’t allowed to choose my clothes or modify my savings vs. spending ratio. This led to a spending binge (i.e. replacing my entire wardrobe) when the ratio was finally changed.

    You and your wife probably need to factor in what the child should be expected to purchase for him or herself, and what those costs are in relation to the spending portion of the allowance. You don’t want to create a situation where he or she ends up trying to “make up for” the savings plan, or worse yet, turning to credit cards.

    Oh, and for what it’s worth: books/educational materials? Not something I was expected to pay for. Maybe romance novels, if I’d read them. But as far as I’m concerned, education up to age 18 is a parent’s responsibility.

  18. Johanna says:

    I also don’t have any kids. But I really dislike the idea of putting any restrictions at all on a child’s allowance. It seems to me that if you force him to save, invest, and give to charity, instead of learning the benefits of those things, he might come to resent them instead.

    Instead of forcing him to save and give to charity, teach him about saving and giving, and make it concrete. Tell him things like, “If you put aside $1 every week, then by October you’ll have $20, and you can buy (thing that he wants that costs $20).” Teach him about what life is like for other little boys whose parents don’t have very much money, and tell him about how he can help them by giving some of his money to charity.

    Personally, I don’t think it makes much sense to tell a three-year-old to set aside money for buying a house when he’s in his 20s. If you want to invest money for him, you can teach him about what you’re doing and why, but that’s an awfully adult responsibility to hang on him right now. Let him have a chance to be a kid.

  19. April says:

    @torrilin A child does not magically learn how to budget on his or her own. If you give a child money on a regular basis and allow that child to spend it all on whatever they want, most children will spend it one something that will give them instant gratification (candy, toys, etc). I follow Trent’s philosophy of trying to teach his children from an early age about how to use their money for things other than personal consumption. I like the Money Savvy Pig’s inclusion of “donate” and “invest”, in addition to the obvious “save” and “spend.” It introduces a child to the concept of money as a tool for morality and wealth-building.

    @Anastasia The idea is to get the child to think about how to give money to organizations that do not benefit him directly, not to encourage him to give to a particular charity. This is a powerful decision for a child to make, as it involves learning about different organizations and making a public statement about what he or she believes in.

  20. Our kids are teens now, and over the years we’ve found no solid course in regard to allowances. All of the comments in the article and reader posts are valid to one degree or another, but much of the success or failure of any money plan involving children depends on the individual personality of the child, moderated by the various age stages they go through.

    At one time both our kids were impressive in their thrift, but at different ages, they abandon that in favor of the cultural pressure to consume. I guess what I’m saying is that a plan implemented at age 4 may not be effective at age 14.

    Here’s what we’re doing now… we continue to provide a very minimal allowance, a few dollars per week. We will increase the allowance based on work performed. This is not routine work they’re expected to do as a matter of course, but special jobs. For example, our son cleaned out our very dissorganized basement recently, organizing all of the clutter into two very neat piles. It was a man sized job that he handled like a man, so he was paid $20. In this way, not only are we providing them with cash for what ever it is they wish to do, but we’re connecting money with work, another important lesson they need to learn. Rest assured that TV–where everyone is rich but nobody works too hard if they work at all–won’t teach them ANYTHING about that.

    Another plan we’ve implemented over the past year is to show them what we pay for things, such as going out to dinner or the movies. After attending an outing or paying a bill, especially those connected with something of interest to them (like cell phones), we’ll actually show them the bill. That’s often accompanied by a stunned “WOW”. Then we’ll attach a lesson to it such as “this is why we don’t eat out as much as you’d like us to”.

    It’s always a juggling act with kids, just when you think you’ve got a situation under control, they transition into another phase. Flexibility is the greatest ally a parent has.

  21. Lisa R says:

    I started getting an allowance when I was 5 or 6. My dad decided that in order for me to learn money management, I needed money of my own to manage. Like you, he decided that my (weekly) allowance would be tied to my age. However, rather than $1 per year, it was one half my age. (I got “raises” on birthdays and half-birthdays.) I got my own money, but it was a small enough amount that I had to decide if I wanted Toy A or Toy B because I couldn’t have both.

  22. c.fish says:

    I started a weekly allowance for my daughter when she was 6. She showed very little interest, so most of the times, the money just went into her savings account. I went with the $1 per year of age, so she had $6 a week at the beginning.

    After a few months, I decided it was too much money so I told her that I was changing it to a biweekly allowance. I get paid every two weeks, so does she. She agreed it made perfect sense.

    She started to get interested about money and finances around 7 and a half.

    Last summer when she was 9, we were watching a tv program about the famine in Ethiopia that started the Band Aid, World Aid movement. She asked if this was still happening and I told her that it was still happening in several countries around the world. She wanted to do something, so I told her about sponsoring a child.

    Since last September, she is the official sponsor of a 11 years old girl in Senegal, through World Vision. The cost is $35 a month. She gives half of her allowance monthly ($10)and we pay the rest. She chose the amount she wanted to give and decided that half for herself and half for Fatoumata was fair.

    Around pay day every 2 weeks she asks if this is the week for Fatoumata or the week for herself and she is happy with wathever I answer.

    She also gets to exchange letters,drawings and pictures with Fatoumata. My daughter made 2 frienships bracelets and sent one to Fatoumata for her birthday recently. Visits are allowed so we might go to Senegal one day (in 5-6 years) to meet her and her family.

    My daughter now has $230 in her savings accounts. She deposits all her birthday money from friends and relatives. She got her first debit card last week and she goes online to check her account.

    If I go with my experience with my daughter, 3 is too young to start an allowance but your son might be different and be interested right away.

  23. Greg says:

    Just curious…

    Why do you (and others in these comments) feel so strongly that allowance should not be tied to chores? What’s so wrong with a kid understanding that money isn’t just handed to them purely because they’re of a certain age, but rather because they earned it?

  24. Joan says:

    @Greg, just jumping into this now but in our family, we believe that money is earned by choice (my husband and I both choose to be income-earners, but that choice has changed at various times) and is used to provide for wants, needs and the future. Helping the family, though, is done by all of us for the betterment of the whole, and that means that EVERYONE does it, without expecting a financial gain. In essence, we work around the house to SAVE money by not paying someone else to do the cleaning/cooking/mowing, not to spend it by paying our daughter to do it!

    That said, if I ask my daughter to do something that I otherwise WAS going to pay someone else to do, I will give her a reward. Sometimes it’s money (a dollar), but just as often it’s her choice of a family board game, an extra 10 minutes of computer time, etc.

  25. geekmom says:

    Hi Trent – We follow the $1 per year of age rule in our family and it still works well now that our kids are 8 and 13. I think it provides enough money for them to satisfy their wants and yet little enough that they still have to save for “bigger” things.

    The 13-yr-old has felt that she wanted more spending money over the past year or so to pursue a somewhat expensive hobby, and that has been a valuable lesson in having to work to earn the money if you want to buy something “extra”. She got a job tutoring a fourth grader for an hour and a half a week and has been doing some sewing work on commission too. I’m delighted with her entrepreneurial spirit.

    I agree with others that your daughter is too young for allowance and that she can be told this is something she will get when she’s older. (Personally I think 4 or 5 is a good age to start allowance).

  26. Gwen says:

    @Greg and Joan: I think it’s OK to use money as an incentive and tie it to chores. I did not earn an allowance when I was growing up, but my mom did pay me $1 every time I practiced the piano. (I was not paid for chores like cleaning my room, helping with the dishes, etc.) I used the money to buy American Girl brand dolls and doll clothes, mostly. She did not dictate how the money was spent. Now it sounds a little ridiculous, but that $1 was incentive enough for me to practice the piano. Eventually I became good enough that I enjoyed playing the piano and I would do it purely for pleasure; I didn’t care whether or not she paid me for it. I’m now very glad I know how to play the piano and my mom is very glad she paid me to practice.
    (It was only for two or three years that she did this and I took piano lessons for almost 10 years).

  27. Cyllya says:

    “Why do you (and others in these comments) feel so strongly that allowance should not be tied to chores? What’s so wrong with a kid understanding that money isn’t just handed to them purely because they’re of a certain age, but rather because they earned it?”

    How would you like it if the government forced you to hold a certain job, even if you got paid? That’s how a kid would feel with authority figures forcing him into labor.

    And if you had a spouse who was a homemaker or going to school full time, would you tie her share of discretionary money to chores? e.g. “Honey, it looks like you did one less load of laundry this week…. That’s 50 cents less for you!” No, that’s demeaning and might possibly count as a type of domestic abuse. If you wouldn’t do it to your spouse, why would you do it to another family member?

    Now, if the chores are actually optional, then it makes sense that you’d pay the kid in exchange for doing them. It’s like the kid owns a service business. But most people prefer to require the kids to do chores.

  28. Lazo says:

    @Cyllya: I feel that my children, through chores in the house, are being taught responsibility and accountability – two things that many kids are NOT taught early enough (I coached baseball, so believe me I know).

    Everyone raises children differently, and there is no *one* way to do it correctly. I feel that a “commission” or “allowance” for doing basic duties around the house is more than reasonable. I also do not have a problem with children being paid a little more if they do some particular task that is assigned to them.

    Also, I do not understand how you can compare teaching a child (which is what we are talking about) with a spouse doing laundry. You seem to be equating chores with punishment versus teachable moments. This is a great opportunity to begin molding a child’s working and spending habits very early on in life.

  29. CPA Offers says:

    I would have to say a child is ready for allowance when they understand the importance of responsibility then how much is depended on chores done that’s my opinion.

  30. 444 says:

    Do you also give your children an allowance of T.P. that they can use?

    SORRY – I couldn’t help it. It’s just that every time I see this blog I remember that post.

    Let me be serious now. How about a small amount of allowance, which is not tied to anything (but I believe it could be revoked by awful behavior – and hopefully that would not happen – so that it’s not necessarily taken for granted) and additional amounts that can be earned for doing certain chores?

