Kids and Finance: Allowance – To Work or Not to Work?

A great Dane named Hamlet once lamented that age old question: "To work, or not to work?" Oh, wait, that's not exactly how it went. Um, anyway, all fuzzy college lit aside, today we're giving allowances a bit more attention. Back in March, I touched on allowances when talking about savings and kids. Today, we're looking at the pros and cons of different allowance strategies.

Two Schools of Thought

When it comes to giving your kids an income, parents seem to fall into two main categories. There are those who give their kids an allowance freely without having it attached to any work or chores. On the flip side, there are those who will dole out a weekly dollar or two when the kiddos complete their responsibilities. If I had to venture a guess, I'd say the latter is the more popular option, but both are legitimate possibilities for homes with children. As with anything, there are pros and cons to each, which we'll explore here.

You Want Money? Take Out the Trash!

This really does seem like a win-win situation: you get some help around the house, and Junior gets some change for his piggy bank. The pros here are pretty obvious: your child learns responsibility and is able to earn money to save / occasionally spend wisely. Having the dishwasher unloaded or the laundry put away is just some icing on the cake.

Some "opponents" (sounds so harsh when discussing allowances!) of this option voice concern about kids who receive an allowance for chores. They believe that children will grow up thinking that everything they do should bring them cash, which isn't true in the real world. Think about it: there are things you probably do every day (making the bed, picking up clutter, etc.) that don't bring in income; you do them as part of keeping a home. Part of the goal of raising kids is to teach them how to do this and participate in a family; paying them for routine stuff could have the potential to disrupt this process. Which brings us to...

Not Just a Freebie

The other half (or quarter or third, whatever it is) maintains that children should receive an allowance with no strings attached. With this option, children are expected to do those routine chores as above; to pitch in as part of the family team but not be paid for these. The key with this idea is that the amount should be something that Junior can get excited about but shouldn't be large enough to buy every item on his wish list. If Junior decides he wants more money for that newest comic book, his parents can offer extra or more demanding chores that he can complete for money.

So there you have it: the two main allowance choices out there on the market today. The main focus and goal shouldn't necessarily be about the cash but about teaching and guiding your child in his earliest financial decisions. What about you, MomVesting readers? How have you handled allowances in your home?

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