This post was originally published on this site
Parents, you may be doling out your kids’ allowances all wrong.
Roughly two-thirds of parents give their children an allowance, according to a survey released Tuesday of more than 1,000 parents by The American Institute of Certified Public Accountants. On average, kids in the U.S. get $30 per week, or roughly $120 per month, the survey found.
“While the average hours of chores a week required by parents to earn an allowance are on par with 2016 (5.1 hours in 2019 vs. 5.3 hours in 2016), the hourly pay rate for children who have to work for their allowance has seen a dramatic 38% increase, rising from an average of $4.43 in 2016 to $6.11 in 2019,” the AICPA data revealed.
Most parents believe that an allowance should, at least in part, be earned. Indeed, the AICPA data revealed that 52% thing the entire allowance should be earned and another 27% think it should be partially earned and partially gifted. And data from Country Financial revealed that more than half of parents give an allowance to teach their kids that money needs to be earned. However parents dole out the allowance, they should be aware of some of these common mistakes.
Mistake #1: You’re obsessed with how much you’re giving the kids
Parents tend to get hung up on how much they pay their kids, but “the amount matters less than that you are using an allowance as a chance to talk about money and how to manage it,” says Kimberly Palmer, the author of “Smart Mom, Rich Mom: How to Build Wealth While Raising a Family.” Indeed, “the most basic tool for teaching your kids about money is by offering an allowance.” Kathleen Grace, the managing director of United Capital and author of “Prince Not So Charming.” Palmer says you should use it to “get them used to handling and talking about money so it’s not so much the amount as the conversation around it — how they can save or spend it.”
That said, the amount isn’t completely irrelevant and should reflect their age. Mike Falco, the president of Falco Wealth Management near Philadelphia, recommends as a very rough rule of thumb $1 per week for each year of your child’s life; so a five-year-old would get $5 per week while a 16-year-old would get $16 per week.
Mistake #2: You start giving the allowance too late
Roughly half of parents still aren’t giving their kids an allowance by age 8 — and experts say that’s a mistake. Palmer recommends doing it “as soon as they grasp the concept — around 5 years old or when they start kindergarten” and Falco says you should do it “as soon as they can count money,” which is around four or five years old. This way, money — and an appreciation for things like saving it and what it is used for — become a part of their lives very early on. “The sooner they learn, the more likely it will stick when it matters most,” says Eric Pucciarelli, the vice president of oXYGen Financial in Atlanta.
Mistake #3: You give an allowance to your son differently than you do your daughter
While nearly two in three men say they got an allowance growing up, only about half of women say the same, a 2016 AICPA survey found — and experts say they still sometimes see this. But all the experts we spoke to agreed that this is unfair. “Boys and girls should be treated the same,” says Falco.
Mistake #4: You give the money with no strings attached
When you give your kids an allowance, you should make them save at least part of it, says Pucciarelli. This will teach them to “save over time for items that they want” and delay gratification, says Grace. It will also help them develop saving as a habit, says Pucciarelli. Falco recommends having your children save roughly one-third of their allowance each week.
Pucciarelli says that you may also want to teach your kids about taxes, by making them set aside at least part of that money for taxes. “Then decide whether you want to teach them to donate the jar for taxes to a charity or put in back in their savings,” he says.
But he cautions that “an allowance should not be used as leverage” — as in: “You didn’t take out the trash? No allowance,” he says.
Mistake #5: You tie all the money to chores
Most parents make their kids work for their allowance, by doing chores, according to the AICPA survey. But some experts (and this one is a bit controversial) say that’s not always the best approach. “Kids should do chores and take on household responsibilities because they are part of the family, and being part of the family means contributing,” says Palmer. “They are not being paid to contribute — it is expected as part of their family role.” Financial columnist Ron Lieber also writes that if you peg an allowance to chores, kids will simply stop doing their chores once they have enough money.
However, Palmer does approve of paying for chores that are outside of the regular weekly or daily chores that kids must do. “I do like paying for extra chores — for example if my daughter wants to organize the shoe closet, I might pay her an extra quarter to do that,” says Palmer. “So there are ways to earn extra, but ways that go above and beyond basic household chores like cleaning up after yourself or making your bed.”
This story was originally published in 2016 and has been updated.