    I’m talking about flexibility. Kids should be expected to carry out some duties around the house, and should not expect payment for those. However, when you have large amounts of work to do, you could offer the children an incentive to earn some money to augment their allowance by, for example, doing some extra vacuuming or something. I just paid one of my kids (actually I allowed him to work off a debt and then earn some extra on top of that) to sort out a veritable mountain of clothing (it took days – we have some serious clothing/towels, etc. around here.) He cheerfully agreed to work off the debt, which was incurred when I agreed not to return something to the store that was bought at a higher price than we needed to pay – long story not worth telling but I don’t regularly let them go into debt – and he kept his word, and did the work so well that and I gave him some extra and he got the debt considered paid-in-full and $5 for going above and beyond.

  31. STL Mom says:

    Until recently, my daughter played with coins like they were legos or marbles, and while she knew what money could be used for, she didn’t seem interested in spending her own money. She recently turned nine and has started carrying her money in a little purse and spending it as she wishes. On vacation this summer, she even bought souveneirs for her brother as well as herself.
    Some kids benefit from an allowance at a young age, but I think my daughter didn’t get anything out of it until this year. Every kid is different in their interests and maturity.

  32. Gwen says:

    An allowance at 3? and 3 dollars per week? seriously? 12 a month for a 3 year old? That seems a little ridiculous to me. And to be given the money for no work? Shouldn’t there be some effort involved to earning the money?

  33. WM says:

    We have 3 children relatively close in age 5-7 and they all receive the same allowance – $5 week. If there was a bigger disparity in age we would have adjusted the amounts. Although their allowance isn’t specifically for chores, we take a slightly different approach. If there is something they have responsibility for and they are unwilling to do it we simply offer to do it for them for maybe a dollar or two. This empowers them to make the choice. They have quickly learned that if they hesitate or don’t do as we’ve asked we’ll go ahead and do the chore for them and at the end of the week when they receive $1 or $2 less it is a big wake up call. It rarely happens any more.

    We have discussed savings and how interest compounds and they understand that they have a savings account. Although we have discussed investing we feel they are too young at this point to require them to put aside some of their allowance towards something they don’t fully understand.

    The biggest challenge is not having them turn in to mini-consumers who would rather take a trip to Target on Saturday than play at the playground because their allowance money is burning a hole in their pocket. Another thing that can be a challenge is that at these young ages they aren’t always carrying their money with them so they want to buy something and pay you back when they get home (which is probably OK) but we’ve also had requests for early payment of tomorrow’s or even next week’s allowance.

  34. liv says:

    I think the time I start giving my kids an allowance will be the same time I decide to teach them about finance/savings.

    Chores are required regardless of payment! :)

  35. Sarah says:

    If the allowance is given with no restrictions and he blows it all on candy, he’ll realize that he has no money left for other things. I say give him an amount that you think is reasonable and give it to him with no strings-that’s how the real world is. He’ll learn a lot more by making mistakes on his own than by having some artificial budget set for him. It’s better to learn the hard way when your 3 than later when there is more at stake.

  36. Lou says:

    When I started getting pocket money it was 10 cents a fortnight! and went up 10 cents a year until I was about 11. (and I’m not that old!) When I started getting more (like $5) it was because I had to start buying bus tickets to get to school. More money = more responsibilities. I was given the opportunity to earn more but it was still pretty pitiful. On the other hand I learned great money management skills and have never been in debt except for university loans and my mortgage.

    While I was never told how to spend my money, I see the point of the whole save, spend, invest, charity division. It does seem like it might be complicated to implement, but the point is to build up habits that will last a lifetime. I’m sure that starting early is the best way to achieve that.

  37. sweetiegirl says:

    While I agree that teaching children about money is important, I think 3 years old is way too early like comment #20 said. What is the rush? Just because a child can count to 20 and realizes that money can buy things doesn’t mean they need to have their own money. They can learn about money without having $15/month of their own at age 3. Eventually children need to learn to spend wisely, give, save, invest before they leave home and are on their own. I agree. Its a matter of timing and of course the child’s maturity and personality. Learning about money is great but it is also an eye opener and heavy dose of reality. Why burden a preschool child with four piles of money and all this responsibility? Investing is a difficult concept to understand, even for some adults :-) Money is fun but the concepts can be stressful to a 3 year old and perhaps overwhelming. (A child might not admit this because they are excited about the spending pile) This early age might be better spent teaching and laying a foundation for a future allowance. Teach them the joy of giving, by example, as they see you donate to charities. They will learn even if it is not their own money. Because it is the family’s money and they are part of the family, they are donating too. Take them to the grocery store with you and say “I have $5 for fruit should I get bananas, oranges or strawberries? We can’t buy everything but we need to choose only a few.” Those are dumb examples, but you get the point I hope. Using your money to teach concepts and involve them in family decisions. Then maybe when the child starts going to school or later they will be ready to handle their own money and the responsibility that follows. Plus, the truth is that the sooner kids get money the sooner they get obessed about what they can buy ‘mini consumers’ as someone else put it. Most of the time it will be wants and not needs that they focus on. And because its ‘their’ money, it will be hard to stop them if you disagree with a purchase.

  38. graytham says:

    I have to agree with those who think that tying the amount to their age doesn’t sound right. $3 a week for a 3 year old is a LOT of money. I’d start off with no more than a dollar a week- maybe even 50 cents. I’m thinking it’s going to be even more ridiculous as they get older. Why does a 6-year-old need $6 a week? Why does an 8-yr-old need $8 a week? Maybe a FEW bucks, but not 8! Don’t start a bad precedent now.

  39. Sierra says:

    This is basically exactly the system we use with my kids’ allowance. My comment on it got WAY too long for this space, so I put it in my own blog, here: http://childwild.com/2009/06/21/kids-allowances-whats-the-right-approach/

    The short version for you, Trent, is that I suggest using old-fashioned milk bottles to keep kids’ money in. They are sturdy, clear, and easy to take money in and out of.

    We also have a toddler, and she has one allowance jar. I give her a few coins from my wallet each week and she gets to dump all the coins on the floor and carefully pick them up again and put them back in the jar. She gets real value out of the money I give her – as a toy! And she doesn’t feel left out of the allowance system.

    One more note about allowances: I have a friend who lets his kids buy gifts at half-cost – he’ll pay half the cost of a birthday or holiday gift and they pay half. This seems to work well for them.

  40. Nelson says:

    Once again, I love the stupid over analysis of crap that the Simple Dollar is just so good at. A whole post talking about an allowance for a three year old.

    A three year old! This is the same kid who sees boogymen in his closet! He probably thinks the Teletubbies are real and that Narnia is just a closet away. And he’s being taught about money?

    Geez. He’s THREE! Let the kid be a kid. If anything, he’ll remember his Dad drilling the idea of saving into his head and be pissed off because all he wanted was a friggin candy bar.

    Investing for the long term? For a three year old? Am I the only one who sees how ridiculous that is?

    I remember working as a kid collecting cans and bottles. After a hard day of work, my Dad would take them in and get the money, and then put it in our “college fund”. When I was 8, I couldn’t have given two craps about college. I just wanted some hockey cards.

    It’s 20 years later and I’m still pissed off about it.

    I think there’s a lot of kids out there who would benefit from their parent’s lightening the hell up. This includes Trent’s kid.

  41. Carrie says:

    I have no children but have earned my own financial wealth and retired comfortably at 51.

    My parents started me on an allowance when I was able to tie my shoes. I did this at 5, my younger sister figured out the criteria and started getting her allowance at 4.

    My allowance was mine to spend as I wanted – that is the only way to learn consequences. My parents gave me an extra dime weekly to put in the Sunday school collection plate, with a little lecture about the importance of giving (I also had to trick or treat for UNICEF). I had chores but they were not tied to my allowance. And I never, ever got an advance on my allowance.

    I had the personality of hoarding money. I had to be taught by a great aunt that money was meant to enjoy or donate, not for hoarding. My parents never taught me about investing or checking accounts, which would have been nice.

    I had my first job walking a dog at age 7. I was always looking to make money. When I was a teenager and wanted more spending money, my mother set up a list of chores with a price list — and my sister and I could choose to do these chores (e.g., polishing a large brass table) if we wanted (otherwise, she would have outsourced these chores).

    I think parents can guide and inform, but when they start imposing their own choices about exactly how the money should be spent, then they are being controlling and not letting the children learn.

  42. Jessica says:

    Trent, I think that the smarty pig concept is really awesome. The only thing that I would really urge you to do is to be consistent with your allowance giving. My childhood memories were of allowance being upon the whims of my parents, including one year (I was about 8-10) where they decided it would be 1$ a week, paid yearly. I was also forced to put all of my money in the bank, only when I started babysitting around 12 was I allowed to start spending the money. My first purchase was this awesome summer hat which I loved and wore everywhere. I think this save everything, no savings for fun mentality followed me into adulthood and I’m having a hard time learning to balance my stockpiling tenancies.

  43. Marsha says:

    I’ve worked with children of all ages for many years, and I think 3 is pretty young for an allowance this complicated. Coin sizes are also confusing–why is a nickel worth less than a dime? Children are very concrete thinkers at this age. Also, paper money is confusing. Why is a thin piece of paper worth more than a weighty, substantual quarter? Furthermore, try explaining the concept of sales tax to a child under 8 or so. The price an item is labeled as costing is not total cost.

    Yes, a child of 3 may be able to count to 20. But can he or she add, subtract, multiply, divide, compute percentages, and deal with decimals? The concept of time is something a child this young has trouble with. Saving “for the future” doesn’t make a lot of sense at this age. The future is 5 minutes from now.

    Also, parents need to keep hold of the “spend” money when shopping. Otherwise, there will be lots of lost money, tears, disappointment.

