The Great Allowance Debate

I love a good parenting controversy. But when I decided it was time to start giving my kids money, I thought this might be the one parenting issue with one right answer. Surely there was a foolproof monetary system that would teach kids to be responsible and financially savvy.

But this is parenting we’re talking about. There’s never one right answer. There are lots of right answers. Which can be either empowering or overwhelming, depending how you look at it.

Back in April, I aired two podcasts on the topic of kids and money. The first was How She Teaches Kids About Money and the second was Brataphobia, about entitlement. In this post, I’ll talk about The Great Allowance Debate, perhaps the most controversial issue regarding kids and money.

There are two main sides to this debate: allowance vs. commission. In the allowance model, kids are paid a set weekly or monthly rate, independent of chores or other qualifications. The second approach is a commission system, a work-for-pay system wherein kids are paid for doing chores and making other contributions to the family. And then, of course, there’s a third option: not giving kids money at all.

I’ll be using four fabulous books as my main source material for this episode:

Buy on Amazon

Allowance

Let’s start with the allowance side. The first argument on this side is that kids should not get paid for cleaning up after themselves and for doing basic chores that contribute to the family. As Wendy Mogel says in her book, The Blessing of a B-, “Chores are best viewed as an essential aspect of family citizenship. ” Kids need to learn that the work we do in our homes has intrinsic rewards, like contributing to the well-being of your family, and a sense of accomplishment.

The second argument is that the point of giving kids money is to teach them about money, not as an incentive to help out around the house. Ron Lieber, author of The Opposite of Spoiled, says, “Allowance ought to stand on its own, not as a wage but as a teaching tool that gets sharper and more potent over a decade or so of annual raises and increasing responsibility.”

The objective here is to teach kids how to use and manage their money, so they’ll become responsible adults. There won’t be anyone handing out cash at the laundromat and telling them what a great job they did separating their whites and colors.

And money isn’t the only incentive we can use for chores. Lieber says, “[t]here are plenty of other privileges we can withhold if kids aren’t getting their chores done in a timely fashion. (Driving that new car, for instance.) Taking away money, which is a tool for learning, need not be one of them.”

My friend Lisa Hoelzer, who blogs at betterwayparenting.net, uses allowance as a tool to teach her four daughters about money. She says, “By practicing with their own money, children can try out concepts—saving for a rainy day, prioritizing goals, and delaying gratification—that might otherwise seem abstract or irrelevant.”

If you give your child money, starting at a young age, they can learn from mistakes when the stakes are relatively low, with small consequences. Expecting them to start learning about money when they’re already an adult is setting them up for failure.

Proponents for the commission sides would argue that giving allowance without making kids work for it teaches kid to get used to a free handout. Lisa says, “I don’t think there is any child who will grow up thinking that money comes for free forever. This is just not a legitimate concern. If you instill a good work ethic in your child he will continue to work hard at whatever his current task is: family chores, school work, college work, or his professional job. Children are smart enough to realize the difference between a weekly allowance from mom and dad and money they will need to earn as an adult.”

Click here read all about How Lisa Teaches Her Kids About Money

Years ago, after talking to Lisa and other moms about this allowance-based system, I was sold. I thought, “You’re right! I shouldn’t be paying my kids to clean up their own messes!” I also wanted them to have their own money, partly so when we go to the store and they want something, the decision is on them, not me. If they have money, they can buy it. If not, nope.

I also loved the logistical freedom allowance gave me. I paid my kids their age in allowance once a month. I automated it on our family banking app, Bankaroo, and it just appeared each month. No scrounging for dollar bills.

Commission

But then you have the commission side—parents who make kids earn their money. The main argument for the commission side is that in the real world, people get money for doing work. When we pay kids for doing chores, we’re teaching them a basic principle of economics. In the book Smart Money, Smart Kids, Rachel Cruze, daughter of financial guru Dave Ramsey says, “From age 5 on, I operated on one general rule about making money: work, get paid; don’t work, don’t get paid.”

Her dad puts it bluntly, “Handing out money and not teaching strong work habits create people who whine, who feel entitled, and who become perpetual victims.”

We’re not doing our kids any favors by teaching them they can get something for nothing.

Paying for work also teaches kids the principle of ownership. In the book, The Entitlement Trap, Richard and Linda Eyre say, “When we work…we feel the ownership that causes us to value something, to take pride in it, to take care of it….True ownership is the antidote to entitlement and the prerequisite to responsibility.”

Dave Ramsey says that even the word allowance is problematic. “It implies that a child is ‘allowed’ a certain amount of money just for living and breathing. Sure, every parent likes to bless his or her child with surprises and gifts, but the allowance system as a general rule doesn’t teach the child how real life works.” Money should never be just a handout.

In The Entitlement Trap, Richard Eyre talks about waking up on a Saturday morning (payday) by his kids knocking on his bedroom door. They were chanting, “Give me my money!” He said, “It occurred to me in my sleepy state that the whole scene looked a little like a welfare office. These kids were lined up for the dole, and I had just opened the window.” His kids were learning entitlement, not responsibility or ownership.

