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Should I make my kids work for their allowance?

Dear Moneyologist,

I am the father of two daughters and my wife and I have a conundrum. I believe our eldest daughter should work for her allowance by doing extra jobs around the house: taking out the trash, polishing the silverware and setting the table for mealtimes. My wife says our daughters should receive $5 a week regardless of whether they do jobs around the house. My eldest daughter, who is nine years of age, usually spends her entire allowance, while my youngest daughter, who is five, is usually reluctant to buy something at a street fair if it means blowing her allowance in one go. But they both get their allowance without any strings attached. I think $5 is enough without additional chores. What do you think?

Mark in Boston

Dear Mark,

This is an issue that crops up regularly on parenting blogs. You and your wife are split down the middle like many child-rearing experts. There are two schools of thought: Tying allowance to a set amount of odd jobs teaches responsibility by not giving your children something for nothing. The other side says children should not be taught to work for their allowance because it turns the home into a de facto workplace, monetizes the relationship, and treats them like mini-work horses. And there are others who believe in a chores-for-food-and-shelter, and don’t advocate giving an allowance at all.

Financial adviser Suze Orman belongs to the first group. She refers to allowance as “work pay.” While Orman says children should make their own bed, clean the dishes and help out around the house as part of their familial responsibility, she says parents should forget the word allowance in favor of “paying chores,” meaning the more work you do, the more money you make with chores on a scale from, say, $2 to $10, depending on the size of the task and the age of the child. Orman believes this teaches children a work ethic and means they don’t expect an allowance just because they’re cute.

I don’t believe that giving them an allowance without first specifying a series of chores outside of the usual responsibilities around the house will turn them into little monsters, and giving no allowance robs them of a valuable learning experience. That doesn’t rule out washing your car or doing some extra gardening in the summer to earn extra cash from time-to-time. However, turning a small gesture that gives your children a sense of financial independence into something called “work pay” seems far too extreme, even if Orman’s suggestion is full of good intentions.

Should children work for allowance?

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Allowance is the second most common financial discussion most frequently initiated by children, according to global management firm T. Rowe Price’s 2014 Annual Parents, Kids Money Survey. When parents were asked how often their kids ask about a financial subject, 37% said they ask about “how much things cost,” while 29% ask about their allowance. Another 19% of parents said their kids ask about where money comes from and 13% ask about saving for college; 11% said their children ask about family finances in general. What’s more, 77% of parents use their kids’ allowance to teach them about money.

The only way kids will learn about saving and spending money is by practicing with their own money. Unsurprisingly, most kids appear to be drawn to instant gratification, so teachable moments could be an uphill battle for many parents. Of the roughly half of children who receive a regular allowance, about a third come back for more money after spending it all—and over 80% of parents say they acquiesce to their child’s demands, according to T. Rowe Price’s 2013 report. And just 1% of kids save money from their allowance, another study by the American Institute of CPAs, or AICPA, found.

Whether or not you give your daughter an allowance tied to chores, have a dialogue about whether she should save some of the money or spend it. While allowance varies by age, the average allowance comes to just over $16 a week, according to the AICPA. That’s a lot for one child to spend on candy or low-priced toys that could break; stick to $5. What’s more, 48% of parents with kids in school pay their kids for good grades. The average rate for an A? $17. This does more to promote a culture of entitlement. Your child’s education should have everything to do with self-esteem and curiosity, and nothing to do with money.

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Do you have questions about inheritance, tipping, weddings, regifting, or any tricky money issues relating to family and friends? Send them to MarketWatch’s Moneyologist.

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