Giving children an allowance

From: Financial Consumer Agency of Canada

Decide if you should give your children an allowance

Giving children an allowance or pocket money is a good way to teach them how to manage money. It can encourage them to make wise decisions about spending and saving.

It’s up to you to decide whether or not to give your children an allowance. Make a decision based on your values and what you think is best for your children and your situation.

Decide how much to give as an allowance

The goal of an allowance is to teach your children how to manage money. How much you give is less important than the goal.

When deciding how much to give as an allowance:

choose an amount that is appropriate for your children’s age
consider starting with a small amount
talk with other parents to see how much they’re giving
decide what expenses your children will have to cover with the allowance

For example, a young child could get less than a teenager. You could increase the amount as your child gets older.

Decide if your children should earn their allowance

Some families choose to treat an allowance as pay for work. The children must finish certain chores before getting their allowance. Other families don’t link the allowance to work. They use it only as a tool for teaching good financial habits.

Decide which option is best for your family.

Be clear with the rules

If your children get the allowance for doing chores, make sure your children know:

what chores they need to do for their allowance
what chores they need to do simply for being part of the family

Decide how often you’ll pay the allowance

Try to give your children their allowance on the same day every week or month. This allows them to plan, budget and save for future expenses.

Pay in small change

Consider giving the allowance in small change. This makes it easier for children to divide the allowance into what they will save, spend and share with others or charity.

Pay less often for teens

When your children are teenagers, pay them their allowance every two weeks or monthly. This forces your teens to manage money over a longer time period. This will help them learn to plan and make choices about how they spend their money.

Decide what your teens will pay for themselves

Make it clear what you expect your children should pay for with their allowance.

For example, you may decide teenagers need to pay for their own:

entertainment costs
cell phone plan
hobbies
clothing
gas for the car when they use it

Make sure your children understand what you’ll continue to pay for.

For example, you may continue to pay for:

a winter coat and winter boots
lessons outside of school
school supplies

Consider raising the amount of your teens’ allowance gradually as they get older. As the allowance increases, let your teens be responsible for paying for more. This will help them to learn how to budget.

What to do if your children want to borrow money

If your children ask to borrow money before their next allowance, talk to them about credit, loans and interest. If you decide to lend them money, consider charging a small amount of interest. This will help them understand credit. It will teach them that it usually costs money to borrow money.

Learn how to teach your teens about credit.

When to stop giving an allowance

Make it clear to your children when their allowance will stop.

When you stop the allowance, make sure your children understand what expenses you’ll pay for and what you expect them to pay for.

You may choose to stop their allowance when:

your children are old enough to get a job
your children reach a certain age

Your teen’s first job

Your teen’s first job is an important step in managing his or her own money.

Encourage your teen to set up an automatic transfer of part of his or her income to a savings account. This way, he or she can save for long-term goals such as post-secondary education.

Have your teen think about how much things cost in terms of hours worked. Have them compare the cost of the item they want to the number of hours they would need to work to pay for it. This will help them when they need to choose between options.

In Canada, there are federal, provincial and territorial laws about the age when a person can begin to work. The laws make sure the work is safe and children can stay in school.

Usually parents must give permission for their children to work.

Learn about labour laws and standards across Canada.

Other ways children can earn money

Children can earn money outside the home doing basic chores.

Some ways children may earn money include:

babysitting
gardening
age-appropriate farm chores
dog-walking
taking care of pets while owners are away
shovelling snow or raking leaves
having a garage sale

Make sure your children are safe whenever they’re working outside the home.

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