If you think an allowance is a dollar bill or two handed to your child each week, think again.
Two-thirds of parents give their child an allowance, and the average weekly amount is $30, according to a survey published this week by the American Institute of Certified Public Accountants. That’s up from $17 in 2016, the group said.
Many children aren’t simply getting a handout, though. Four in five parents who give an allowance said they expected their offspring to work for the money — about five hours a week of household chores, on average.
Children whose allowance is based on their completion of chores earn an average of about $6 an hour, an increase of 38 percent from three years ago. Over the same period, the average hourly pay rate for all Americans rose 10.5 percent, the institute said, using federal labor statistics. (The group said it could not explain why the amount had increased, because the survey didn’t ask parents about that.)
Three-quarters of adults surveyed said the main reason for giving an allowance was to teach the value of money and financial responsibility. But just 3 percent said their child mainly put the money aside for savings, a proportion the institute deemed “alarmingly” low. Most said their children spent the money on things like outings with friends, digital devices and entertainment, or toys.
“There is a big disconnect there,” said David Almonte, a member of the institute’s Financial Literacy Commission. At $30 a week, a child could potentially save more than $1,500 in a year.
Mr. Almonte said parents should take advantage of “teachable moments” afforded by the allowance. Parents can discuss the difference between “wants” and “needs” when their child wants to buy something with the money, and encourage them to save some of the cash each week so they can pay for short-term (pricey video games) or long-term (college) goals. About half of the parents said they took time at least weekly to teach their children about money, but about a third said they did so just once a month or less.
The average age of a child reported to receive an allowance was 14, but 4 percent of parents said they provided an allowance to a child who was 22 to 25 years old.
Mr. Almonte said some families might give a child in college an allowance to help with spending money so they could focus on their studies as their full-time “job.” But an allowance during the school year, he said, shouldn’t preclude older children from working over the summer and using some of their earnings to help support themselves.
The findings come from a landline and cellphone survey conducted for the institute by the Harris Poll, which talked to 1,002 adults in August, including 273 parents with at least one child 25 or younger living at home. The margin of sampling error was plus or minus three percentage points.
Here are some questions and answers about allowances:
Q: How should I decide how much allowance to pay my child?
A: A rule of thumb is a weekly amount that is the child’s age in dollars: $5 for a 5-year-old, $10 for a 10-year-old and so on. Parents can consider a larger sum, paid monthly, when the child becomes a teenager, said John Lanza, author of the book “The Art of Allowance.” That “breakthrough” allowance, he said, can help the teenager begin budgeting over a longer period.
If money is tight, the institute’s Financial Literacy Commission suggests that smaller amounts — even a few dollars a week — can help teach the same lessons. The size is less important than what the child does with the money, Mr. Almonte said. The commission offers additional tips on its website.
Q: How can I encourage my child to save when interest rates paid on savings accounts are low?
A: The premise of saving money over time for larger goals is important regardless of interest rates, financial advisers say. But seeing a balance grow by compound interest builds enthusiasm. One option is to pay a more generous rate on your child’s savings out of your own pocket or to match each dollar your child saves. Mr. Almonte recalled that his father, who stressed financial lessons with his children from an early age, would write a check — “He sort of made a ceremony out of it” — to match the cash his sons had saved over the previous year.
Q: Should I require my child to work in exchange for an allowance?
A: While many parents favor linking an allowance to chores, that’s not necessarily the best approach, said Todd Yuzuriha, a co-host of “The Money JAR,” a family finance podcast sponsored by Junior Achievement. He recommends decoupling chores from an allowance since the goals of each are slightly different. An allowance, he said, is “a tool for parents to teach their kids about money.” Basic chores like helping around the house, he said, should be considered contributions everyone must make as part of the family.
“You don’t want your kid to think they’re optional,” Mr. Yuzuriha said, lest the child decide to skip taking out the trash and forgo the money. He suggests that parents consider paying only for extra work or projects, above and beyond shared household tasks.
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