When Do You Stop Giving Kids An Allowance?

“When do you stop giving kids an allowance?” If this question has been bothering you, you’re not alone.

According to a survey conducted by The American Institute of Certified Public Accountants (AICPA), roughly two-thirds of parents nationwide give their children an allowance. Of the 1,000 parents interviewed, more than half felt that the entire allowance should be earned while others felt that an allowance should be partially earned and partially gifted. If you want your child to have a great start, try a nice college prep program.

Aside from whether or not an allowance should be earned, there’s an ongoing debate on when to stop giving kids an allowance. Should parents end the allowance once their children have jobs or continue to dole out an allowance for as long as they like?

In this, as in most other parenting debates, there’s no one-size-fits-all approach. Every family’s financial situation is different. There’s no right or wrong time to begin cutting back on an allowance. The right time to end your child’s allowance depends on what works best for your family.

Some parents want their teens to stay focused on their schoolwork. So, instead of encouraging them to get part-time jobs, parents continue giving children an allowance until they graduate from high school. Other parents see no point in giving their kids allowances once they begin earning their own money. These parents figure that if their children are responsible enough to hold down a job, they no longer need to rely on their parent’s financial help.

Stop Giving Kids An Allowance in College?

Still other families decide they’re done giving out an allowance once their kids are in college. These parents feel that college study is stressful enough.  They don’t want their children to have to work for their support in addition to having to study. Instead, the parents continue the allowance to give their kids a measure of financial freedom. This allows their college students a chance to both socialize and concentrate on their studies without having to worry about money.

Some parents opt to continue supporting their children with an allowance even after they’ve graduated from college. They do this to offer the kids a cushion until they’re professionally established and can start paying their own way. But ultimately, the decision to end an allowance rests with the individual parents. It’s all a matter of preference and ability.

An allowance is a useful tool for teaching children how to manage money and budget for the things that are important. But in offering an allowance, it’s important for parents to have a clear exit strategy of when to stop. You want to make sure that both you and your kids are on the same page. Here are some questions to ask as you work out when to phase out or stop the allowance altogether.

1) What Is The Purpose Of The Allowance?

There are several reasons parents opt to give a child an allowance. Many parents give an allowance in order to teach children how to manage, budget, and save money. As children receive a regular allowance, they become more adept at handling finances.

If you begin giving your child an allowance with a clear purpose it’s easier to determine the appropriate time to stop. If your reason for the allowance was to allow your kids some extra spending money, for example, then it’s okay to stop the allowance once your children begin earning money for themselves. You may, however, want to delay cutting off the cash if your child’s income is unreliable.

If, on the other hand, your purpose was to teach your children how to live within a budget, then the allowance should continue until you’re sure they’ve grasped the concept. Parents can help children budget for the items they want when they’re young, such as toys or treats, then gradually make children responsible for their own needs (e.g. clothes, car insurance, school supplies) as they grow older.

Once you determine that your initial goals for giving your child an allowance have been met, you can either stop giving your kids an allowance or set new goals.

2) Do I Want My Kids To Work As They Study?

Putting an end to your kids’ allowance might be a great way to inspire them to look for other ways of making money. Teens can take on jobs like babysitting or mowing lawns around the neighborhood to make some extra cash. Older teens might even get part-time jobs at restaurants and shops.

But parents also need to consider the effect that having a job might have on a child’s academic performance. While some kids can effectively juggle the demands of school and work, others can’t manage and go into burn-out mode. A job and some extra money are great but not at the risk of causing your child’s grades to slide. This doesn’t only apply to students in high school students but to those in college, as well.

If parents notice that children are too focused on a job and earning money to keep up their studies, it might be time for step in and reinstate the allowance. This requires careful thought. Are you able to continue subsidizing your child’s lifestyle? How long can you manage this financial assistance?

3) Has Your Child Mastered Money Concepts?

