Allowance Best Practices For Kids 12 & Under

This is the second of three posts about Allowance Best Practices (ABPs). The first, “Don’t Get Burned by Giving Allowance Without Structure” was published on March 4th. The third will be published on April 1st.

Once you’ve made the three broad decisions (explained in our most recent post) required to ensure that allowance will accomplish it’s intended goal (which is to give kids practice earning, budgeting and spending money), you might be wondering about age-specific guidelines. Certainly you don’t give an 8 year old the same amount or leeway with allowance that you extend to a 6th Grader, or High School Student. This week we are going to focus on ABPs for kids 12 and under. We will tackle allowance methods for teens immediately after Spring Break.

When younger children receive allowance, a frequently used rule of thumb for the amount is some multiple of their age over a given period of time. You can give a 10-year-old for example, $10 a week, biweekly or monthly. Up until age 12, it is hard to imagine why they would need more than $48 a month in spending money. Your family may have good reasons why a larger amount is appropriate; making the amount some multiple of your child’s age is just a simple way to both 1) remember what the agreed-upon sum is; and 2) and keep spending in check with what not-yet-teens are usually able to handle.

For kids 12 and under, the amount of allowance is typically a multiple of the recipient’s age, given in cash, physically stored and spent. Introducing saving and giving before the teen years is also advised. Done properly, allowance for younger children can allow kids to begin adolescence with some nicely developing money management skills. Don’t worry, they still have lots to learn after turning 13.

Younger children in particular need the visual cues that are received by physically collecting and spending money, so you want to give them actual bills and coins, and a safe but not too accessible place to store them. We’ve heard about families that use everything from mason jars to bathroom drawers – and it really doesn’t seem to matter what is used. What you want is for your kids to become comfortable handling money, counting it out, and experiencing both the joy and concomitant loss of spending it – which happens best when using cash versus gift cards, IOUs or heaven forbid for anyone 12 or younger – plastic.

The sooner you can get your kids into the habit of saving and giving some of their allowance, the better. This can be accomplished by adopting the home version of a payroll savings plan for kids 10 and older – where their allowance is actually $10 a week, but they only receive $8, and then have $52 in each of a savings and charitable giving “account” at the end of the year. They can look forward to determining which good cause they would like to support and on what more meaningful purchase they might ultimately spend their savings. Getting comfortable with putting real distance between wanting and getting is the cornerstone of being able to live within one’s means – and it will never be easier to establish such a habit than by starting it from the outset.

When your not-yet-teenagers desire items that lie completely outside of their spending ability, ask them to complete a Gifting Sense Survey and suggest the item could be a candidate for an upcoming holiday or birthday gift. Gift Surveys are free, and safe, and they help kids learn the true value of their requests. They also help ensure that family gift dollars are only spent on items that will really be used and appreciated.

For those of you who believe that childhood should be a time of completely unfettered gift giving and receiving, as personal finance writer Ron Lieber and his colleagues so squarely assess, when you neglect to give your kids money-smarts, rather than protecting your child’s innocence, you might only be giving them the idea that money is neither scarce nor valuable. Introducing children to measured spending doesn’t mean they can’t still have incredibly memorable birthdays and holidays. It just means those incredible memories will be “gift-wrapped” in some quick but meaningful financial lessons. Done properly, allowance for younger children will allow your kids to begin adolescence with some nicely developed money management skills. Of course – there is still lots for them to learn once they turn 13!


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