Allowance Alternatives To Teach Kids About Money

Providing an allowance to your child is a great way to teach reliability, responsibility, and financial literacy. Using creative allowance alternatives to teach kids about money management is a valuable tool that will lay the foundation for budgeting, financial planning, and saving for essential things or life events. Understanding the value of money also helps show your child the importance of generously giving, patience, strategy, goal setting, critical thinking, and maybe even the basic premise of entrepreneurship.

However, giving your kids extra pocket money regularly without having that money tied to a sense of accomplishment may create unintended results.

The Problem With Giving Kids A Weekly Allowance

Too often, parents become wrapped up in wanting to give everything to their children. While it isn’t wrong to like to provide your children with a small amount of money to buy something they will enjoy, there is a risk of potentially creating unnecessary behavioral hardship.

While kids enjoy receiving extra spending money and choosing what to do with it, a fixed allowance system often creates a sense of entitlement and expectation. There are also valid arguments for the benefits for kids living with minimalism, and teaching your kids to value earning money, budgeting, and saving for future events helps prevent your children from growing up thinking they need to spend money to be happy.

Honoring Your Budget vs. Keeping Up With Allowance Trends

Too many parents are pressured by what other families are doing by providing an allowance to their children. Often this pressure results in parents taking money away from a limited living expense budget, which will only leave them stressed, irritable, and resentful.

Allowance is a learning tool to set your kids up for the future and should not be a point of contention. If you don’t have the capacity in your budget to pay your children for extra work around the house, consider compensation alternatives or barter. Another idea is to ask around the neighborhood to find out whether anyone in your community would be able to pay for extra chores done outside of the home.

Keep in mind your bottom line. Only provide an allowance you can afford.

Establishing Boundaries For Chores and Compensatable Household Assistance

Regardless of the decided-upon reward system you use for your kids, ensure it is financially sustainable and flexible. If an emergency or additional expenses are required, discuss them and agree on a suitable replacement. 

To avoid creating entitled expectations and busting your budget while factoring in pre-established money sharing, restructure or set up your allowance system to be more of a reward system dependent on work ethic, extra assistance, or accomplishment.

If you’re worried about your child only wanting to participate in working for money when they want something, come up with creative trade ideas. Establish the boundary that their assistance with household tasks is a requirement, and if they don’t want to participate, they can offer to use their earned allowance to pay you or a sibling to do their chores for them. Explain to them that as they grow into adulthood, if there are household items they don’t want to do, they’ll need to pay someone to come over to help, but you’re open to negotiations.

The Average Allowance for Kids Varies by Age

As of 2021, the average weekly allowance for kids was approximately $10, depending on their age. 

• 4-year-olds received an average of $5.12
• 5-year-olds received an average of $5.46
• 6-year-olds received an average of $5.99
• 7-year-olds received an average of $8.05
• 8-year-olds received an average of $8.19
• 9-year-olds received an average of $9.18
• 10-year-olds received an average of $9.85
• 11-year-olds received an average of $11.15
• 12-year-olds received an average of $13.11
• 13-year-olds received an average of $14.80
• 14-year-olds received an average of $15.70

58% of parents surveyed required their kids to do something to earn their allowance instead of just providing them a weekly or monthly stipend. While most parents questioned mentioned giving an allowance to their kids as a way to teach them money management, only 3% helped their kids with savings plans and establishing a budget.

Allowance rates may vary depending on the money earned and whether the kids are making money based on their efforts and accomplishments. For example, 

• The average birthday gift is $50
• The average payment to kids for mowing the lawn is $7.50
• The average price for parents to pay their kids to rake leaves is $4.50
• Washing windows nets an average of $2.00

7 Creative Allowance Alternatives To Teach Kids About Money Management And Responsibility

Using alternative ideas to giving an allowance helps keep you honest in your budget and helps encourage your child to learn the value of money. It is increasingly important, especially with inflation skyrocketing, for youth to understand that money is directly tied to effort and strategy and provide a valued service to the community (or your family).

Remember that earning extra spending money shouldn’t be stressful or overwhelming for you or your child. These are teachable moments that bring together various means of accomplishment and a small sum of money or non-monetary reward.

1. Teach Kids To Earn Money Through Hard Work

Paying your children for doing chores helps reward them for working hard.

There are many age-appropriate chores kids can do around the house or homestead. You will want to factor in your child’s emotional maturity before assigning them tasks to ensure the assigned duties aren’t overwhelming or too much for them to handle.