  44. Ashley says:

    I am the solo mom of a 12-year old boy and I still don’t know what to do in terms of allowance! I am only employed part-time thanks to layoffs and cut hours. I don’t bring in a lot of money. When I work on commission, my son’s allowance was 1% of my paycheck. He also assisted me with my budget and was by my side every step of the way when I shop and pay bills, etc. The reason I went with a percentage was because he was calling me a lot at work and “getting sick” a lot. That stopped when his spending money was based on how I performed at work!!
    I don’t think I’d recommend that for a child that young, though. A younger child is NOT going to understand why he’s getting $5 one week and $2 next week.
    Money tends to burn a hole in his pocket and/or he loses it. I stopped giving him “legal tender” and started using fake paper money. He can earn extra with doing chores and buy extra video-game privileges. When he needs to “cash out”, it takes an extra step to trade with me for real money. But he is still learning the basics of buying, spending and saving. His clothes, food, school supplies, etc. are purchased for him. His allowance is his spending money to “do as he wishes” but I do step in a lot and say, “No, you’re not spending $4 on that cheap toy. Remember, you had one like that and it fell apart in the car?”! If I didn’t step in, he would never have the chance to buy the next thing he “has to have”! LOL! If it’s at Walmart or some store like that, I ask him to wait, because it will be there next week. If it’s at a thrift store, I’ll probably let him buy it.
    I never “loan” him money anymore. I used to but decided that was a bad idea. I may give him extra if he jumps in and helps out cleaning the house without complaint or does something else spectacular and I’ll sometimes remind him “tomorrow’s payday, make sure your room is clean” instead of *not* giving it if it’s dirty!

  45. Tordr says:

    Trent, so far the comments have been largely anecdotal evidence. Very few people have documented this process in any way, although it is our first real meeting with finance.

    I would argue that you should start giving an allowance not only to teach your son about money, but also as an experiment and something to write about in your blog. So not only will it benefit your son, but you can also share a wealth of knowledge, that is not often documented, with the rest of the world. And if you keep blogging then in 10 years time you (or someone else) can write a story about children and relation to money, and back that up with hundreds of blog posts.

    Maybe the little kid comes up with some insight, that can teach us adults a thing or 2 about money.

  46. Jill says:

    As a homeschooling mother of three with another one on the way, I think that 3 is too young for an allowance. While he might understand how to count, what money is for, etc, the concepts you want to teach him are very abstract for his age. I think you should consider waiting until at least age 6 or 7.

  47. jaana says:

    I think that my 8 years old is still not mature enough for the independence that comes with the regular pocket money, (she hardly knows yet how to count the coins!) I started the regular payments to my older kids at the age of ten. Before that age the money given was more like a reward for some well done thing, for chore or school work – or a gift due to a special occasion. I feel that regular pocket money given too early would just make my child to be a victim for other persons greed.

  48. Tordr says:

    My do not remember much about my own story with allowance. I was taught to save and I even got some bonds before I was 10 (maybe given by some grandparents). I was to young to understand bonds then and they where boring.
    My real entry into finance was around when I was 18, I got a sizeable inheritance from a childless uncle of my father. Some of it (20% maybe) was squandered on stocks (even if the stock marked goes up I am able to loose money). It eventually got used as a down payment for my apartment, when I was 30. (Now I am 35).

  49. Jenni says:

    In my house (actually my parent’s house), younger children were given a reward system instead of a strict allowance. There is a 10 year difference between me and my older sisters, so this problem was quite frequent in our home.

    My sisters were expected to complete their chores no matter what, and for that, they were given a set allowance each week. My schedule was much more variable, so I was given small amounts on a per-chore basis, which I immediately deposited into a piggybank in my room. My parents decided to stick to 10c and 25c denominations, because the size of the coins helped me understand that one was worth significantly more than the other. I was able to choose if I just wanted to bus the table (required, and earning 10c) or if I wanted to dry dishes as well (earning me a fully 25c).

    My sister’s now have young families, and their children are on similar policies in my parent’s home. They started on their 2nd birthday with very simple tasks (but never anything that is expected, such as picking up their toys), and it seems to be working well.

  50. Teresa says:

    As I child, I received an allowance. Mine was associated with doing chores. Those chores were supposed to be done no matter what and this started at probably age 8. My daughter, who is 7, has been getting an allowance for the past two years. I follow the rule of threes, similar to yours; Spend now, save short term and save long term. The long term can’t be used for any purpose other than puting into a savings account. Short term is for things like a CD, and spend today, exactly that. So we give her allowance in increments of three and she is the one who “deposits” the money into the containers. She rareley uses the spend today fund, and carefully chooses between a 5 dollar bracelet and candy. She realizes the candy will disappear in moments and the bracelet can be kept for a longer time. We hope she continues on this path!

  51. Claire Grimble says:

    I gave me daughter $1 a week when she was 1 so deposited $52 into a savings acount for her, $2 per week into the account when she was 2 etc. Now she is 4, she gets $4 a week and we do the save, spend, donate plan. We haven’t gotten to invest yet, she gets to put the extra $1 into one of the other 3 categories.

  52. GayleRN says:

    @Marsha has some very valid points. You are dealing with a 3 year old who will have some difficulty just learning about the various coins and what they will buy. He may not be even able to grasp that coins can equal dollars. While I applaud the intent behind having some money set aside for savings, investing and donating the concepts are way too sophisticated for a 3 year old. In actuality, although savings and investing are two concepts in your mind, it is the same concept to a 3 year old, if he grasps it at all. A piggy bank is a fine teaching tool for him as he is a very concrete thinker. He can feel it getting heavier and see the money accumulating. A bank is just another place Daddy goes and does some really boring stuff with other big people while he plays with his hot wheels.

    Right now all you can do is some simple teaching about cost and value,counting and rudimentary saving. You might be able to instill donating as a habit, ie a quarter goes in the offering plate as a matter of course but don’t expect him to like it or understand why he has to give away money he just got hold of for no particular reason that he can discern. As far as he can see you just started donating money to him. If you ask a 3 year old to tell you why things happen you get some very surprising and fanciful answers. They usually have nothing to do with what you think you are trying to teach them.

  53. Rachel says:

    I grew up in a family of 8 kids.
    I now have 6 children of my own – ages 2 to 12. The whole idea of getting money each week, just for being part of the family and doing no work whatsoever is training the child for welfare! Especially at age 3.
    Absolutely ridiculous. As a child, I knew my parents would care for my basic needs ….and even some of my wants. I never felt deprived. But if I wanted something extra-special, I had the ability to make my own money by WORKING for it. One summer I went door-to-door selling stuff out of a catalog, so that I could earn money to buy “something big” I wanted. We took care of the neighbor’s pets in exchange for money – while the neighbors were on vacations! As a result, every one of my siblings and myself are hard-working, entrepreneurial, contributing citizens who don’t expect the gov’t to care for us/feed us/provide us shelter/etc. So the next obvious question is HOW does a child earn money. Well, regular chores like taking out the trash and rinsing supper dishes, and cleaning one’s room and vacuuming one room each day are typical chores that contribute to the family…and each person is naturally expected to help with these. (everyone has a chore list to complete) It was never a big deal to any of us growing up, and my kids now don’t have a problem with it. Same way I don’t have a problem making dinner for my family. It is part of LIFE. Extra-big chores, like mopping all the hard floors in the house, earn special rewards, such as monetary payment or other treats (ice cream, whatever).
    You can see that we were not spoiled, nor are my kids now….but neither are they deprived! My children now each make money every week by doing real-world things. My 2 oldest each have egg-laying chickens. They sell the eggs to neighbors, natural-food stores, and to folks that stop in when they see our sign out front (farm-fresh eggs). The next 3 children make cookies and bread each week and sell it. Their uncle takes a basket of fresh-baked foods to his corporate workplace, where all the other employees buy up all the goodies. My oldest daughter also makes cloth dolls which she sells online! In all of these cases, money is set aside for supplies (chicken feed, recipe ingredients, fabric, etc.)….and then the “profits” are what the kids get to keep! THAT is how you teach kids about money. I do make them save a portion of everything they make. Therefore, each of my children has a sizable savings account already.
    I’m sure somone is going to argue that my kids are overworked, etc. However, anyone around would testify that ours are the happiest kids in the neighborhood, and OUR HOUSE is the place where all the other kids like to hang out. In fact, on Saturdays, when we mop the hard floors, it is not uncommon to have 2-3 of the neighbor kids ask to help out, so they can earn the ice cream afterwards too! And we let them! :)

  54. michele says:

    We gave a small allowance. We did require a saving and gaving portion. We would give a raise every year on their birthday week. I also listed all of the housekeeping jobs around the house that were mine and my husband’s responsibility with a price. When the children wanted more money they could always do work around the house. I was able to teach them basic housekeeping without requiring it! When my youngest wanted a laptop, our house was cleaned every week! If they needed a few dollars they would do just the amount of cleaning to get what they wanted. Sometimes I would tell them I had no work available. They have started their own lawncare business(because they were getting “enough” money), so now they don’t get an allowance from us. Amazing to see the effort to save for a bigger item and the struggle of the lure of instant gratification. I believe if you don’t give too much than it is okay for them to buy gum and junk food. (just make sure they brush really well before bed!) Believe me they learn! Some learn qicker than others, but better for that learning to take place when they are children than adults!

  55. Shymom says:

    One thing that we do, that I haven’t seen mentioned above, is give our older children (12 and 16) their allowance once a month. When it is gone it’s gone and the kids have to wait until the next month before they get anymore spending cash. They quickly learned the value of holding on to their cash.

  56. AB says:

    We have twelve children, so I do have experience in this area. Why would anyone give their child an allowance? That is teaching them that money is just handed to them on a silver platter for nothing…not such a good idea for when they are older. Our children have chores they do just because they are part of our family. Then we have extra jobs that I would have paid someone to do anyway that they can do instead to earn money. $3 for a 3 yr. old is way too much, imo. My six year old saves her pennies and quarters for weeks and thinks it is a lot of money. Too much money just turns them into shopaholics. Our children also have spend, save, and give categories. They are all happy to give. We have always just said that’s how it is, and they have been raised that way, so it comes naturally to them.

