American parents aren’t going all in on the allowance.
While many financial experts tout the allowance as an important tool to teach kids about money, a recent survey commissioned by CreditCards.com found that only 40% of children under the age of 18 receive one.
“Whether or not to pay an allowance is a personal decision, but teaching about needs versus wants is a must-do,” said Ted Rossman, industry analyst at CreditCards.com.
Certified Financial Planner Lazetta Rainey Braxton agrees it’s important to teach children responsibility and money management.
That may include paying your kids for doing chores.
“Conceptually, the allowance for rendering services is a good way for children to know that you get paid for working,” said Braxton, founder and CEO of Financial Fountains in Baltimore and a member of the CNBC Advisor Council.
However, it’s important to follow that up with guidance on how to spend and save that money, she added.
When and how much?
You can start teaching your kids about money early by letting them know what things cost or how your job enables you to pay for the house.
As they get older, you can start to give them a weekly allowance. The median age is 8, according to the survey, conducted by YouGov Plc for CreditCards.com in May. It polled 2,694 adults with school-aged children.
The median payout is $4 a week, the survey found.
While cash is still king, more parents are turning to technology and debit cards.
According to the survey, 10% of parents pay via mobile payments, such as Venmo or Cash App, 10% use a direct bank transfer and 10% pay with a debit card.
Rossman thinks there are additional lessons to be learned by going cashless.
“If you are only teaching your kids about money in terms of coins and bills, you are doing them a disservice,” Rossman said. “Transacting with plastic and via an app is really, obviously, the way of the future but increasingly the way of the present.”
So instead of thinking that a credit card is a magic way to get something from the grocery store, kids can come to understand the money behind it.
Rossman said there are “a lot of smart fintech companies doing some really interesting things when comes to mobile apps and prepaid cards targeted at kids.”
That includes names like Greenlight, Current and gohenry. Parents can load funds onto the cards and then monitor their kids’ spending through an app.
There are also allowance-specific apps, such as Rooster Money.
Rossman said Rooster Money lays things out in a “fun, easy format.” It allows parents to list the specific chores, which the kids check off when they are done
“This is really great at equating work with money, which is a valuable life lesson,” he said.
Not hot on an allowance?
If you are someone who doesn’t want to pay your kids to do work around the house, you’re not alone. However, you still need to teach them about handling money.
Braxton said that’s what she does with her daughter.
“Our chores are just a part of your family duties,” she said. “We also believe in … sharing the responsibility of the budget.”
That means giving your children a set amount of money that they can use towards things they want or need, such as a toy or school supplies. The key is that they make the decisions on how to spend that money, and in the process learn the value of it.
It teaches kids “that money is finite and doesn’t grow on trees,” Rossman said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.