"What is the value of starting an allowance for our child? At what age? How much? Can it be a reward for doing chores?"
An allowance is one of many opportunities to help develop a child’s autonomy, self-esteem, and sense of responsibility, as well as to communicate a family’s values. An appreciation of the value of money and work is an essential part of growing up. How is money used in their domestic economy? To enforce chores? Reward school performance? In a relaxed or tense manner? Other than parental respect and affection, there are few tools as potent as money to help children and adolescents cultivate responsibility, patience, negotiation skills, and discipline.
The pediatrician can offer guidance rooted in knowledge of child development and behavioral principles on this issue. So, approach this opportunity enthusiastically if it comes up in an office visit or build it in to your approach to anticipatory guidance.
At what age should a child begin to get an allowance?
A child should be able to appreciate the value of money and be basically able to handle it in a simple transaction. Otherwise, a parent might as well be giving poker chips or stickers. Most children can retain the value of different coins and understand greater and lesser value by kindergarten or first grade. They should be able to consistently handle the essentials of addition and subtraction by second grade, so that they can figure out what their money would buy and add up change. Some children may be especially adroit at math, and thus interested in and able to handle an allowance earlier, and some may need a little extra time to be able to understand and manage an allowance.
When parents decide that the time is right for an allowance, they should have a conversation with their children to explain how much they will be receiving, when, and what it can be used for.
Should young children be able to spend their allowance?
There is little reason to give a child an allowance if it’s only for saving. (You might as well create a college fund that they can’t use, but could watch grow to illustrate compounding interest.) Being given some money tells the child that the parent is comfortable relinquishing this small bit of power and respects the child’s judgment. If 7-year-olds see a "two candy bars for a dollar" special in the supermarket, and they have a dollar of allowance, then it is up to them financially and nutritionally to make this choice.
Giving children some control does not mean that parents cannot be involved. An allowance provides the chance to let children learn about money, but children will learn more nuanced lessons if their parents are present to listen and reflect with them about the choices they face. Parents should be curious about what a child wants to buy, and talk with them about what they give up when they make any choice.
Beyond the piggy bank, parents might start a bank account in their child’s name. This way, they can delay or facilitate a purchase, as young children will need a parent to help them with a withdrawal. In a split system, where half of a child’s allowance goes into a bank account and half can be spending money, children can watch just how much they save, and compare it to what they may have to show for the money they have spent on themselves or for a holiday gift. In this way, money provides both the material and the reward for teaching children about the value of patience and self-control.
Once children are old enough to have unsupervised time outside of school and home, such as time at a mall or walking to town with friends, they will likely want (and possibly need) some money to spend. Depending on the location and child’s personality, this usually happens around sixth grade. It’s helpful if they have already had a small allowance and been introduced to the value of saving. But if not, this is a good time to begin an allowance rather than simply handing a child pocket money every time he or she goes somewhere with friends. Parents should consider with their children how to use this money (snacks, bus fare, etc.), but stepping back and allowing their children to then manage it on their own is a powerful way to support healthy independence. Times have changed and bus fare and a daily snack can be used to estimate a starting sum.