Giving kids an allowance isn’t just about handing them spending money—it’s a chance to teach valuable financial lessons about budgeting, saving, and savvy spending. Whether you tie it to chores or offer it as a means to learn money management skills, an allowance can help kids develop smart financial habits that last a lifetime.
The History of Kids and Allowance
The practice of giving children allowances has been around since the 1800s but didn’t become popular until the mid-to-late 20th century. Then, the practice gained momentum in the post-war 1950s and 1960s as a way to teach kids about money management and responsibility. Why? The post-war years brought about economic prosperity, characterized by rising incomes and a growing middle class. That era also ushered in a rise in youth culture and a shift toward more permissive parenting. Suddenly, teenagers had buying power. “A serious commercial interest in teenagers didn’t begin in earnest until after World War II,” notes an article from the Saturday Evening Post. “To entice marketers, teenagers needed money, and that money would come from two principal sources: the labor force and parents”
Why Give an Allowance?
An allowance gives kids hands-on experience managing money in a low-risk way. It helps them:
- Understand the value of money. With an allowance, kids learn to budget their money. They practice real-world spending and saving habits on a small scale before encountering the world of credit, debt, and income management.
- Practice saving and budgeting. With a regular income, kids can plan for both small and big purchases. They’ll learn the value of money and have a greater understanding of how much things cost.
- Make mistakes and learn from them. An allowance offers a safe space for kids to make financial mistakes without serious consequences. If they overspend, they’ll learn the importance of budgeting and delaying gratification.
- Develop financial independence. They start making decisions about their own money, which builds confidence and responsibility.
Ways to Structure an Allowance
There’s no single right way to offer an allowance, but there are some common approaches to consider. Here are a few of our favorites:
- A fixed allowance. With a fixed allowance, kids are given a set amount regularly (typically weekly or monthly), no strings attached. This empowers them to make smart financial choices and allows them to practice managing money responsibly.
- Earned allowance. An earned allowance is tied to chores or tasks and teaches kids the value of hard work. Many parents feel that this approach encourages a strong work ethic while also fostering a sense of ownership—not only for the money earned but also for the work itself.
- Hybrid approach. Some parents opt for a mix of both, with a base allowance and opportunities to earn more through extra work.
- Needs-based allowance. A needs-based allowance is basically a budget. Together, you determine how much money kids need to cover routine purchases (like school lunches), and kids are given that amount. Through this method, kids learn money management by practicing how to budget for real expenses.
Making it Easy
No matter how you structure it, establish clear expectations with your child about how their allowance will arrive. Choose a payment schedule and stick to it. To make it easier for everyone, get the Greenlight mobile app and debit card.
1. Automate, organize, and monitor.
In the Greenlight app, you can automate the allowance process (no cash required) and make changes whenever necessary. From the Parent’s Wallet section of the app, you can send money, get real-time notifications, and see how your kids are using their money.
2. Give them financial freedom.
When you sign up for Greenlight, your kids get their very own Mastercard debit card (with their name) that they can use for purchases almost anywhere Mastercard is accepted. They also get their own version of the Greenlight app, which includes interactive games and videos to help kids learn about financial literacy. From their dashboard, they can see their balance, track their earnings, manage chores, and set savings goals.
3. Create chore schedules.
If you are opting for a chore-based allowance, schedule and automate those chores through the Greenlight app. You can set regular tasks (like laundry or dishes) to occur as often as you like. You can also add one-time and seasonal chores for literally anything you desire—from mowing the lawn to designing a family crest. The app allows you to pay your kids automatically once the task is complete (in part or in full).
4. Set limits and enable parental controls.
The parent side of the Greenlight app also allows you to turn the card on or off, choose where they can or can’t spend, and freeze a card if it is lost or stolen.
5. And so much more.
There’s a lot more to the Greenlight app, but you get the idea. Plus, in the month of April, when you sign up for Greenlight, you’ll be automatically entered into a contest to win $100!
What if I can’t afford to give my child a regular allowance?
An allowance doesn’t have to be about giving extra money—it’s about teaching financial responsibility. If a set allowance isn’t feasible, consider other options:
- Earning-based allowance. Let kids earn money through extra tasks beyond their usual responsibilities.
- Non-monetary allowance. Instead of cash, offer rewards like extra screen time, a special treat, or a fun family outing.
- Real-life money lessons. Teach budgeting skills through everyday experiences, like letting your child help with grocery shopping and price comparisons.
Building Lifelong Money Skills
An allowance isn’t just about spending—it’s a way to help kids develop financial confidence and responsibility. Whether they’re learning to save for a big goal or figuring out how to make their money last, these small lessons will serve them well into adulthood. With the right approach, allowance becomes more than just pocket money—it becomes a foundation for smart financial habits that last a lifetime.
Allowance FAQs
How much should I give my child?
There is no one-size-fits-all answer to how much each child should get for an allowance. It depends on your family’s budget, your child’s age, and whether or not the child will earn their allowance by doing chores. Some parents use the “$1 per year of age” rule (e.g., $8 for an 8-year-old), while others base it on what they expect their child to pay for.
What’s the right age to start giving an allowance?
Many experts suggest starting around the ages five to seven—when kids first begin to understand the concept of money and trade-offs. At this age, an allowance can be a simple way to introduce basic financial concepts like saving, spending, and giving. However, if your child is younger and already asking about money, you might start with small amounts and gradually increase the allowance as they get older and more responsible.
What if my child spends it all right away?
Let them! Small mistakes now help them learn better habits for the future. You can also guide them toward smarter spending by asking, “Was that worth it?” Allow your child to make mistakes and avoid bargaining or bailing them out when they run short.
What if my child asks for more money before the next allowance day?
This is a great opportunity to teach budgeting! You can remind your child that they’re responsible for managing their money until the next allowance day. If they run out early, resist the urge to give more—this helps them learn to plan ahead. If they need money for something important, you could offer a chance to earn extra through additional chores or responsibilities.
Should I require my child to save a portion of their allowance?
Encouraging savings is a great habit to build early. Many parents use a “save, spend, give” method—dividing allowance into portions for savings, spending, and charitable giving. You can set a percentage for savings, like 10-30%, or let your child decide with some guidance. A savings goal (like a special toy or experience) can also make it more engaging.
Want more tips on teaching kids money management skills?
- Discover some hands-on tips to help kids save, spend, and earn at any age.
- Learn how to help your child build good credit early.
- Find out how to answer all those challenging questions kids ask about money.