Of all the personal finance topics related to children, the topic of an allowance might be the most hotly debated. In my opinion, children should earn their allowance, not just receive an allowance. I view an allowance as a tool to teach children about working, budgeting, saving, giving, and investing. It is impossible to teach the “value” of money to anyone if they don’t “earn” it. Of course, “earning money” can, and should, mean different things for different ages, so feel free to adjust your interpretation as appropriate for your situation. I also think that there is nothing wrong with putting away a little money for them each week as an “allowance” without them knowing about it so that you have a “fun day” fund, but that is a gift, not an allowance. It’s worth addressing the idea that children shouldn’t receive an allowance because they should be expected to contribute to a household. It is a fair argument, but I think the benefit of teaching via an allowance outweighs it. If anything there can be “expected” contributions to the household such as making a bed or picking up toys and then “unexpected” contributions that earn allowance such as raking leaves or packing lunch for a younger sibling. That’s the tact position I outline below, and plan to do when our little ones reach allowance and chore age.

Dear Ney Ney,

Today I wanted to talk to you about your allowance. An allowance is the money that parents give their children each week, usually in exchange for doing work in the house, called chores. Chores are how you earn your allowance. An allowance allows you to have money to spend, save, invest, and give to charity.

Soon you will start to help with chores around the house, and soon you will also be able to earn an allowance. Chores might be making your bed, cleaning your room, feeding the dog, weeding the garden, and emptying the dishwasher. 

When adults do chores they don’t receive an allowance. Adults do chores because they are simply things that must be done in order to have a nice life. Another word for something you have to do is a responsibility, and you become responsible for doing the task. 

For example, I am responsible for driving you to school. If I don’t drive you to school, you won’t learn how to read or do math. It is important that you know how to do those things so you can have a nice life, so I have a responsibility to take you to school.

So, some chores will be your responsibility. You won’t get an allowance for doing those chores. As part of our family, you need to help others in the family live in a clean and comfortable place, and so those chores help the well being of our family.

If you want to earn your allowance there will be a list of chores you may choose to do. For each of the chores you complete you will earn some of your allowance. This might sound tough, but I know you can do it, so get to it!

I love you.