  57. Bert Lowry says:

    My wife and I read a book called The First National Bank of Dad. We tried it on our 3 children and found it was very successful. In a very small nutshell, it recommends:

    a.) giving children fairly large allowances (starting at a young age),

    b.) making children responsible for their own discretionary spending

    c.) paying children a very large monthly percentage on their savaings (my wife and I pay 5%/month for any money that our children have saved.

    All in all, it has really revolutionized how our kids see money, long-term purchases, and value verses cost.

  58. Margie says:

    I think your plan sounds great except do not say to your son “you get an allowance because you are older”. He will always be older and the younger one will eventually feel upset by him getting such and such because he is older. Instead you could tell him that because he turned 3 he gets to start getting an allowance. That will give her something to look forward to (more positive).

  59. Denise says:

    I agree that $3 is too much for a 3yr old. I think that 25cents is good, to do with as they wish. I would then revisit the allowance question every six months. My daughter got an allowance when she started kindergarten and regular chores weren’t tied into it. She did have to save a portion and donate a portion. She also did extra chores for small ammounts of money. Issues to consider are: what is included in their allowances, such as school lunches or all those little school extras, what exactly will you provide,and down the road, what about jobs and allowances? I constantly revisit these issues and I have had to change previous decisions that werent working. As parents, you have the final say and I believe that it is good to show your children that parents can sometimes make mistakes, be honest about them and show children that mistakes can be fixed and sometimes life changes and decisions have to be reevaluated.

  60. Julie says:

    My husband and I still haven’t decided how we feel about allowances, but I do agree that your daughter is too young. As with real life, IMO, she should wait.

    However, the teacher in me says there’s nothing wrong with exposing her to which is the penny, the nickel, etc. She might not get it yet, but she will before 1st grade when it’s taught in math!

  61. Beth says:

    My one qualm with the smarty pig tactic is that it doesn’t seem to go far enough. While there’s a lesson to be learned by collecting money and handing it over to a charity, unless it’s supported with the idea of giving your time and getting involved in your community then it’s just teaching kids it’s okay to throw money at a problem. With the economy and environment in crisis, is that what we really want to teach future generations?

    We weren’t required to give a portion of our allowance or earnings to charity, but we grew up volunteering our time. There’s a big difference between writing a check and actually getting involved yourself. People get things done, not their cash.

    I’m not sure how I’ll handle “budgeting” with my kids (when I have them), but I don’t think putting quarters in a donation jar is enough to teach them how to be responsible citizens and community members.

  62. Randy says:

    We started our first at a quarter a week when she was about four and wanted to buy things on her own. Everything was measured in quarters at first, smaller change was ignored. We’d go to the store and she’d ask how many quarters a box of crayons cost. How many quarters is that coloring book? How many for that bicycle? :) – fond memories. (She’s 25 now).

    Eventually, she learned the value of things and we increased her allowance. We set very few absolute restrictions on what she could purchase. In one case, she saved enough to buy her own stereo system (she was on $1 or more allowance by this time). Before I let her spend that much, I asked her to research (age approriate research) different options and value. I then purchased it for her on credit card and I purchased the extended warranty (more extended warranty). In return, she agreed not to horde it from her younger brother/sister.

    When her allowance got to a dollar, we started talking about giving. We made it our practice to give 10% weekly to church. We encouraged her to give her tithe also.

    We did not tie chores to allowance. Our theory was that chores were required, regardless of allowance. If we tied them together, they may decide to do no chores and get no allowance.

    I was cautious about allowing too many choices on meals at school. My theory was that I paid for meals, not bubble gum, etc. I used this same idea for clothes, they had to be clothes I would approve (but gave her some flexibility). I also subsidized some events (camps, etc, and even a concert) by paying all or part of them, discouraged others by telling her she would have to pay for all of it.

    I was strict about music (CDs). No profanity allowed. If she bought one and it had profanity, she could bring it to me for a refund. If I found the profanity, I confiscated the CD, no refund.

    I wish I had been as diligent with my younger two.

  63. SteveJ says:

    @Trent- I would not tie the allowance amount to age. You might have a problem when your son is 8 and your daughter is 6. You can raise the amount arbitrarily on a birthday, but once you start giving your daughter an allowance I would match them up, at least with them being so close in age.

    @WM – I like the charging approach. Have you had any issue with the kids trying to sell each others chores? In some cases I want a specific child to do an unpleasant task, and I don’t want them to think they can get out of it for a buck.

    I’m torn on giving extra money for extra chores, on the one hand you’d love to have that stuff done plus give your kid a chance to earn money. On the other hand, I’d like to be able to ask for an extra favor here or there without dishing out cash. We didn’t receive allowance growing up and it was understood that if something needed to be done, you pitched in. That could range from taking out the trash to raising a barn. I’m really not sure how that was “taught” though, it’s not like anyone was punished for slacking off, it just didn’t happen. A lead by example kind of thing, I guess.

  64. ldk says:

    I have 2 (almost) grown children…one 21 (starting grad school) and one 15. IMO 3 is far too young to be introducing allowances. I think you can (and should)introduce monetary decision-making but it needs to be more ‘real-time’ relevant. (ie. “you can spend $3 in the dollar store–do you want the stickers or the colouring book…because we don’t have enough money for both.”) But I don’t believe 3 year olds can truly grasp the concepts of long term savings, etc. As for charity…I find having the kids go through their toys, etc. to pick some out to donate to the ‘kids who don’t have any’ or taking them shopping at Christmas to buy toys for a hamper to be a much more direct and less abstract lesson…and one very young kids can grasp.

  65. dsz says:

    ‘He shouldn’t be getting candy or junk food at home, and once he has an allowance, he shouldn’t be getting toys or books from you guys except on his birthday and Christmas.’
    He should have to buy his own Goldfish crackers and toy cars at three?

    @torrilin ‘If you enforce a budget, he will have no motivation to budget on his own.’@Johanna: ‘It seems to me that if you force him to save, invest, and give to charity, instead of learning the benefits of those things, he might come to resent them instead.’

    Children have little motivation on their own to do most of the things they should-brushing teeth, bedtime, eating veggies…it’s the job of the parents to ‘enforce’ behaviors on a child until they’re old enough to understand the value and consequences related to those behaviors and choose to do them on their own or not. As Trent and his wife also spend, save, donate and invest their money it’s less a matter of forcing the child than this is just what this family does, just like some families attend church services or visit Grandma every Sunday. Parents ‘force’ kids all the time and sometimes they resent it, but that’s how they learn.

    ‘… make it concrete. Tell him things like, “If you put aside $1 every week, then by October…’
    A three year old can’t grasp that concept, at that age sometimes waiting until tomorrow is difficult-’October’ is meaningless.

    ‘Personally, I don’t think it makes much sense to tell a three-year-old to set aside money for buying a house when he’s in his 20s. If you want to invest money for him, you can teach him about what you’re doing and why, but that’s an awfully adult responsibility to hang on him right now. Let him have a chance to be a kid.’
    Trent didn’t indicate he’d tell his son to do that, he wrote that he’d ‘love it’ if some of those quarters did fund a downpayment, he IS investing the money for him in a way (it’s Trent’s money, after all) and he’s not hanging an adult responsibility on him. Where did Trent write he’d tell his son to save those quarters or he’ll never have a house when he’s 20?

    I think this is a great idea and a dollar for each year isn’t excessive, especially divided this way. At present he’ll only have $.75 cash to spend and the days of penny candy are long gone. He’s not too young and it’s a great way to teach that a little dime is worth more than a nickel. Having the little one wait until the same age is also a good idea, it’s a rite of passage and one more step to becoming a ‘big girl’. She’ll also learn by watching her brother. IMHO, an allowance shouldn’t be tied to household responsibilites. Every member of a family needs to contribute according to their abilities and the payoff is not monetary; it’s the health, happiness and prosperity of the family and its members. Extra money for extra work is different.
    I would suggest that the charitable donation be converted to a physical item, at least while he’s little. It would make the experience more concrete for him. Maybe have him buy a duplicate of one of his toys for a children’s hospital or home or some Goldfish for a food pantry. That way he can equate his enjoyment of the item to the child receiving it. Giving the money itself my be too abstract at his age to induce the warm and fuzzies you want him to have to encourage a lifetime of giving.
    A friend did something similar with her boys, they got an allowance and were also able to earn extra money for performing certain tasks (I *hate* the word chore the connotation automatically makes a task unpleasant). They donated some to charity, invested some and the rest was theirs to spend/save as they chose. If they didn’t save for a larger purchase Mom would decide to buy it, offer an advance or ‘tough luck’ depending on the circumstances and age of the child. As far as investing, they boys had to put a minimal amount in a savings account but could add as much extra as they wanted. At the end of the year they totaled the deposits and Mom matched it. She beamed when telling how a 12 year old ‘cost her’ $500 one year. As the accounts grew funds were withdrawn and reinvested in higher income accounts, but never withdrawn for spending before college graduation. All four boys graduated from college (paid for by the parents) and used part of their savings to buy homes. Those first quarters did indeed help buy their homes when they were in their 20s. They all own income property as do the parents who are worth well over a million-all on one blue-collar salary and a smart stay-at-home mom. Those boys are smart, hard-working, good husbands and fathers, financially secure and they share their bounty with the less fortunate and most of it is due to the thoughtful upbringing by their parents. I see Trent and his wife giving their children the same great start.

  66. Mona B says:

    How I did it…

    When my children were about 3 or so, and could start counting, I only gave them pennies. (allowance: 10 pennies a week) They are single units and easy for them to count. I didnt really focus on the money value/spending aspect, but rather the math aspect.

    When they could count it out to 30 or so they could spend it on “little cheap somethings”. (Yard sales and flea markets are great for this)Then we would stack the pennies to learn counting by 5′s 10′s ect. Only once that skill was fully learned did I allow them to exchange their pennies for nickels. Once nickels were fully understood and integrated, I added dimes, and so on.