The commission side agrees with the allowance side about the importance of teaching kids money skills when they’re young, it just gives it a different spin. Again from The Entitlement Trap: “As a person earns, obtains, and takes care of something that belongs to him, he develops self-esteem, self-discipline, self-confidence, self-motivation, happiness, and good judgement.”

Another friend of mine, Sarah D’Hulst is a great example of a commission-side success story. From about age 9 or 10 she pays her kids generously—a dollar per chore, with about 8 chores a day—but then expects them to pay for most of their basic expenses, including clothing, shoes, recreation, and other extras. As a result, they know how to save, spend, and give money in a real-world context. They make plenty of mistakes and learn from those mistakes at a young age. You can read about the details of her system at howshemoms.com.

When I learned about Sarah’s system, and talked to some other moms using commission-based systems, I found myself being convinced away from the allowance side. I looked around my house and realized that my kids were not doing their chores consistently and yet the money was still rolling in. That meant they were begging me to go to the store, so they could buy junk that would mess my house up even more.

So I did an about face and switched to the commission side.

Nothing

To confuse you (and me) even more, there’s yet another school of thought: the best way to teach kids about money is not to give it to them at all. The argument here is that paying kids to do chores is not the real world. In fact, paying kids at all is not the real world. In the real world, you get a real job if you want money.

My friend Sarah is a perfect illustration of this principle in practice. Sarah’s dad lost his job when she was 12, and they scraped by with minimal necessities. She started babysitting and doing odd jobs to pay for most of her own clothes, shoes, and any extras. She worked all through high school at ski resorts, grocery stores, and a catering company. She also worked at a dance studio so she could take lessons there. She later paid her way through college. That lesson was effective and free.

But you don’t have to lose your job to teach this lesson—you just have to stop giving your kids money. Then, when they’re old enough, they can get a real job.

Until then, Amanda Hamilton Roos, founder of buildingthebridge.com says, “Letting a child work alongside you as you create your family life is a better motivation them sending them off to wash windows for a quarter. For most of their lives, my kids are going to bombarded by external motivations: grades, trophies, honor rolls. I want them to first learn at home that we do things well because we want to do our best regardless of who is watching and rewarding.”

A few years ago, Amanda wrote an article for powerofmoms.com called “3 Reasons I Don’t Pay My Kids an Allowance.” Another of her reasons is that giving kids money teaches them more about consumerism than financial literacy. She says, “Because my kids are little, my husband and I provide for all of their needs. This means the only things my 7-year-old spends his money on are ‘wants.’ Unfortunately these wants are mostly created from commercials and product placement. In short, junk. When he took his birthday money to the dollar store, he was determined to spend his money — on anything. All he’s learning is Consumerism 101: The important thing is not what you buy, it’s that you buy.”

As for learning to how to earn money, Amanda says, “I have no problem with my kids working for someone else. I gladly pay our neighbor’s kids to house-sit our cats and would welcome an opportunity for my kids to do a similar job. Because that’s what it is: a job. Our family life is not a job; it’s a workshop for building the kinds of people who will do hard work and make wise decisions, independent of the money involved.”

The other beautiful advantage of not paying kids at all is logistics. There aren’t any!

And the Winner Is…

If you’re like me, you’re thoroughly confused by now, and maybe even a little mad at me. Wasn’t this Allowance Debate supposed to have a winner? All of the arguments are pretty convincing to me. So which system is the best?

If you have listened to my podcast long enough, you’ll know that the answer is almost always that there is no one right way. It’s that classic answer—it depends.

For our family, a straight commission-based system didn’t work much better than the allowance side did. This time it failed because of logistics. I tried several different job charts and checklists, and I could sustain them for about a week before the kids and I all burned out on keeping track of their daily work. We kept trying for about a year, but finally abandoned ship.

Some moms are great at making either one of these systems work. If you’re one of these moms, there may be one right system for you. Moms like my friend Lisa, who are more organized and better about managing household chores do not have the same problem I did with an allowance-based system. It works great for them, especially if they also have a deliberate plan in place to teach kids how to manage the money that’s coming in. Moms like Sarah D’Hulst have the logistical stamina to find an accounting system that works and stick with it.

In addition to these moms, I have several more success stories from moms who are good at teaching kids about money in episode 4.

What my family has settled on is a very relaxed commission-based system, with some principles from the allowance-based system thrown in. I have a list of daily chores that I expect my kids to complete if they want screentime or to go play with friends. They have to practice the piano, clean their room, tidy their bathroom, do homework, and do their kitchen job. For extra jobs above and beyond this, I pay on the spot, adding the money right away to our allowance app. No charts. I pay for babysitting, vacuuming, gathering the trash, weeding, mowing, etc. Then every Saturday, we have a family cleaning project that we all do together for no pay.

Again, this is just what works for my family’s personality. Like us, it will probably take some trial and error for you to figure out what works for your family, and different systems may work for different ages and stages in your family. The good news is that you’re winning just by the fact that you’re putting some thought into the issue of kids and money. Whatever system you land on, whether it’s paying an allowance, paying by commission, or not paying anything at all, your kids will benefit from anything you can teach them about how to manage their money and about how to work.