What is a Fair Allowance for Kids?
10/24/2019
Would you be surprised that the going rate for kid's allowance is approximately $30.00 per week? According to a recent Harris Poll, on behalf of the American Institute of Certified Public Accountants, parents are paying US kids about $6.00 per hour to do chores. This payment represents a 38% increase since 2016. Four out of five parents in the survey expected their kids to work for their allowance at least 1 hour a week. On average, children are spending 5.1 hours a week to earn their allowance.
Many parents believe that providing a weekly allowance can help kids understand the value of money and ideally instill financial responsibility. Yes! Unfortunately, the poll indicated that only 3% of the kids are setting aside savings with their allowance. The survey showed that 97% of the kids are spending their money on going out with friends, digital devices, downloads, or toys.
What is a fair allowance for kids? Whatever amount you decide and whatever is best for your family. The bigger question is, what financial education do you provide with the allowance? If only 3% of children are allowing for savings, then most parents are missing a teachable moment.
The ACIPA's National CPA Literacy Commission suggests five steps for parents to follow to help their children understand the value of money.
- Start the Conversation Early
- Set Clear Parameters
- Use an Allowance to Talk About Budgeting
- Discuss Impact of Impulse Purchases on Goals
- Talk Often
If a child was earning an allowance of $30.00 per week and saved 50%, they could have $4,000 saved in five years. Teaching solid money management skills goes hand in hand with providing an allowance.
At Atlantic, our Cenetsables Youth Savings Account lets children 12 and under learn money management through interactive online games and videos. The Centsables are superheroes – six fearless friends whose greatest power is to help kids make smart financial decisions. We think it is a fun way for kids to start learning about smart money decisions.
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