    This was a long, slow process, but by the time they were about age 4/5 or so, they were up to dollars and started getting more of a “real” allowance and understanding of the value and responsibility of money.

    Interestingly enough, I recieved food stamps at that time, so they were accustomed to the idea of “food money”, “house money”, “electricity money”, etc. So if they wanted something I could say “sorry, mommy doesnt have any ‘toy money’ today” and they understood. When they got their own allowances, they now had their own ‘toy money’ and were already used to limits and restrictions.

    I never paid my kids allowance for chores. If they lived in my house, they were expected to pitch in. In my opinion it fosters a “team player” attitude, rather than “whats in it for me”

  67. 444 says:

    As I mentioned above, I believe in occasional opportunities to earn money by doing some odd jobs (in addition to a small fixed allowance for “nothing”) and that doesn’t mean at all that every job has a price attached to it. Far from it – most of the time kids have to pitch in just because they are told to and because they are part of a family; but the occasional opportunity to fatten the wallet or piggy bank encourages an enterprising spirit. I speak from experience as a parent of four: Allowance that is just given should be small. Age-graded or large allowances do get spent on “stuff;” we have a room full of Webkinz to prove that; in retrospect, we made a mistake by giving, for a time allowances that equaled one dollar per year of age every two weeks and it should have been less than that. It added up to a lot of Webkinz and disused video games. This was several years ago; take three kids about ages 8, 10, and 13, with a dollar for each year of age every two weeks, add it up over a year and we were giving the kids far too much spending money and much of it was wasted. It really did burn a hole in the kids’ pockets and I witnessed them trying to figure out how to spend it. Two unrelated asides: I don’t believe in forcing people to donate to charity; we did veto certain uses of the money and I believe parents should retain that power always.)

    We revamped and now give out far smaller allowances (and someone asked, “Why would anyone give out an allowance? That’s so you don’t have to pay for every Slurpee and kids can feel that they are managing some money, even if it’s tiny) and give some opportunities to earn some more money; it’s a win-win situation for us and the kids.

    Trent: 3 is too young to really understand money very well, beyond the occasional quarter. I would say a few quarters, something in the range of .25 – $1.00 (enough for a gumball machine prize or dollar store item) given once per week on the same calendar day, so he can look forward to it (example: Saturday) would be a good way to start. More that that isn’t appropriate until at least age 6 and then I’d go slowly.

  68. 444 says:

    p.s. I will retract what I said about the dollar-per-year-of-age being excessive. Now that I analyze it, the room full of Webkinz and excessive number of video games came more from distant relatives sending $50 or $100 at birthday or Christmas time, and that should have been managed more carefully. Live and learn, right?

  69. Jenna says:

    I agree that $50 per month for an allowance is a bit much. However, it’s also necessary to keep in mind that $50 in 10 years might not in any way be equivalent to what $50 today would buy.

    I agree that charity contributions is a good thing for a child to include in an allowance budget, but I wouldn’t recommend having such a large percentage (25% is too much) towards it. I would say perhaps 10% is a good amount in my opinion. One thing that you could do as a parent, is have an agreement that whatever your child agrees to donate to charity, you will match that amount to a particular amount. This would not only bring the amount back up to 20%, your child will still understand the value of giving back.

  70. swampette says:

    @dsz Great comment! Yours seems to be the most rational, thought-out one so far. I’m years away from these decisions, but this post really got my significant other and I thinking about what we’d do, and how we should handle our own finances to set the best possible example.

  71. Suzanne says:

    @SteveJ: You should absolutely not give them the same pocket money if they are different ages! Two years is a world of difference when you’re that age. As an older sibling myself, with a similar age difference between me and my younger brother, had my parents given us the same amount of pocket money I would have been furious.

    $3 a week is a huge amount for a 3 year old! I’m 18 now and throughout the whole of primary school I got 10p per year of age per week (e.g. 80p a week when I was eight), which woud only be given if my room was immaculately tidy on Sunday morning.

    I get quite a bit more than my brother now, but I buy my own clothes and he doesn’t, for example. You have to think about what they are going to spend their money on and how much they will need. $3 can buy an awful lot of sweets!

    Also, I’d say that while you should explain and encourage your proposed saving system, I don’t think you should enforce it. He’ll learn from his mistakes.

  72. Rani says:

    I started to give allowance when my boy was 3.5 year old. Why? It’s because my boy started to nag me to buy stuff which are not part of his needs, like lollypops, toys, and stuff. I link his allowance to his daily chores. I link the concept of chores-allowance with “mommy and daddy go to office everyday to work, and earn money”. Basically, you need to work for money. At the beginning, I give his allowance daily, so he can see immediately the fruit of his work of the day. And I only gave him one box, only for spending, so he can immediately see the reduction when he decided to spend.

    Now he is 4 year old, and he has two boxes, one for spend and one for saving. His allowance is 2 dollars per week, depending on the chores that he does. I also began to set out his wishlist. Each time he nagged me to buy something out of his want, I reminded him about his wishlist. This wishlist is linked to the saving box. He is free to add or take out items from his wishlist, which is limited to five items. Linking his wish to saving box, I found it very important, as it trains him to delay gratification and to focus on goal (i.e. a specific toys in his wish list, for example).

    Interestingly, his little brother who is 18 months began to get interested in the concept of money, just by seeing his brother’s routine of getting allowance and putting them into boxes. Because he has shown his interest, i might start allowance for the little brother too, just for the fun of it. No pressure at all.

  73. cherryriver says:

    I think the $1 per year of age is a bit much; what I did was start with $1 (at age 5) and THEN add $1 per year of age after that. So now my daughter gets $3/week.

    I agree with the rest of the bunch: once you pick an age to start (maybe when he turns 4?), just keep the starting age consistent for your other kid(s). They’ll find that fair, I imagine.

    I personally feel your four-part allowance system is WAY too complicated for a little guy to understand. I also think so much control will tend to keep the kid from learning the natural lessons that come from an allowance. We need to be allowed to make mistakes with money before we really learn to handle it well. Unfortunately, for most of us those mistakes were made in early adulthood, when they put us in debt for a significant period of time. An allowance gives the kid a chance to make the mistakes while their basic needs are still provided for by their parents. If they have a chance to experiment, as well as good role models for spending (as you guys are), they will learn quickly.

    My daughter is allowed to do whatever she wants with her allowance. If I think she’s making a poor choice, I may comment upon it, but I won’t force her hand. She’s tremendously good about saving her money, not spending it all on junk and treats, and then buying bigger items; but she hasn’t yet learned, entirely, to be smart about the play-value of those bigger items. After the fact, though, she’ll sometimes concede that the doll she doesn’t play with wasn’t worth the big bucks.

    She’s sticking to her guns, though, about the value of the million Webkinz… and that’s her business, I figure.

    We also have a long-standing policy regarding major cash gifts from relatives at holidays– ones that are just too big for a little kid to fathom, like $50; half of it goes into the bank account right away, and the bank account is never touched. She’s got about $1000 in savings right now, and she’s looking forward to using her nest egg for something she really wants or needs when she’s a grown-up. :) She knows her foster brother did this for years and then got to spend 4 months in Paraguay when he graduated from high school, paid for largely with those savings.

  74. Candi says:

    Disclaimer: I have no children.

    Ok well I can remember the pittance I was paid as an allowance. I chose to keep it. My mother also had the option of doing extra work for additional money. Frankly I knew it was a rip off. The amount of chores required to earn an additional dollar or two were simply not worth the time and effort. Please remember that as kids get older they do understand how much some jobs are worth. If you only offer them below minimum wage rates, do you really think they will want to do it? It taught me that I should not work unless I was going to get paid enough to bother with the effort. That lesson took a long time to undo. . . just a thought

  75. Kai says:

    I think the people advocating the same amount for all children are youngest siblings. :)
    Even the one who says her kids are very close in age – I can tell you that the oldest doesn’t feel as close as you think, and is resenting being treated the same age as its youngest sibling.
    As an oldest, I can tell you how frustrating it was to start receiving an allowance at ten – while my sister started at the same time, at the age of four. Basing it on age seems very fair, although it could always be something like going up in certain increments every few years rather than age directly
    Depending on how much you plan to have the child use their money for (and three seems insane – what can he do except buy cars?), Age/month, divided by four seems a little more reasonable.

  76. flybabymom says:

    We’re talking about this subject, too, for our little boy. He’s 6, and I think he needs something so that he has some discretionary money to spend on little things he wants, and to learn to give.

    Have you, Trent, read “The Bank of Dad”? I’d be interested to know your opinion of it if you have.

  77. My comments on allowances are way back at #13 but this thread has only gotten more interesting since! Everyone has some level of struggle with this, but it’s also clear we all want to do the right thing.

    Rani(#40) that’s brilliant with the boxes. Kids are visual, and the boxes are something I REALLY wish we’d thought of!

    Tordr (#28), in regard to the comments being largely anecdotal, you’re right on target with that, but kids aren’t programmable like computers, so you can have the same plan for two kids and get very different results with each. One kid grows up and follows the plan to be a careful saver, but the other becomes a spendthrift, perhaps precisely because he rebels against the plan.

    Probably the best course we can take is to have some type of plan of how and why with the allowance, be ready to be flexible–especially as they get older, and probably most important, to model the desired behavior to our kids and hope it sinks in.

  78. AB says:

    444 (#38) Right, as a parent, you don’t want to have to pay for every little slurpee, etc., and you do want your children to learn to manage money, but that does not answer “why” give them an allowance. They should learn to manage money the way they will have to as adults…they have to EARN the money first, not have it handed to them weekly for no reason (I believe that’s called welfare).

  79. IH says:

    On a related note, our children (10 & 5) have had a savings account for several years now at our local bank. It is a custodial account and they enjoy visiting it annually to make deposits from that portion of their allowance that they’ve saved. However, the interest rate at this point is 0.2%–pathetic. I want to switch them to an online bank but wanted to keep it as a custodial account so that they have a sense of ownership. I’d love to get the opinion of the other parents out there as to the best online custodial accounts…?