Working for their allowance isn’t to test their abilities to get everything done but to encourage them to be helpful and do more than the bare minimum.

If you’re concerned about them only doing the bare minimum chore amounts, consider having a core set of chores for each child and offering to pay them an allowance for completing extra duties and their household responsibilities.

Appropriate Chores for Kids 2-4

While most kids under five don’t usually care about earning money, it’s wise to develop good habits by starting a routine with them, helping you clean around the house. Because toddlers primarily focus on fun and exploration, the tasks may take a little longer to complete or require additional encouragement, but the lessons learned and cleanliness habits gained are well worth the extra time and effort invested in them.

• Put toys away
• Fill up a pet’s food bowl
• Put dirty clothes in the hamper
• Wipe up spills
• Dust baseboards, shelves, tabletops, or windowsills
• Put away books on shelves
• Help load the washer and dryer
• Match socks together
• Put away their clothes in the proper drawer
• Mop small areas with a dry mop

Appropriate Chores for Kids 5-9

Depending on your child’s maturity, kids ages 5-9 should be ok handling chores from the 2-4 ages plus:

• Collect eggs (if you have backyard chickens)
• Water indoor and outdoor plants
• Feed and water pets and small animals
• Brush fur of any pets or animals you have at home
• Work on DIY projects with hand tools (under supervision)
• Make their bed
• Pull weeds in the garden
• Assist with planting garden seeds
• Assist with harvesting garden produce
• Vacuum
• Sweep floors
• Mop floors
• Load and empty the dishwasher
• Wash dishes (with supervision)
• Help make meals
• Make themselves snacks
• Assist with setting the table
• Clear the kitchen table after meals
• Wipe down counters and sinks
• Scrub the table after meals
• Help bring in light groceries
• Help to put away groceries
• Sort laundry into whites and colors before wash
• Clean their bedrooms with minimal supervision
• Clean up after any art projects they do
• Help sort, wash and dry their laundry
• Fold and put away their laundry

You should pay attention to your child’s emotional status during these years. It doesn’t take a lot for kids to feel overwhelmed. They might feel overwhelmed having more than three chores to do.

Appropriate Chores for Pre-Teens 10-13

By the time your child reaches the age of 10, they should be ready for additional responsibilities and have a more firm fundamental understanding of what money is and how to earn it.

Depending on your pre-teen’s maturity, young adults ages 10-13 should be ok handling chores from the 2-9 ages plus:

• Rake leaves
• Use hand tools for light DIY fixes
• Use limited power tools with parental supervision
• Push-mow with supervision
• Handle and assist with caring for animals (if you have pets or homestead animals)
• Clean up animal waste in the yard or barn
• Plant or harvest garden produce or flowers
• Wash the dishes by hand
• Load and unload the dishwasher without assistance
• Wash the family car
• Prepare easy meals without assistance
• Wash, dry, fold and put away laundry
• Take trash outside to the appropriate bins
• Take trash bins to the curb
• Babysit younger siblings or neighborhood pets with parents at home
• Help parents with simple automobile or appliance repairs
• Assist parents with making DIY cleaning or personal care products

Appropriate Chores for Teens 14+

The most significant concern of teenagers is teaching them to understand and respect their physical and mental limitations. Maturity is difficult to gauge since all teens are different.

Depending on your Teen’s maturity, kids ages 14+ should be ok handling chores from the 2-13 ages plus:

• Operate and maintain equipment under supervision
• Managing animal needs
• Operate a riding mower or tractor and implements (after a 10-hour training course)
• Clean out the fridge
• Help deep clean kitchen (appliances and cabinets)
• Clean the bathroom toilet, sink, and shower
• Clean windows
• Babysit younger siblings independently (for short periods)
• Mow the lawn
• Care for pets and homestead animals independently (including walks)
• Make more complex meals
• Accomplish small shopping trips alone (after receiving their license)
• Iron clothes
• Resew buttons or holes on clothing
• Help parents with simple home or vehicle repairs
• Assist in cleaning gutters (supervised)
• Assist in cleaning the pool (if you have one)

2. Teach Kids To Earn Money By Helping Others

Entrepreneurs hold a standing belief that states, “if you want to make more money, help more people.”

Teaching your kids while they’re young to help other people is essential to develop them into valued members of society. Still, it also enables them to find creative ways to make money by helping others or giving back to the community through volunteer work and random acts of kindness.

