I went to live with my maternal grandmother, Big Mama, when I was 4. At 4, I stepped into her financial class.
“Big Mama, can we go to McDonald’s?”
This question and every other similar request to buy me anything that was not a necessity were met with a money lesson. Every. Single. Time.
That is how I learned to be a good money manager. Big Mama talked incessantly about saving, spending wisely and staying out of debt.
I watched her manage on so little and still pay all her bills on time. Big Mama was so tight with her money that if she held a penny, Lincoln would scream.
Hands down, this woman taught me more about money management than any financial expert I have ever met or interviewed. She did this without ever giving my siblings or me an allowance. Big Mama could not afford to have us on her payroll.
So, whenever parents ask me whether they should give their child an allowance, my answer is: It is not really necessary. I am not saying it does not help, but the absence of an allowance does not produce spendthrift children, either.
During a recent online discussion, the question came up about whether an allowance is the key to teaching children to be financially responsible.
“Having an allowance to manage on their own provides real practice in an environment where you can help them learn from their mistakes!” one reader wrote. “My daughter had an allowance tied to her age until the day she left for college. She was expected to pay for social outings and all of her ‘wants’ with it. No money, no movie with friends. And we also never tied it to chores. Allowance teaches you how to manage money; chores teach you how to manage your life, take care of yourself, and be a good housemate. That said, if she was ever short on funds and wanted to make a little extra, I would ‘sell’ my chores to her.”
Another wrote: “I grew up poor, but my dad quit smoking to give me $10 a week in high school to use for spending or to buy my lunches. There was no financial education, and I paid the price by getting in over my head on credit card debt in college.”
A lot of people swear by the power of the allowance.
“In my opinion, the most important aspect about allowances is it teaches young children about choices and empowers them to make choices,” one reader wrote.
Folks believe an allowance teaches about natural consequences.
“If your teen doesn’t have money of her own and you are giving it to her as she needs it, then she is not learning how to delay gratification and save,” another reader wrote. “Give your teen an allowance and when they spend it all, it’s gone until the next allowance. I gave my teen an allowance once a month. At first, it was difficult because she wasn’t used to budgeting, but a few months of spending it all too soon cured that. Now she is really great with her money.”
Here is a conversation one mother said she had with her 7-year-old son.
Son: “Mom, what’s an allowance?”
Me: “It’s when someone gives you money.”
Son: “For doing nothing?”
Son: “Why would anyone do that?”
Me: “Good question!”
What is the common denominator in the comments from the parents? They were talking to their children about money. You use an allowance as an opportunity to have financial discussions and relay your family values. The talks can occur without the tool.
My husband and I gave our three children allowances sometimes, but mostly we did not. Whenever our children, who are still young enough to rely on our support, need or want money, we talk. Sometimes, it is a quick conversation. Other times, it is a, “why don’t you sit down” type of dialogue. They groan, of course, but our money comes with a teachable moment. Every. Single. Time.
With two of our children in college and one headed there in the fall, they earn enough from part-time jobs that their financial requests for personal expenses have greatly diminished. They make money mistakes. They regret purchases. But despite living, for the most part, an allowance-free childhood, they are excellent money managers.
There is no power in an allowance alone. You raise money-smart children by constantly engaging them in discussions about how to save and spend the money you give them — and by modeling financial responsibility yourself.
Give an allowance, do not give one — it is really up to you. In either case, it is your interactions that make the difference.