  80. momof4 says:

    this whole post made me laugh. We experimented with giving the older 3 an allowance starting a year ago ( ages 9, 7 and 5). They received $10 per month. When we would go shopping or out somewhere we would tell them that they could use their allowance $, or use in on hot lunch, movies etc in an effort to teach them about money management. The funny thing is that over the course of the year, they’ve spent almost nothing, maybe $20 total each. The only significant cash they’ve spent was their birthday money. Suddenly when they needed to fork over the cash they wanted nothing. Unfortunately, due to budget cuts, we’ve had to suspend the allowance program at this time. I will be interested to hear about what you decide and the choices your children make.

  81. Sandy says:

    We have 2 girls, aged 15 and 11. They both get small allowences ($3 for the 11 yr old and $5 week for the 15yo). That may seem small to some readers, but then they both have the opportunity to earn more with additional chores. They both have specific chores that they must do.
    We have never tied their money to what they must do with it. For charity, they always are a part of their Girl Scout troops’ services to numerous charities over the years, plus we always participate as a family in the various service projects through our church. Also, we (our family) occasionally go to the store and pick out cases of canned goods, and deliver to the local food pantry. For savings, about every month or 6 weeks, (based on when I’m going anyway for one reason or another)we head to the bank in our town. I let them know the day before, so they can think about it. They decide for themselves how much they want to put in the bank, and have, over the years, amassed quite a bit for their ages, IMO. They have both learned that even small amounts of savings added to their accounts on a regular basis adds up. As a parent, I feel the need to make opportunities for them to physically go to the bank and hand over that cash…a very important, concrete experience.
    For budgeting, we give our older daughter an entire school year’s school lunch money, in August, in an amount that roughly equals about 1 school lunch per week. She can choose how much she wants to spend on lunches in any particular month, but knows that she needs to pack her lunch the majority of the time. She actually had $10 left over from the last school year(!)The 11yo knows that she can choose 2 hot luches per month. She pours over the monthly menu when it comes home and makes sure that she buys only the lunches she loves the most, thus not wasting money on so-so food that may well get thrown away. She is responsible for packing her lunch the rest of the days. As a parent, I feel responsible for having healthy food choices from which to make their lunches. Hopefully, while not exactly giving them a ton of money, they are learning to make choices with what money they are in control of.
    I never agreed with the $1 per years old method. If I did that, I would base it on what the expectations for spending would be…for example, right now, if I did that, that would be $26 per week for our family. Over $100 per month. Since we provide still for both of them much of their school needs,clothing etc..it’s really not necessary for them to have additional money for movie tickets, webkins, Itunes. They can save allowances for those things if they want them (but they either have to do additional jobs or wait to purchase them out of allowance). However, with the 15yo, we may start giving her the entire amount for say 6 months soon…we’ll think about that.
    For a brief time, we even took out “taxes” from their allowances to show them how the government works (we all went out for ice cream on the “tax” money! to show how paying taxes benefits the community (our family, in this case).
    Remeber, though, once you start down a path with your kids with money, it’s hard to break the pattern they become used to. If a kid gets a candy every time they do something, it’s hard to say to tthem that the rules have changed. Whatever you do, you are setting precedent…and little sister may or may not notice what you do with big brother. But then again, you have the right to change how you do something if something doesn’t appear to be working.

  82. Lou says:

    Trent, that’s a very thoughtful plan. I have some ideas about your questions:
    1) your daughter can perhaps be helped to understand that it isn’t just about age, it’s also about skill – let her see the value of learning and understanding numbers. Girls somehow often are not taught that.
    2) I like everything about the way your son’s money will be split, but I suggest that Mom & Dad might want to pay BIG interest on his savings. Put his 10% of interest earnings into his bank for him every month. so he sees in his own terms what interest and compounding interest mean.
    3) how I wish my parents had taught us this way!

  83. mary says:

    My mom tied up 50 cents every day in a hankerchief and pinned it to my uniform when I was in kindergarten. Ten cents was to take the bus home. In those days, the bus driver knew everyone. Fifteen cents was for my lunch and the rest I could spend on a goodie after school Sometimes, I’d walk home and use the ten cents for a treat. That was the start of my allowance.
    We basically started our daughter the same way – in kindergarten, money for lunch and a little extra for a treat. Each year it increased. We would supply the basic clothes and school supplies, anything extra she wanted, she had to save for. I do wish we had taught her a little about investing and charities. She is thirty now and has learned how to handle her money. She learned about budgeting from her allowance which over the years had to cover gas for a car, excursions and shopping with friends, movies, etc. She put herself through school and will be a veterinarian in November. Living out on her own, she learned the hard way about credit cards and student grants and loans. She is in for a lot of debt on her student loans, but is looking into a program to relieve that. I’m proud of her. This all started with an allowance that was her part of the family money and not coupled with any chores. Chores were done because she was a part of our household. No more, no less. She could earn extra with summer work or baby sitting. She has rarely hit us up for money. Once because she got into credit card debt and a few times when she was really strapped because she didn’t record her debits. She learned. I wish that I had started reading the Simple Dollar a lot sooner. I’m still learning. Maybe, she and I will learn about investing together when we are finally debt free.

  84. I am also curious about the logic behind an allowance that is not tied to doing a job. I can understand the comments by those who said they want to teach their children that chores are done to help out the family and are not optional, but in the real world, money has to be earned, and when you give children a free allowance, how do they learn that important lesson? Why can’t there be some chores that are required and some chores that earn money?

    My parents gave us an allowance that wasn’t connected to chores and used a system similar to the one you described – we had save, spend, and tithe categories, and I didn’t carry any of those financial lessons into my adulthood. I wish instead that they had taught us that money has to be earned and that spending money becomes much more enjoyable when you know how hard you worked for it.

  85. Bob says:

    I agree with Kevin above, comment number 20.

    Thinking long term, the best thing my parents did for me with money was to match what I invested and saved, as long as it was for the long term. Nothing like getting an equal match (instant 100% return) for some real saving motivation. As a result of that, I bought stock at age 13, just in time to learn a great lesson about stock bubbles, and by the time I graduated high school managed to build up over $20k in savings. I also think that that policy was a very big impetus for me to get into personal finance.

  86. Georgia says:

    As a child I never had an allowance. And we worked to help put food on the table. We gardened, picked fruit, did paper routes, etc. We griped, but we knew our input was needed to keep us all fed. And we never got special treats at the store. Mom would buy a grocery sack of day old cupcakes at the bakery and that would have to last for a couple of weeks. When I was working at 16, I was going to school and working 48 hours a week as a waitress. Mom began charging me $20 a month for rent. She wanted to teach us the value of money. What we paid her was rent – she still did our cooking, washing, ironing, and paid all the utility bills, which we would have paid on our own if we moved out. They didn’t need the money. They banked it. In my 2nd year in college, I lost my job and was going to have to drop out mid-semester. Mom sent me my “rent” money so I didn’t lost the money I had already paid in tuition and room.

    I did have one for my children and they set aside giving money and money for supplies. I would purchase school supplies and divvy them out in increments that matched their money. If I bought a $1 pack of paper, I would divide it into fourths and each pack would cost them $.25. They learned money was spent for things you needed before what you wanted. They also bought their weekly meal ticket at school with their allowance each week. This did leave a small amount for them to spend as they wished.

    I did read one psychologist who wrote that all children should have chores they were not paid for. After all, they were a part of the family and had to share in the work. They owed it to their family to help, just like mom and dad. But, he also felt they needed to learn the value of earning money. So he suggested deciding on several chores that were not necessarily part of their family responsibilities, such as cleaning the garage, washing windows, etc. As an example he suggested putting a dime on each window to be washed and the one who cleaned it got the dime. In other words, set up a price schedule for extra jobs. That way one child couldn’t gripe that another had gotten more money because the parents liked that one more. They got more money because they worked for it. If you wanted more, you just checked with mom and dad as to the optional duties you could be paid for.

    And – as to the value of money to children – my husband at age 5 or 6 was told he would be paid for helping pick up corn in the field. He was given $1 at the end of the day because he had done a good job. He threw the $1 bill into the coal bucket. That wasn’t money. To him, money was coins. So, the payer quickly retrieved the bill from the bucket and gave husband a dollar in change he had in his pocket.

  87. Ruby Leigh says:

    Not being a parent, I decided to share my opinion with that disclaimer. I grew up with many forms of allowance programs. All of them worked to different ends.

    The first involved me performing a specific task everyday in exchange for rice cake! haha, I was 4. Next, I got 25 cents / week for behaving, I was 5. The third sounds very similar to your proposed plan $10 every other week and $1 to donation, $2 to savings, $2 for “gifts”, and $5 for our spending. It introduced a budget with limits. I think this was a good approach, however we were still not required to pay for much of anything. – So most of the money went to fun things except for the allocated categories. I was about 10 for this plan.

    The last allowance program and I believe most effective strategy for me was in 8th grade. I wanted a check book. My parents said yes, but I had to keep track of what I spent. SO they signed for the checkbook, and my allowance was $30 – biweekly. In order to continue getting this I had to show a record of what I spent. I still have books of every penny I spent between 8th and 12th grade. The money was not linked to chores (although I was expected to help) and I was expected to pay for everything besides food and shelter with it. (Dinner out with friends, most of my new clothes (still had Christmas and birthdays)). I stopped choosing to receive allowance when I was in 10th grade after I had obtained a summer job. I was and am a very independent person, and no longer wanted what I felt at the time was a handout as I now could earn a suitable amount of money for myself.

    The allowance programs worked well for me, and okay for my sister, who is 3 years younger than me. So she got a checkbook in 5th grade, and started getting $4/week when she was 6 or 7.

