First Allowance: When and How to Start
Starting an allowance teaches kids money management before they face real financial decisions. Here’s your practical guide.
When to Start
Ages 5-6: Best starting age. Kids understand numbers and can make simple choices.
Too early (under 5): Money is abstract. Use play money first.
Not too late: By age 10-12, habits form. Earlier is better.
How Much?
Popular methods:
- $1 per year of age per week: 7-year-old gets $7/week
- $0.50 per year: More modest, $3.50/week for 7-year-old
- Based on your budget: What you can afford consistently
Start small. You can increase yearly.
Chores or Not?
Two philosophies:
Unconditional allowance: Teaches money management separate from work. Family contributions are expected regardless.
Chore-based: Connects work with earnings. Teaches effort = reward.
Hybrid (recommended): Base allowance for being part of family + extra money for extra chores.
Example: $5/week base + $1 for washing car, $2 for yard work.
The 3-Jar System
Teach budgeting from day one:
Save (30%): For bigger goals
Spend (50%): For wants
Share (20%): For charity/gifts
7-year-old with $7/week:
- Save: $2
- Spend: $3.50
- Share: $1.50
Rules to Set
- Payment day: Every Sunday after dinner
- No advances: Teaches delayed gratification
- Their choices: Let them make mistakes
- Review quarterly: Adjust amount as they age
What Allowance Should Cover
Ages 5-7: Toys, treats, small wants
Ages 8-10: + Birthday gifts for friends, some clothing choices
Ages 11-13: + Entertainment, hobby supplies
Teens: + Personal care, phone bills, gas
Teaching Moments
When they blow it all: “That’s frustrating. What will you do differently next week?”
When they save successfully: “You waited 6 weeks for that game. How do you feel?”
When they overspend: Natural consequences teach better than lectures.
Common Pitfalls
- Inconsistent payments (kills trust)
- Bailing them out (removes consequences)
- Controlling how they spend (prevents learning)
- Starting too complex (keep it simple)
Graduation Plan
As they prove responsibility:
- Age 8-10: Open savings account
- Age 11-13: Debit card for teens
- Age 14-16: Earning opportunities beyond allowance
- Age 16+: Part-time job, reduced allowance
Allowances aren’t about the money—they’re about practicing financial decisions while the stakes are low.
