Setting the right amount for a kid’s allowance doesn’t have to be guesswork. Choose from the following options to determine a fair rate.
1. Age Many families with pre-K and elementary school age children provide a weekly allowance based on the age of the child (either fifty cents or a dollar per year of age). With this method, for example, a ten-year-old would earn either five or ten dollars a week.
Some parents give kids one dollar per grade level per week (a fourth grader would earn four dollars a week under this system). As children get older, many families switch to an allowance system that takes actual needs into account.
2. Peers Some parents base the amount on the going rate for allowances in their area. If this method seems fair to you, ask the parents of your child’s friends what they pay their children and set your child’s allowance at a similar rate.
3. Budget In order to teach money management skills, some parents let their older kids pay for the expenses parents would usually pay with allowance money. To figure out an allowance amount using this method, record everything you spend on your child for a month. Determine which expenses your child will be responsible for and which ones you’ll cover. Subtract the expenses you’ll pay and average the rest. Decide whether you want to include money for savings and for charity. When you arrive at a figure, make sure your child understands exactly which expenses he or she is responsible for.
4. Your Childhood Allowance You can choose an allowance amount based on the amount you received as a child, especially if you think that allowance was effective in teaching you money management. Use an
allowance calculator to calculate an amount that is equivalent to the purchasing power of your allowance when you were a kid.
5. Payment for Chores Some experts claim that chores and allowances should be separated (one is meant to teach family responsibility, the other to teach money management). But other experts argue that money should be earned not just handed out.
One compromise between these two conflicting opinions is to provide a set allowance and mandatory chores. Additional chores earn extra money. For example, a child may be expected to make the bed, set the table, fold clothes, and take out the garbage. If the child wants to earn extra money, parents might agree to pay two dollars for scrubbing the bathtub or five dollars for washing the windows.