    Anyway, all that to say 3 years old sounds young to me, but I wouldn’t frown on it. I just thought I would share what my experience was and say that it worked for the most part. I obviously still make mistakes, despite my good financial education, but I am keenly aware of it and continue to learn.

  88. argus says:

    i have twins 2,5 years old… they received a piggy bank each for their first birthday as an introduction. since than they are using it to store coins they receive, find and earn (i take them with me when returning bottles and cans and they receive the profit from that which they store in their piggy banks). from that they learned early on that:
    - money is valuable
    - you have to work for it
    - its in limited supply
    - not all things cost the same
    - when you don’t spend it immediately you can buy more and bigger stuff (5-6 months ago one twin decided not to buy a small toy and instead fill his piggy bank more to buy the bigger toy)

    whenever they try to have a fit in the store i just ask them if they wish to spend their money to buy the toy/candy they see or save it for something else.

    i guess i’ll introduce allowance when they start going to school

  89. savannahK says:

    Readers may want to refererence your “Bank of Dad” column, or the original book, as well as the Dacyzyn allowance columns. We’ve found many of those concepts helpful in figuring out our philosophy.

    We started allowance when our children could count to 100 on their own, and identify coins. This was in kindergarten/first grade, about the time they started getting serious “I wants” and peer pressure.

    Allowance is not tied to chores. Chores are part of the privilege/responsibility of being part of the family, as is a small allowance. Extra money can be earned for extra chores.

    So far we have one spender, one saver (who has enough money for his obect of desire and is trying to decide if he wants a used DS, new DS, or new DSi and is now letting additional interest accrue so he has a cushion left after making his purchase!), and one who is not yet at the age of reason. Interestingly enough, our saver is far more emotionally volatile and impulsive than our spender.

    We have family treats, but additional treats, birthday presents, etc come out of their accounts. We have not enforced charitable giving yet, but my oldest has helped me balance the checkbook and seen how much goes to mortgage, the womens’ shelter, savings, etc.

    Like sleeping through the night, there are many, many possible solutions. Research, think, and find the best mutual solution for you and your child. Then be prepared to tweak it over the years.

  90. Susan says:

    We have a 5 1/2 year old son and used the exact method as you have described (not tied to chores, $1 per year of age on our payday, divided into same 4 categories) and started an allowance at 4. We knew he was ready and it has worked out beautifully! He has a little envelope for church (or wherever he would like to donate). He opened a savings account last year and saved up for a kids acoustic guitar ($30). I have never seen him so excited about toy/purchase! The allowance also saves us money at the store/ on vacation because he is able to buy small items he wants with his spending money. The only thing is that he does not quite grasp the whole investing category, so we have tabled that for a year or so.

  91. EngineerMom says:

    I read an article in the newspaper a few years ago concerning children’s ability to conceptualize time beyond a day or two. A child as young as 3 isn’t going to be able to wait months for a result. Think about it – in the life of a child who has been on this planet for 1095 days, 3 months is 8.21% of his life – comparable to 3.28 years of a 40-year-old’s life. Compound that with a child’s much shorter attention span, and expecting a 3-year-old to understand when you tell him he can’t do anything with some portion of his money for 3 months is a little unrealistic, in my opinion. Donating his dollars or coins to a charity every week might be better at first.

  92. SteveJ says:

    I don’t think 3 is too young or the system is too complicated. It depends on your son of course, but some will grasp this sort of thing intuitively and some will not. No reason to wait until it’s “age appropriate.” Could you imagine if Mozart’s parents had said “Oh three is much to young to play the clavier”?

    I’m a same allowance for everybody advocate and I’m quite a bit older than all my younger siblings. In my case, I was followed everywhere I went and I can just imagine the ruckus if I bought something that cost $13 when my brother only earned $8 a week. As stated, I didn’t have an allowance, but I certainly didn’t get 5 more apples at snack time. You’re already taller, stronger, and get to do everything first, and you get paid more? I realize older siblings do more “work”. So what? I’ve only ever been an oldest child, but I think having minions to boss around evens out the extra responsibility.

  93. Erin says:

    Regarding tying the allowance to jobs done around the house – would you allow your child not to do their chores if they said they didn’t want the money that week? I wouldn’t, there are certain things that a child has to learn they are responsible for no matter what because they are a part of the household.

    And someone else brought up stay at home parents – the working spouse doesn’t tie (well I hope not) the amount of spending money the stay at home spouse gets to how much housework they do, right? It’s just part of the family budget and hopefully both spouses decide on it together because they are a family unit and it is the family’s money.

    So I believe that at a certain age – maybe 5 or 6, certainly by the time they are old enough where they might go places sometimes with friends and their parents without you there – kids should get an allowance for “walking around money”. I’m still not sure whether I will require them to do the “save, donate, spend” categories or not. Then if they want something extra, they can do extra chores towards some extra money to save up for what they want.

  94. partgypsy says:

    Having a 6 year old we are still undecided about what to do. I just don’t know if we can be consistent, and if you are not consistent, what does that teach the child? We try to drop a couple dollars in our daughter’s piggy bank every week, not specifically tied to anything, but then we forget half the time, though there’s around 50 bucks in there. When she does remember, she wants to carry the money around in a little purse , and we don’t like that idea. The only time we use it is when we are out and she wants a toy or item we didn’t want to get for her, and we would say, if you want it, the money comes out of your piggy bank. 90% of the time she would then decline, but then 10% of the time she would say yes, and happily get the item.

    I’m conflicted about the whole allowance thing because growing up our allowances were not equitable. My sister and I got a small and intermittent allowance while my two brothers got larger regular allowances. If we asked for our allowance we often got: “what do you need an allowance for” (the lesson being if you don’t have an immediate need to spend the money, you shouldn’t get it). We were expected to do chores around the house regardless. If we did additional chores, we would not get paid extra, but if the boys did the exact same chores were paid. As I was a nerd happy in my plaid shirt and torn jeans reading books from the library, I didn’t need the money but it definitely caused alot of resentment.

  95. Evita says:

    This little boy is only 3…. one year from potty training! could’nt you spare him the stress of owning and managing money until he is a bit older?

    However bright he is, the four-pile system is complicated. Maybe you can teach him only ONE concept at a time.

    Disclaimer: I never had an allowance as a kid… only got money (pennies!) when I did chores that were outside my daily responsibilities….

  96. Jim says:

    I think that 3 years is a bit young for a regular allowance. I’d wait till 5-6 age range for that. I also kinda think that giving them their age in $ is a bit high especially at such young ages.

  97. julie says:

    Our kids are 4 and 2 and while I think the 4 year old is mentally ready for an allowance I’m not ready to have to deal with it just yet, but I appreciate the discussion. And I never got an allowance as a child–we did chores because we were required and I started babysitting at 25 cents per hour for neighbor kids when I was 11 (late 80′s).

    To the commenters arguing that $3 is too much, remember that with this plan only 1/4 of that is in immediately spendable money. That’s 75 cents per week which is not even a full-size candy bar in most stores, not quite a kid-sized ice-cream cone, etc. If anything, it’s almost too small–kids will have to save up for anything other than the quarter machines at the front of the store. If his kid wants to save up for a standard kid toy of $5-$10 that will still take 7+ weeks. That’s some serious long-term planning for little kid.

    And on the “chores or no chores” debate, I see it this way. Household tasks and enjoyment are required of all of us without pay other than being part of a team. Some of us pull more weight than others, each to our ability. So too, the proceeds of our family are available to each of us. If giving a small allowance without explicit chores tied to it is welfare then asking our kids to work WITHOUT specific payment is some sort of enslavement. Neither is true.

    As it is, I would gladly spend about $1 per week on my daughter if she asked me nicely to buy some special stickers or some crayons or something, and I would not expect anything more of her for that than just her usual decent behavior and general teamwork in the house. Giving her $1 in spending money for herself just puts that responsibility and control on her (and means I wouldn’t have to try to remember if I’d already indulged a request this week!) so she can decide if those stickers today are worth using up her weekly “ask”.

    Right now we basically work under a plan where she gets no more than 1-2 “want-sies” each week. If she asks for a lollypop at the grocery store and then realizes she wants a sticker at the store–too bad, so sad, you used up your treat for the week. The allowance will just help us break that down into an easily counted, stored, tangible format. Coupons would work, too, but actual money provides a teaching opportunity. And we’ll probably do the “$X per TIME just for being a part of our family and helping it work smoothly” (just like she already gets certain treats and rewards just as a perk of being in our family) and then a payment process for additonal help with big deal chores outside of her weekly/daily expectations.

  98. argus says:

    “This little boy is only 3…. one year from potty training! could’nt you spare him the stress of owning and managing money until he is a bit older?”

    huh? my boys are potty trained since they were 2 years and 2 months old!

    it should not be about managing money but introducing the concept of money and simple economics to the child. just like you have to explain the concept of ownership, pain, danger, etc. management can come at a later time and surely the child will inquire about it when he/she is ready.

  99. Amber says:

    My kids are 3 and 5. I’m just beginning to think of giving the 5 year old his own money. My biggest reason is what Erika said in a comment above. He’s just now beginning to grasp that 10 pennies is less money than 1 quarter. Our current level of money education is recognizing the coins and knowing how many cents they are worth.

    My intention is to do a chore chart and commissions. Not all chores will be paid, but all chores will need to be done in order to get paid for any chores. Also, I think it makes sense at 5 years old to pay for “self-care” chores such brushing his teeth and making his bed. But by the time he’s 7 that would become a non-paid chore.

    As for your daughter, I don’t think a child who isn’t even 2 yet has any need for an allowance. I agree that you could wait for her until she turns 3 (if you start your son now). I might start both kids at the same time. I think my daughter will at least get a sticker chart. I probably shouldn’t have started a sticker based chart with my son 2 years ago. The fact that I didn’t isn’t a reason not to do it with DD now! Life isn’t always fair.