In considering whether or not to continue an allowance, parents must think if they’ve accomplished their goals. Have your children mastered concepts such as fiscal discipline, management, and responsibility? Every time you give your children money, it should stand as a teachable moment to help your children learn basic money skills. While it’s best to begin teaching these lessons early, it’s never too late to teach children how to budget, save, invest, give charity, and in general, to adopt the habits of responsible spending.

Before ending a child’s allowance, make sure they know how to save money and live within a budget. A good way to teach children how to budget is to have them divide their allowance between three different jars. One jar should be for spending money, while the other two should be for savings and charitable giving.

Once children have mastered this basic budget, let them know they are now responsible for purchasing some of the things you once paid for. For younger kids, this could be treats, games, and trinkets, while for older kids such items can include clothing, entertainment, and school supplies. If children find they cannot afford to buy an item when they want it, encourage them to save up their money for purchasing the object at a later date. This teaches children frugality and the art of choosing between instant gratification or saving up their allowance for a future purchase.

Having an allowance is also an opportunity to learn how to open and operate a bank account. If you’re child has not yet mastered basic banking, it’s not yet time to end your child’s allowance. A parent may wish to deposit the allowance into the child’s account. Once the child draws enough income from a job to continue making deposits on his own, the parent can begin to phase out the allowance.

Rather than worry about when to stop giving kids an allowance, parents may want to think about what they’ve taught their children about money. If your child still has money lessons to learn, it’s okay to continue the allowance. Some children need more time to absorb these lessons.

4) Is Your Child Using The Money Wisely?

Before you pull your financial support, you may want to consider how your children use their money. Are they putting the allowance to good use or are they blowing it all away on frivolous or irresponsible purchases? If you have already taught your child how to responsibly manage his money and he still insists on wasting it, you may be justified in withdrawing your financial support. Make sure you issue a clear warning, before you stop giving your kids an allowance.

Is your child is working toward a reasonable major purchase, for instance a first car, or spending money for a gap-year vacation? You may want to continue the support until the goal is achieved.

But what if you feel that an allowance is dampening your child’s motivation to go out and look for a job? In our zeal to provide the best for our kids, we may end up giving them so much money that they don’t see the need to work. In this case, a parent can cut back on the allowance in a more gradual way. You want to create enough financial discomfort to spur your child into action. This course of action often works well with teens. Sometimes, giving kids a smaller allowance is just the incentive they need to look for jobs so they’ll have more ready cash to spend.

Remember that the job of a parent is to be helpful but not to support or enable a child’s bad behavior.

5) Did You Give Fair Warning?

Cutting off a child’s allowance shouldn’t be sudden. Nor should you use ending a child’s allowance as punishment for poor money management or a child’s bad behavior. Parents should instead give children warning that the allowance is about to end. This gives your child a chance to prepare. If a parent doesn’t warn the child that the allowance is to be cut, it’s as if the parent is blindsiding the child. This can cause children a great deal of stress and anxiety, which is surely not the goal you had in mind.

A parent’s warning that the money fount is about to dry up, can be the spark that ignites the entrepreneurial spirit in a child. That may just be the ticket to inspire children to create a business that will simultaneously earn them money while keeping them busy. Maybe they’ll leverage their digital-native know-how by monetizing a YouTube channel or designing websites for paying clients. They might even offer to teach senior citizens how to navigate the internet and social media. There are endless ways for your children’s hobbies and passions to become sources of income with just the right push from a parent.

Having an allowance teaches fiscal responsibility and management. This money knowledge can set a foundation that will serve children well into adulthood. That is why the decision to withdraw an allowance isn’t one to be taken lightly. When the time comes to pull your financial support, do so gradually and only after ensuring that you’ve done your best to teach your kids to be financially disciplined and budget conscious.

Keep in mind that what works for one family might not be ideal for your own. So in deciding when to stop giving kids an allowance, take all the time you need. What’s important is figuring out the right approach to serve you and your child’s best interests.

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