Before Giving Your Kids an Allowance, Do These 3 Things First

kids allowance

Joanne Poh


One day Junior is in diapers and the next, he’s stretching out his hand asking for money. How time flies. Many parents don’t realise how giving their children an allowance can have an impact on their attitude towards money later on in life.

Giving your primary one kid 50 cents a day to spend in the school canteen might seem like an insignificant act, but if you play your cards right you can use this as a chance to teach him much about managing his own money.

Do the wrong thing by giving your kids an unlimited cash flow and you might, on the other hand, end up sharing the house with an entitled brat. Here are some ways you can disguise the simple act of doling out an allowance as a lesson on personal finance.


1. Tie the allowance to chores around the house

Do you ever feel like you’re the only one around the house slaving away to provide while everyone else just takes, takes, takes? That could be your own fault.

One of the biggest things to look out for when giving your kids an allowance is to ensure they don’t start feeling entitled. That’s not to say that you need to remind them every day how hard you work just to put food on the table, because that just gets boring. But there are merits to teaching your child the value and satisfaction of an honest day’s work.

A child who is entitled at home is one who grows up to become entitled at school, at work and in relationships. Just because you’re fine with raising a little monarch doesn’t mean the world is going be as forgiving.

When your child is old enough to start receiving an allowance, have a talk with him about how he or she is now old enough to help out around the house. Discuss what he can help out with, and explain that in exchange he will receive an allowance.

There’s no need to get too obsessive by saying doing the dishes is worth $1 while washing the toilet is worth $5. But do impress upon your child that as a family everyone should chip in and pull their weight. Instead of framing helping out around the house as something that is to be done in exchange for money, emphasise the interdependence of everyone within the family unit.


2. Come up with a money management plan together

Instead of telling your kids they’ll be receiving $20 a week and leaving it at that, sit down together and discuss their spending needs, arriving at a joint decision as to how much they’ll actually need.

Often parents are totally clueless about what their kids actually spend money on, especially as they get older and start spending more time outside of school and the home. I’m pretty sure my parents had no idea I was buying Christopher Pike novels and Smash Hits with my allowance back in the day.

The very youngest kids in primary school will mostly be spending on food in the canteen and perhaps the odd stationery item from the school bookshop. Have them do some research by writing down the cost of some of the items they foresee they’ll be buying and then work out a budget based on that.

Older kids will need more money for transport, and you can bet your bottom dollar they’re going to want some money for discretionary spending too, whether it’s hanging out at Starbucks or playing games at LAN shops. At this point, it is crucial that you sit down with them and discuss their spending habits.

If you can’t afford to give them as much as they hope to receive, don’t feel bad—allowance should never be thought of as an entitlement. Discuss ways they can earn an extra buck, perhaps by getting a part-time job or helping out with the family business. Also talk about how they can reduce their spending if they’re unable to get by on the allowance you’ve allocated to them. For instance, bringing their own lunch from home instead of buying food at the school canteen will not only help them save a few dollars a week, but also teach them how to make sacrifices in order to save money—something many children from affluent families don’t learn till it’s too late.

Of course, you’ll also want to talk about saving money. This is your cue to give them a crash course on how investing works in order to motivate them to put some money aside, rather than spend everything they’re given.


3. Let them start paying for their own phone bills

Having to deal with paying bills is tough to accept as an adult. Without trying to seem too sadistic, give your child a taste of what it feels like to have responsibilities by having him start paying for his own phone bill.

Instead of paying for his phone bill on his behalf, give him a little extra allowance so that he can foot the bill on his own. This is not a pointless exercise, although the amount of money you spend overall may not change.

Most kids who walk around glued to their smartphones have no idea how much their mobile data plans cost, or what they can do to lower them. Once your kid starts paying for his own phone bill, encourage him to review the various phone plans available on the market and consider if there are ways he can lower his bill.

When the money is coming out of his own pocket, he’ll have greater incentive not to spend hours watching YouTube on his data plan or fry his brains by gabbing for hours on his mobile phone. He might learn that with self-control he can downgrade his mobile plan to one with less data or talk-time, thereby saving him quite a bit of money.

How do you give your kids their allowance? Share with us in the comments!

Personal finance tips delivered to your inbox!


Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.