  100. Patricia McCarthy says:

    Ok, one thing left out in all of the comments is to help the young man start a written record of his money, where it goes to, come from and date when he got it or spent it. I feel this should be started by the age of 10 since by then they have learned about what writing is all about. Meanwhile for younger children, parents could start one for them and keep it up to date, showing by example what is being done. Your children learn so much by example of what the parents do, even at the tender ages below that of five years old.

    The log book could be simply made of a notebook with columns of the amount, dates of given, spent, and so on.

    I love the idea of the allowance into four piles: spend, save, donate, and invest. You might want to pay the young fellow in coins like say quarters so the factions of money may make more sense to the younger mind. My own problem is that the invest part might be better around the age of ten, where the understanding of CD’s would make a little more sense to them.
    Until then, a saving account would be fine but in the “log book”, leave that as a blank column, writing in only the age when you will go into more detail at that time. This will give the parents chance and time to slowly teach about a very important area which is skipped over by many families. The areas of investment and keeping a written track of where the money goes.

    I fully agree that some chores around the home should just be done but others could be extra reward stuff. (More such to be written up in the log book?) Also the reward/duty jobs changing with their age sounds like a great idea to me too. Maybe each year during the week of their birthday, the family could sit down with the child and discuss what new chores could be added to the different lists of .. reward payment and duty to the home?

    Again, a family together, talking over different issues is a valuable teaching/learning experience for all, both the parents and the children. You can not say that all five year olds are not ready for dealing with money as children are all different with different learning speeds. I have seen some kids truly ready to grasp the understanding of money at the age of five.

    Take your time and go slowly. Talk and listen to the young person and answers to when handle the different parts of the money topic will be found.

  101. Chris Cruz says:

    I wish I was taught more about money as a child. I was an only child and I admit that I was spoiled. I had an allowance of $10 a week only because I asked since all my friends had an allowance. But it didn’t last too long. If I REALLY wanted something my mom would buy it for me. She also rewarded me for tagging along with her to the mall by buying me something. With Filipinos they give money on birthdays and christmas instead of giving gifts so I’d get around $300-$500 per holiday. So luckily my mom didn’t let me have ALL of it and put it into a savings account until I was in college. But as I get older(I’m 26 now) I think about how I’d want to teach my kids how to be smart with money. I’d definitely give them an allowance and let them control their money and spending while refusing to give in and buy stuff for them. I have many friends my age that still can’t save money because they go out to eat EVERYDAY, buy starbucks in the mornings, and go out on the weekends. I’ve seen that many of them pick up the traits of their parents as they never ate dinner as a family, were given an allowance, or chores.

  102. Sarah says:

    I’m not sure I would personally start a child off at three. I don’t have kids, but I’m thinking of my own childhood. I distinctly remember when I started negotiating for an allowance and what a big deal it was for me to have my own money. I

    I personally don’t think that kids remember all that much before the age of 5. I would be interested in my kids remembering not being handed money freely, when they had to ask for things. I wouldn’t want them taking it for granted that they just get money out of thin air every week. I also believe in teaching my children to have a strong connection between work and money, so I would probably do some combination of small allowance and extras for special tasks until they were old enough to work.

    Asking a child to split up the money is an interesting idea. If the child could really understand the fractions, I think it would be a great way to introduce them to budgeting and various important uses of money other than just to buy material items.

  103. partgypsy says:

    I’m going to go back to the question of what do I want to teach my children to figure out what to do with allowance.
    a) I want them to learn personal-responsibility. Therefore they will be responsible for chores (picking up room, keeping shoes in shoe basket etc) that is NOT tied to an allowance (non-negotiable).
    b) I want them to learn budgeting, and delayed gratification: for myself not to buy them little things every time we go to the dollar store, but if they want something like that they save up using their allowance.
    c)I want them to have self-initiative, that they can think of other tasks that are not part of their regular chores, or if they want to do a lemonade stand, other business to earn more money I will help them with that.
    d) I want them to be compassionate to others. I also like the idea of 10%; teaches the concept without being too onerous. We already as a family choose organization to contribute each Christmastime; at this time she can research and decide where she wants her money that has been saved all year to go to.
    e) As far as saving for really long term goals, we discuss and explain what we are doing as a family; we are a team. However I’m not going to take some of her allowance to go towards college because it is too abstract and not the function of an allowance. I don’t mind the idea of a savings account for cash gifts from relatives however.

  104. Andrea says:

    I think everyone will be interested in hearing what you ultimately decide. 98 and soon to be 99 comments has to be close to a record (at least while I was paying attention it is).

    My two cents: my 5 year old got some b-day money in May. We tried a three pile process, tithe, spend and save. It was complicated and took several tries before he got it.

    We went to the bank with the save part and he got to hand it to the teller, but several times he has asked how he gets the money back.

    He also wanted to know how God got the money when those men took it. That took some over-simplified explaining as well, and I’m not sure I did a great job at it. He gets the offering part in school, so it wasnt completely foreign.

    The spending piece has been interesting. I keep all of our spending money in envelopes so I created one for him. When the book fair came around at school, I was not interested in spending money on that, but told him that he could use his b-day money. He made the selection and was satisfied.

    He still has about $10 left to spend and the other day he mentioned something small that I didnt really want to buy, but it was a reasonable purchase so if he asks about it again I’ll make a point to remind him about it the next time we are in a store that would allow him to purchase the item.

    Good luck with whatever you decide.

  105. torrilin says:

    After reading all the comments after mine, I noticed a bunch of hidden assumptions in my thinking.

    1. My parents (like many families) had a small entertainment budget. In their accounting, the kids’ allowances would have been the kids’ share of the entertainment budget. They made the family budget more and more explicit the older we got. By the time I was 12, I knew how much my dad earned at his day job, and that he and mom earned more money via the family business, and that he got paid for writing magazine articles. If I wanted to earn more money than my allowance, I could babysit, work for Dad, or do chores that were adult jobs.

    2. Most 3 year olds are not in a position where they can walk to the store whenever they like. This means the child must ask a parent to take them to the store. This gives the parent a great deal of control over the child’s spending, even if the child is nominally allowed to choose freely.

    My parents always answered no if I wanted to be taken to the store right away. I could always come with on regular trips, or I could make an appointment with them to go on a special trip. The appointment had to be made in advance, and had to be convenient with their schedule. I’m not really sure I figured out what stores were until I was about 5 or 6, and the appointment concept wasn’t really introduced until I was about 8… I may have come up with the idea on my own, from learning about doctor’s appointments, hair appointments and dentist appointments. I remember getting very upset a time or two when mom or dad forgot about an appointment I’d made with them. They used it as a chance to introduce the idea of appointment calendars.

    3. If I misplaced my money, or left it out where my siblings could take it, my parents did not replace it. It was my job to keep my money safe, so once I had a bank account I was very likely to put a dollar in the bank… my little brother couldn’t get at my dollars in the bank! He could only get at his *own* dollars there. It was great! (it was less great when I realized that no matter what I wanted to spend my savings on, it would be vetoed… in my dad’s mind that was “T’s college money”. that has set up some really problematic habits for me in my adult life. if you have a college fund for a child who is too young to understand or care, it should not be mixed in with their personal savings.)

    4. We had a regular payday. My parents would have a weekly budget for the household, and we would get our allowances on a regular basis just like they did.

    5. When I first got my allowance, I was too little to understand how giving money to strangers could help. I *could* understand that giving my sister two blocks from my candy bar, and my brother two blocks and keeping two for myself was nicer than eating the whole thing myself (also, I learned that they could be really awful if they wanted candy and were too little to buy it for themselves… and that I shouldn’t reward them with candy if they were mean to me, because they’d just get meaner). It was a very concrete set of lessons, and giving money to a charity is a lot more abstract. I do think I would have done better with the idea of volunteer work at a young age. It is a lot more concrete.

  106. k2000k says:

    Never had an allowance as a kid, I remember my mom tried working some sort of sticker chart, but that would always flop, both my mom and I are pretty hard headed :D. I do remember my ol’ man used to say every Saturday if we wanted to earn some money, it would entail things such as washing the car or some basic yard work. Usually $ 5 a pop, $ 10 when we got older. Occasionally a big project would come along, helping set up Christmas lights, spray cleaning the driveway and house, or sodding the lawn. That was payday for me, usually would get $ 100 for that. Looking back on it I liked the concept, work=pay, and it was drilled into our minds from a young age.

  107. partgypsy says:

    Postscript to story: most kids are not old enough to handle large sums of money! My 6 year old daughter keeps her money in a piggybank in our hutch/cabinet. She is allowed to take out some money for visiting a store. Unnoticed by both of us parents, she had taken down the piggy bank from the cabinet and put ALL of her money in her wallet. We found this out Saturday when she was going with a relative to the mall and she only wanted to take $3 of her money with her because she didn’t have that much money left (I knew she had over $50 in there). Her piggybank was in her room empty, and only had 1′s and 2 in wallet. She doesn’t know what happened to the money. This is the second time she has lost a large sum of money (when she went to Disneyworld she brought $45 with her and lost it on the first day by leaving her purse at a playground. There were some tears, she says she only wants to do what we do (have money in her wallet) but I tried to explain to her while we may have a small amount of money in our wallet, most of our money is in the bank, because it is safe there. We are not going to replace the money. We are taking the remainder of her money ($29 including loose change) putting it in the bank for her, and starting over, with 1.50 each week in her piggy bank, 1.50 deposited in the bank, to be done once a month.

  108. Megan says:

    Just a comment and a question (both of which may already have been stated above, I have to run to work, or I’d dig through the comments to check):

    Question: Why not tie the allowance to chores? Or does that come later?

    Comment: I would advise that you make the allowance a privilege because your son is older. As the oldest child, I often felt gypped when my parents told me I had to wait until I was such-n-such age to get something, and then my sister’s complained that I had it and they didn’t, so they got it without the waiting.

    Now, I don’t have kids yet, and I’m sure my sisters would tell you a different story, but I would recommend waiting until your daughter is three, just to be fair.

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