Help your child strategize ways to be helpful throughout your community to develop a skill. Then as they become proficient with that skill, have them earn extra money by providing that service to neighbors.

3. Teach Kids To Earn Money Through Academic Accomplishments

A common way for parents to provide an allowance based on academic accomplishments.

• $20 per A grade in school
• $10 per B grade in school
• $0 per C grade in school
• -$10 per D grade in school (where the child gives $10 to their parents)
• -$20 per F grade in school (where the child gives $20 to their parents)

Providing cash payments for academic accomplishments isn’t as common among homeschooling families. However, if you homeschool your children, you could offer them an extra bit of money for reading books and their curriculum requirements that will benefit their future.

4. Teach Kids To Earn Money With Reading Rewards

A more creative alternative allowance method is to pay your child to read books.

You could offer them $5-10 for every nonfiction, finance, business, trade skill, or personal development book they read in addition to their school curriculum requirements.

Another idea is to offer a discounted price for any fun or fictional book or novel they read in addition to their school curriculum requirements.

5. Teach Kids To Earn Money Through Business Ventures

If you have a business, there are many ways your child can help you with age-appropriate business activities, whether it’s helping with accounting, stock, customer service, typing, organizing, mail responsibilities, or creating products. Working with you shows them valuable lessons not available anywhere else and enables them to kinetically learn business tasks instead of just reading about them in books.

If you don’t have a business, consider helping your child develop an age-appropriate business to help them start and grow. Lemonade stands are popular options, as are creating and selling art projects. If you have a homestead, you could offer your child the opportunity to collect and sell backyard chicken eggs, produce, handmade baskets, or other items you make together.

You can also by playing business. Take the idea of paying your child for extra chores done by assigning a monetary value to each assignment in a graph, and allow them to choose which task(s) to complete. Then they can see the additional tasks’ worth and play business by meeting them and giving you an invoice.

6. Teach Kids To Strategize Ways To Earn Money

Encouraging your child to delve into creative thinking is easily the most significant gift you can give their future. Take a step back from controlling everything they do, and offer them the space to brainstorm and decide what they want to do to make extra money. Your encouragement will help increase their confidence, but you’ll also assist them with developing critical thinking and strategy skills not taught anywhere else, giving them a stronger foundation for success when they become adults.

7. Teach Kids To Enjoy Earning, Giving, and Spending Money

Money doesn’t need to be a taboo topic that no one discusses. It also is not the root of all evil (the proper Bible quote is “the love of money is the root of all evil”). Making money should be something they enjoy doing because the tasks kids complete to earn money are appreciated and needed by their family or community. Showing your child that making money is tied to a sense of accomplishment and doing meaningful tasks may be a form of self-care you and your kids can do together.

When your child sees the impact and value of contributing in a meaningful way, they realize the value of assisting other people and finding their motivation to achieve their goals.

5 Tips for Helping Your Child Manage Their Money

Giving an allowance is only half the task of teaching your kids about money, whether they receive a flat rate weekly amount, you’re paying them for chores, or you’re compensating them for academic accomplishments.

1. Teach Your Child To Tithe Their Income

The Bible mentions tithing 10% of your harvest, giving a historical foundation to the idea of saving for emergencies, future shortfalls, and assisting less fortunate people. Tithing expresses thankfulness and gratitude. Be grateful for what you receive, and share it willingly.

“Honor the Lord with your wealth and the first fruits of all your produce; then your barns will be filled with plenty, and your vats will burst with wine.”

– Proverbs 3:9-10

Use that biblical lesson to teach your kids the importance of saving and giving back to the community. Proverbs chapter 3 verses 9-10 encourages you to keep some of what you earn to help support the most vulnerable members of your community, such as orphans, widows, homeless shelters, or a local nonprofit that aligns with your values. 

2. Teach Your Child Advanced Level Budget Management

Many financial gurus recommend following the 50/30/20 budgeting rule, which is a great teaching tool. This rule tells you that 50% of your income should go towards necessary expenses. 30% of your income should go towards what you want to buy now. The 50/30/20 rule says you should save 20% of what you earn for the future. Discussing this type of spending plan with your child helps them lay the foundation of understanding money management, not just spending everything they have at once. Kids over eight years old who have the maturity and understanding of delayed gratification will benefit significantly from understanding this budgeting technique.

