Can’t Afford to Pay an Allowance? Maybe It’s Just How You Define It.


By Jayne Berkaw A few weeks ago I wrote a post about paying allowances, noting that it is “one of the big conundrums of parenthood” and that “a lot of it is based on your own experience, your view of its place in parenting, your financial situation, etc.” One of our FamilyMint parents commented that paying allowances was difficult in light of her family’s limited “spending” money, so I wanted to touch on the topic again with that in mind.

There are lots of reasons to back away from paying an allowance to your child. Job loss, unplanned medical issues, home repairs, and other unexpected expenses can wreak havoc on family finances. But here’s the deal: as parents we simply have to teach our kids how to manage money so they can grow up to be financially responsible adults. We have to give them lots of opportunities to practice saving and using money, and we have to let them learn from their mistakes and applaud their successes.

The US Dept. of Agriculture estimates that it now costs an average middle-income American family $222,360 to raise a child from birth to 18. In their estimate they include things like housing, food, transportation, clothes, child care, health care and misc. things like haircuts, sports equipment, computers, and books. These are things you are likely already paying for, so they are also things you can consider letting your child control through an “allowance.”

This is an idea mentioned on many money sites as a way for families that can’t “afford” an allowance to actually pay one, reaping the benefits of loads of teaching moments and, importantly, building kids’ financial skill and confidence. It’s pretty easy too:

  • You and your child sit down and talk about what you spend on him/her during a week or month; things like clothes, school lunches, snacks, movies, sports, etc.
  • You talk about what items your child can be responsible for, being careful that choices are age appropriate, and that you discuss what a budget is and how to set priorities.
  • You pay your child the agreed upon funds, relieving yourself of those responsibilities, enabling your child to experience the responsibility and all that goes with it, and you become coach and mentor – hooray!

If the family is navigating rough financial waters, adjusting allowance teaches them that when times are tough, belts get tightened. Just be sure to explain what the financial pressures are, with assurances that when things stabilize, things will be readjusted.

I appreciate your comments, so keep them coming!