Teaching kids about money can feel daunting, but it doesn’t have to be. By modeling smart financial decisions, setting up allowances, and encouraging hands-on experience with earning, saving, and spending, we can empower our children to develop healthy money habits. Plus, who knows, you might even get a little extra help around the house in the process!

According to T. Rowe Price’s 2022 Kids & Money survey, most parents give their kids an allowance—64% of those parents say their child is required to earn that money. Still, the question many parents still have is: how much should that allowance be?

The short answer is that it depends. While the survey found that 35% of parents gave between $11 and $20 per week, many factors may influence what’s right for your family. Your child’s age, your own money values, and your financial situation all play a role. 

One common approach to determining their allowance amount is to tie it to chores and responsibilities. This might mean creating a clear list of expectations for some kids to earn their weekly allowance. However, this approach won’t work for all children.

If your child resists the idea of a chore list or gets overwhelmed by multiple tasks, try a “menu” of household responsibilities with their respective pay rates. For example, emptying the dishwasher might be worth $2, while cleaning their room without being asked could earn them a cool $10 each week. This approach gives your kiddo the autonomy to choose which tasks they can tackle, and you might be pleasantly surprised at how quickly your house becomes sparking clean—better head to the ATM now, just in case. 

A smaller allowance is enough for younger children to practice basic money skills. Start with coins to introduce the money-exchange process—a quarter or two for a gumball or a small toy from a vending machine. To reinforce money concepts, get visual with three jars labeled “spend,” “save,” and “share.” The “share” jar introduces the concept of generosity, where kids can allocate their earnings towards donations or thoughtful gifts for others. 

Your teenagers may need a larger allowance to manage their expenses, like dining out, entertainment, or clothes shopping. Consider setting up a savings or checking account with a debit card to help them learn to track their spending and discuss the concept of debt and how to avoid it. But remember, it’s their money, and they can spend or save it as they wish. 

Consider using money management apps for kids to track their earnings and learn to make smart financial decisions from a young age. Many apps include fun, educational activities to teach kids how banks and investments work, share bill-paying responsibilities, and learn the importance of saving for bigger purchases. 

Remember, giving an allowance is more than just dishing out your hard-earned cash for someone to sweep your kitchen floor—they’re an important tool to teach your kids about financial responsibility. Having a squeaky clean floor is just a bonus.

Here are other ways you can teach your kids about money:

Involve them in financial decisions. Talk to your children about routine family expenses like groceries, bills, or vacations. Use age-appropriate language like, “We need to make sure we have enough money for food and to keep the lights working.”

Let older kids help create budgets for back-to-school shopping or other purchases. Involve them in online bill pay to demonstrate the cost of household essentials like electricity, internet, heat, water, and waste management services. They can also have big-picture money conversations about long-term savings and investment opportunities.

Discuss needs vs. wants. This conversation is easy to start at a young age. Help your children understand the difference between things they need, like food and clothes, and things they want, like the latest toy or video game. Encourage them to consider and prioritize needs over wants when spending their money. 

A fair warning, though: my son likes to turn it back on me and ask questions like “Do you need me to brush my teeth, or do you want me to brush my teeth?” Parenting is fun, isn’t it?

Use cash instead of cards when you can. Kids learn best by seeing and doing. Watching you pay with cash and coins helps them visualize money as a limited resource. It’s also an excellent opportunity to explain how we exchange money for goods and services. 

Get “financially healthy” and model smart decisions. Improve your financial management, set financial goals for your future, and build wealth for yourself and your family. Talk openly about your financial goals and avoid impulse spending.

Talk about earning your paycheck and what kinds of monthly expenses your income goes to. Discuss how you make investment decisions and save for things like emergencies and retirement. 

The takeaway? Money conversations don’t have to be taboo, and teachable moments are everywhere. Start the conversation early, and make it a normal part of life—because it is. 

What are your thoughts about allowances for kids?

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