With not needing to worry about living expenses, kids should instead invest that 50% into a separate saving account to benefit their future. Establishing a savings account for significant future expenditures helps provide expenses like resource books, a future car, future college tuition, future house down payment, or even starter business equipment expenses. For example, if your child is selling handmade baskets, they may want to save up some of their income to invest in higher quality tools to help them make more complex baskets.

The 50/30/20 rule states that 30% of your income should be for things you want. Allow your child to spend 20% of their earned money on items important to them, like a new phone, a new game, a particular outfit, carnival tickets, new toys, a new bike, a special treat at a restaurant, gifts for family members and friends, or new sports equipment. Your kids could even use this spending money to pay each other to take care of their expected chore list.

Children shouldn’t need to worry about debt payment unless they compensate you for taking care of their chore list or as a previously agreed upon punishment for low academic performance. Typically, for children, that 20% should go toward building an emergency fund, long-term savings account, creative investments, or even starting a retirement fund.

These numbers and spending applications will likely need to change as they get older, depending on how much they make compared to living expenses. But teaching your kids the difficult-to-understand financial fundamentals of not spending every penny burning a hole in their pocket will transform into invaluable lessons when they’re older.

3. Teach Your Child To Manage Money By Setting Goals

It is only a matter of time before your child will see something they want but can’t yet afford. Use that as a learning tool to save up for something they want.

For example, if 8-year-old Sam wants a $200 bike, discuss extra household tasks or mini-business opportunities he could do to earn that $200 (plus tax) needed to purchase it. Help him establish his goal of saving $200. Then, set up a budget with his earned allowance and a plan to earn extra cash to accomplish that goal.

4. Teach Your Child Investment Techniques

Investing in the future is always a beneficial lesson to learn. Discussing investment opportunities is wise, especially for teenagers. If you have investments, discuss what you invest in and why with your child.

As they get older, strategize with them about different ways to invest, and create spreadsheets to track fictional investments to give them an idea of how much they could earn or lose through those investment opportunities.

When they feel comfortable starting an investment account, consult with a financial advisor or do what you can to assist them in starting small and building an investment portfolio. You can also discuss the value of diversifying investments through tangible options like real estate or starting silver and gold coin collections.

5. Use Your Child’s Spending Budget To Teach Your Kid About Money

Helping your child understand the value of money, how to make it, and what they can realistically afford helps them develop a healthy financial perspective and is the cornerstone to becoming financially literate.

Take a look at their spending goals and budget, and have candid conversations about the value of money by comparing different ways to earn with the things they want or need to purchase.

Talk with your child about the value of different types of work and how helping more people with more complex problems results in higher income.

Teach Your Child To Barter Their Skills (Cash-Alternatives)

There are several other ways to compensate your child for taking the initiative to do extra tasks in addition to their required household chores or homestead duties.

1. Go to a special event, like a concert or fair
2. Have a cookout with neighbors, friends, or family
3. Take a camping trip
4. Stay up late
5. Take a memorable trip somewhere
6. Buy or make an edible treat
7. Offer an item they want
8. Teach them something extra they want to learn about

Teach Your Child To Value Their Time and Effort By Choosing Their Reward

Allow your child to choose what they receive in exchange for their efforts. This reward could result in financial compensation or bartering for something they want. Either way, make it more enjoyable for them by allowing your kids to decide what they want to work for or how they spend their earned allowance.

Your child taking the time to choose how to use their money also sets them up to learn through practice the natural consequences of money. Honoring their decisions also means giving them space to experience buyer’s remorse and set money-based priorities.

What Family Surveys Show About Choosing An Allowance vs. Allowance Alternative System

According to a survey conducted by the American Institute of CPAs (AICPA), 92% of parents say it’s vital that their children understand how to manage their money effectively, and 66% give their children a cash allowance.

T. Rowe Price investment firm found that 62% of kids agree that having financial conversations with their parents make a difference in their 12th annual survey.

Are Allowance Alternatives Right For You?

Whether or not to give your kids an allowance is personal, and the correct answer will be different for different families. 

Most importantly, make your decisions together, and keep the financial conversations light-hearted. Our society uses money to measure energy and time to accomplish a task and relate it to its value. Earning an allowance shouldn’t be daunting or provoke anxiety. It should be a fun endeavor to explore developing savvy financial habits.

This post originally appeared on Hello Sensible.