How to set an allowance rate for your kids

You Should Ignore the “Going Rate” For Allowance

We all want to teach our kids good money habits. And allowance can be a great way to do that – if you can decide how much you should give your child.

Many of us end up following the dollar per year of age rule, or asking our friends what they do with their kids. But trying to set money rules by what everyone else is doing may not match up with your family’s financial goals – or the lessons you’re trying to teach your child.

Today, my friend Amanda is visiting from Money Prodigy to share the things we should consider when setting up allowance for our kids. Over at Money Prodigy, Amanda creates money educational adventures to prepare all kids to be financial rockstars by the time they receive their first paycheck.

Amanda is an expert on communicating about money with kids, and she has a lot to say about allowance. Take it away, Amanda!

Is there a touch of allowance comparison-itis going on in your household?

Perhaps you gauge your own allowance amounts on what the other moms are doing with their kids. Or maybe your child complains that he makes too little compared to his older sibling. Or Bobby down the street gets a whole $20/week and that’s just unfair compared to his $8/week.

It’s often easy to fall into the trap of just giving the “going rate” for allowance. But that may not be what’s best for your family. So, today, I want to share how you can come up with – and communicate – your own allowance rate.

Hint: If you already use the going rate, keep reading. I’ll show you a way to tweak it without taking money away – because that would probably cause a meltdown!

Why You Don’t Want to Give the Going Rate for Allowances

Sometimes the going rate is something you overhear in the bleachers while at your kid’s sports practice. Sometimes it’s from an article you read from a financial guru, who spouts out a general rule, like paying $1 for every year your kid has been alive.

This is not a good way to figure out how much allowance to give your child.

That’s because you need to take into account several key things when you come up with your allowance number – otherwise, the allowance amount might actually prevent your child from learning the money lessons you want them to.

3 Considerations to Make When Setting Your Allowance Rate

Instead of choosing the “going rate” for allowance payments and moving on, you’ll need to consider how your child will actually be using the allowance you give them.

This is going to be dependent on three things:

#1: Your Child’s Money Responsibilities

As a parent, you might hear that so-and-so gives their 12-year old $20/week, and think you should just go with that.

But what’s missing from this is the context of what that child’s financial and household responsibilities are to go along with the money they’ve been given.

Baby riding on a Roomba
Starting them young

Money responsibilities are the purchase areas/categories a child is responsible for paying for with their own money.

Figuring out what money responsibilities you’re going to give your child needs to come before you decide on the actual amount.

For example, if you expect your child to pay for their lunches out of their allowance money, or for their weekend trips to the movies, or for their brand-name clothes, then you’ll need to figure out how much you would normally spend on those items and adjust the allowance accordingly.

Up against a child of the same age who is only expected to pay for trinkets like checkout counter candy? Your child’s allowance might look like a fortune! But it makes sense when given the context of money responsibilities you’ve passed on.

Examples of money responsibilities you might want to pass along (depending on their age/capability level):

  • After school snacks/vending machines
  • Extras at the grocery store
  • Brand name clothing (they can split the difference between what you would like to pay, and what they would like to own)
  • Weekend outings with friends
  • Friend/sibling birthday gifts
  • Gas money
  • Cell phone data plan
  • Etc.

#2: Your Child’s Financial Capabilities

Your child is likely on a different financial capability level than other children their age. So, having more money than others that they can funnel into a savings goal, or having less because they’re still in the spend-everything-at-once stage just makes sense.

Little girl throwing money out the window
This girl clearly has too much allowance…

It just really depends on where your child is. A general rule of thumb is the younger your child, the less money you give them (and also fewer money responsibilities). As they age, you ramp each of these two things up.

Remember here that one of your goals is to have your child start to save their money towards a personal savings goal. I’ve got a one-page money goal setting worksheet that will help you guide your child in filtering all their needs and wants down to the best one for them to move forward with – the quickest win.

If your kiddo is just starting out with a savings goal, then you’ll want to encourage them to save a little from one allowance to the next. To stretch their delayed gratification muscle a bit more, you can even play around with duration of time in-between their “paydays” and see how they handle it.

Is your child further along than that? Help them choose a goal that will take them over a month to save up for, and adjust your allowance amount accordingly – see Consideration #3.

#3: What Your Child Wants to Purchase

One of the smartest things you can do to get your child setting a money goal and working on reaching it is to figure out what they want to buy first. Then, then base your allowance amount off of that.

Look at it, the new Nimbus 2000!
Within reason, of course…

You want to make sure the allowance amount you give them is not so much that they won’t have to save some money from one allowance cycle to the next (or one month to the next, depending on how far along they are in the money goal-setting realm) in order to get it. And you don’t want to give them so little that what they want to buy will take a year to achieve.

The right balance can help teach your kids delayed gratification. And for older kids with significant wants, you can encourage them to find ways to earn extra money, outside of their allowance to reach their goals faster.

How to Handle Your Child’s Allowance Comparison-itis

One big reason why parents choose the going rate for allowance is that it’s an easy number to latch onto (I’m a mother, too, and totally understand needing a little convenience!). Plus, it stops your child from complaining about the allowance other kids are getting.

I’ve shown you why this isn’t the best method – even with those perks, but I don’t want to stop there. I’d like to leave you with some tips for this comparison-itis subject you’ve likely already encountered or will be dealing with in the near future.

How are you supposed to handle your child complaining about how their older sibling earns more money than they do, or how their friends get more allowance money than they do?

Here are a few tools to keep in your belt:

  • Explain to Your Child that So-and-So Also Has More Responsibilities: If you’re giving an older sibling more money than the younger one, chances are you’ve also already put them in charge of purchasing more of their own personal items. You should point this out to the younger sibling – a family budget meeting would be a good place to do it –and tell them that when they get old enough to take care of purchasing “X”, then they’ll be given more money to do so. In the meantime, they can be part of the decision-making for that category of spending for themselves, but of course, you have the ultimate say.
  • Explain to Your Child that Adults Make Varying Pay as Well: Your child may feel better knowing that you are in the same boat. Let them know that adults don’t all get paid the same amount of money, either. And when that happens, no one jumps in and equalizes the amount of pay one adult is making from the next. Advancement and pay increases happen, but it takes time.
  • Re-frame the Conversation: Instead of your child focusing on what they don’t have, point out to them that even though people get paid varying amounts of money, or varying amounts of allowance, everyone has the same choices they get to make. It all comes down to maximizing the money that you DO have, not about how much you get.

Sure, listening to others share how they’re handling things like allowance for kids, chores, and anything else parenting-related is a nice gut check. And we all learn something from each other, so being part of these conversations is a great tool.

But when it comes to deciding on the amount of allowance you’re going to give your own child? I hope you’ll take everything you just learned into consideration, and stand your own ground on this one.

How do you set allowance rates in your house? Has the “going rate” ever come into the conversation? Share your methods the comments!

Author Bio: Hey-ooo! I’m Amanda L. Grossman from, where I teach kids aged 8-13 how to manage their money through Money Educational Adventures (like the Mt. Everest Money Simulation). I’m a Certified Financial Education Instructor and won a 2017 Plutus Foundation grant to bring my creations alive.



How to Ignore the Going-Rate for Kids' Allowance

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