What an Allowance Really Teaches Kids About Money

I love allowances! In fact, I want one! Kidding aside, I do strongly believe in them.

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I’m often asked, “Dave, do you believe in giving an allowance to your children?” For sure. In fact, I just tried to get one from my dad the other day. He passed. What a cheap guy. Kidding aside, I believe all the financial experts I know are fans of allowances for kids. Why? Why do we all feel that way? The teachings.

We need children to understand that money is finite, that tough decisions constantly have to be made. That there are trade-offs. That there are always trade-offs. The best way to do that? Give them skin in the game. They will understand a lot better when they have to make the decisions. When they have to understand that there are trade-offs involved.

What better way to set parents up for meaningful conversations about money with their kids? There isn’t one. Are you still glad you bought that toy now that a week has passed by? Do you think you should maybe be giving some of your money to those less fortunate in our community? What made you pick going to the movies over that video game you love so much?

Once the kids are dealing with those types of questions, those types of conversations, they’re much more likely to understand that you too are constantly dealing with them. Money is finite. Robin Taub has some great stuff on all this and so does ChatGPT, actually. I still remember when I was a little kid, maybe 8, saving my allowance for months to buy this electronic

football game. The field vibrated. That saving process taught me about deferred gratification, but it also taught me an even more valuable lesson: Most stuff loses its luster very quickly. Months of saving — days of use. My sister, on the other hand, used to buy 45s with her allowance. And once she bought a Ouija board. We listened to the Monkees and talked to my dead grandpa.

What better way to spend time? Much better than electronic football.