ALLOWANCES: What are the Rules and Why?

By Lesley Lwinski

In order to learn to manage money, you have to have money to manage. This is a good reason to give a child an allowance – with no strings attached.

Without rewards and punishment linked to an allowance, children are more motivated to save and to give – two essential components of money management.

What is the right amount of allowance? A dollar per year of age is a good rule of thumb.

As the child ages, consider what you want her to be responsible for buying.

Children are responsible, with your support, to spend wisely and stay within their budget.

Mistakes are valuable learning experiences. When their money is gone, it is gone. Let them own the problem they created by spending their money. Offer empathy instead: “That shirt would have looked wonderful on you!”

Let them experience their sadness and frustration without rescuing them: “Oh, let me buy it for you!” or blame: “I told you not to buy that silly necklace last week. I hope you’ve learned a lesson!”

If children experience the consequences of their financial indiscretions, they will learn how to change their behavior.

Here are some tips to get you started:

Be consistent. Once a week is good for young children, while older children can get an allowance once a month.

Determine what percentage of each allowance goes to each category (e.g., Savings 40%, Charity 10%, Medium Term 25% and Spending 25%) Adjust as you go.

Have a visual – 4 jars, 4 envelopes, 4 boxes…. each labeled with a purpose:

Long-term savings – This goes to the bank for college. Teach them how to fill out a deposit slip and take them to the bank with you to make the deposit. Leave it alone and let it grow.

Charity – Any good cause your child chooses. Your child can give weekly or save up and donate all at once.

Medium term savings – For more expensive purchases such as new cleats, a special outfit, a game, skateboard, etc.

Spending – This is for everyday spending and is the only money that should be kept in a wallet or purse.  It can be spent or put in any of the other jars.

Talk about values: giving, saving and budgeting.

Walk the talk.

Consider loans and terms of repayment. Follow all the way through.

Think about “matching funds” for gifts or vacations.

It’s good to give children responsibility and control over themselves whenever possible, and money is a good place to begin.

They learn to be competent and confident in their skills, feel less entitled and they become more independent.


    Lesley Iwinski is a Lexington mother of three grown children, a family physician and Executive Director of The Parent and Family Enrichment Center, Inc. and Growing Peaceful Families. She offers classes, workshops and seminars. Info:  (859) 333-3053 or