Allowances vs. Chores: Which Is The Better Way To Teach A Child Financial Responsibility?

There is much debate about the best way to teach children to be responsible with money: should their allowance depend on completing chores or be given without any strings attached so that the child learns to handle money with no ulterior motive? But the harsh truth is that, while both ideas are good, research tells us that this choice has a lifelong impact on the financial behaviours of the child and the overall sense of responsibility. 

Allowances  

An allowance for children is one of the most recommended first steps to teach children about budgeting, saving, and spending. A 2023 report from the American Institute of CPAs, or AICPA, cites that 86 per cent of parents feel that giving a child an allowance in fact teaches children important financial skills. In some cases, over half of respondents who provide an allowance tie it directly to chores, meaning that money is earned and not merely given. 

Allowances let your kids take in money without any of the risks. Whether they spend it all at once or save for something bigger, the way they are going to spend it is going to teach them what the implications are of their decision-making process around money. Also, regular allowances create an opportunity for parents to have teachable moments around saving and budgeting, and even delays, all important elements of long-term financial acumen. 

Allowance Tied to Chores 

Sounds like a great idea, as tying allowance to doing chores can be the reason for teaching responsibility, but some research has questioned these allowances' practices. One might argue that chores are something a child does for his or her family and not as a kind of pay-for-work. "Paying children to clean might even have the perverse effect of diminishing intrinsic motivation," argued a study by Kids' Money. Chores for children will no longer be a duty; rather, they may have a real chance of learning that they are optative and there only to receive an element of money. 

One might also argue that it would be of better benefit to present chores as an effort unto themselves toward the household. With such an approach, if the children do their chores without awaiting pay, they are taught responsibility and accountability for potential sentiments of belongingness and self-esteem. 

Hybrid Approaches 

The hybrid approach presents a middle ground to shake off both allowance and chores extremes. This makes allowance useful for parents, according to a 2023 Truist survey, but most parents also deem it just right to give children more money when they complete other tasks besides their assigned chores. For instance, a child can be entrusted with the task of doing daily chores like cleaning his room or putting the table setting without pay but is paid in hand for mowing grass or washing the car. 

This hybrid model balances out by emphasizing that some of the jobs are done out of responsibility while others provide an opportunity to get paid money. This inculcates children to understand that though they have some responsibilities, there are also opportunities to increase their earnings based on their effort and initiative. 

Financial Lessons Beyond Allowance 

Another area in teaching children responsibility concerning their finances is that of the proper use of allowance by children. According to the AICPA report, most parents use allowances as a means of introducing larger money management principles such as saving and budgeting to children. The principle of management of money may be imprinted very early in the mind of a child if children are encouraged to divide their allowance into three categories: spending, saving, and donating. 

Both methods have their pros and cons, though the hybrid approach is more researched, indicating that by allowing your child to have chores such that they are part of the household and then giving them an allowance for proper financial management, you give them a balanced and properly learned experience. This is how parents prepare their children for a lifetime of responsible personal financial habits by discussing the finances of the family and giving the family chances to make overtime pay.