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Is Allowance Like "Welfare for Kids"?

Posted by on Jun. 4, 2011 at 3:44 AM
  • 25 Replies

5/20/2011 11:41 AM ET


By Liz Weston, MSN Money

Allowances: 'Welfare' for kids?

When children feel they're entitled to parental payouts, teaching the value of a work ethic, as well as sound financial practices, becomes even more important.

Giving your kid an allowance is supposed to be a good way to teach important financial values, like delayed gratification and the importance of budgeting.

So explain why:

1. High school freshmen who received allowances were no more likely to save money than those who didn't, and the allowance-getters were less likely to view work positively, a study indicated. In other words, allowances seemed to undermine the formation of a work ethic.

2. High school seniors who received regular, unconditional allowances (one not tied to chores) scored worse on a national financial literacy test (.pdf file) -- 49.1% correct answers -- than kids who received no allowances (52.5%) or allowances dependent upon chores (52.1%), according to a 2008 study by the National JumpStart Coalition.

3. Unconditional allowances are also associated with lower participation in the labor force. Nearly one-third of seniors who received such allowances had never worked in a paid job, compared with 20% of those who received no allowances, the coalition study said. Paid employment is associated with higher financial literacy.

4. High school seniors with no plans to attend college were more likely to receive unconditional allowances (25%) than the general population of seniors (10%), the coalition reported.

5. According to another study, most teenagers who received allowances viewed the money as either an entitlement for basic support or earned income, rather than educational tools that promoted smart financial habits later in life

It doesn't matter that a couple of those studies are more than a decade and a half old. Fifty years' worth of research about allowances has yet to turn up evidence that regular cash transfers to kids have the positive impact that parents expect, and unconditional allowances appear to have significant negative effects.

"It's very consistent with child development theory," said financial literacy expert Lewis Mandell, who pointed me to the studies cited above, "which is that if kids get something for nothing, they will say, 'Why work?' In a less politically correct era, we'd call that a welfare mentality."

Mandell wonders if kids wouldn't be better off simply nagging their parents when they want something, rather than getting money for free.

"They should at least have to do something unpleasant to get the money," Mandell said. "Then getting a job at McDonald's might seem better than having to cadge their parents for money."

Raising money-smart kids

Holy cow. As a parent who leans toward the unconditional-allowance end of the spectrum, I didn't particularly want to hear what Mandell (and all the research he's citing) pretty clearly states.

I know some parents are comfortable tying allowances to chores, reasoning it replicates the work world, where you get paid for your efforts. But I believe that chores are what you do because you're part of the family and that everyone needs to pitch in.

Still, I have to admit to seeing the entitlement mentality take root in our daughter, who's 8. The first time I heard her demand, "Where's my allowance?" I promptly instituted rules requiring her to finish her weekly chores before I paid up.

But she has yet to save much money, beyond the amount we require her to put in her credit union account. And if I tell her she can save up to buy the toy or game she's currently coveting, she quickly loses interest.

That's fine, for now. I'm not interested in training her to be a bigger consumer, even though I would like her to see the benefit of saving toward a goal. What really worries me, though, is the idea that her allowance may interfere with her work ethic.

A 1994 study by University of Minnesota professors indicated that high school freshmen who received allowances were less likely to view work as a source of "intrinsic satisfaction" -- in other words, to see the positive value of work -- as well as less likely to value the "extrinsic" benefits -- the money that could be earned.

"Parents and financial counselors need to be careful about undermining the development of work values through allowance practices," the researchers warned.

That finding concerns Mandell, too, since a good work ethic is so important to success, financially and otherwise. Not all jobs, especially those available to teenagers, will be fun, and the ability to persevere through "boring, dirty and exhausting" jobs, as he puts it, is important to later achievement in life. Not that I want my daughter necessarily cleaning houses to make ends meet, as I did in college, but I also don't want her flaking out when the going gets tough at work or in life.

Mandell, who is a fellow at the Aspen Institute and a visiting professor at the University of Washington's Foster School of Business, believes parents could make allowances more effective by talking to their kids about what lessons they're expected to learn -- and about how the family copes with financial matters in general.

Do you think allowance is like "welfare for kids"?

Do your kids get allowance?

Did you get allowance as a child/teen and if you did or didn't affect you and your financial habits as an adult?

Join us on the Moms with Teens Group! Yvonne

by on Jun. 4, 2011 at 3:44 AM
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Replies (1-10):
by on Jun. 4, 2011 at 6:31 AM

No one pays my spouse and I for chores, I certainly would not pay a child to be "a good roommate".

That said, my spouse and I have jobs, where we do get paid; if the company does well, or we do something awesome, we may get a bonus. 

Our daughter's job is going to school. We pay for grades, with bonuses for honor roll, principal's scholar (based on grades), and getting an A in an AP class.

by on Jun. 4, 2011 at 6:51 AM

I got a small allowance as a child, my kids also get a small allowance, as my husband and I both work but we dont make alot. My daughter gets 10 every 2 weeks, which goes to help pay for her cell phone and her viola. My son who is 6 gets 5 every 2 weeks. He usually spends it within the same weekend but he is a bargain shopper, like me. My kids do have chores to do but nothing too much. They just have to make sure they pick up after themselves. LIke take glasses to the sink, make sure dirty clothes are in the laundry and throw away any paper they are no longer using.

by on Jun. 4, 2011 at 7:00 AM

I don't  think it's welfare for kids.  My 13 year old daughter gets $15.00 a week.  If she is doing something special like a movie or outing with friends I will give a little extra.  She is not expected to pay for school lunch or her activiities with this, it is just fun money.  She is a straight A student, but my husband is not a believer of paying for grades.  One time he did relent and gave her some money for a great report card.

by Susie on Jun. 4, 2011 at 9:05 AM

If they are working for things, why not.  No, its not welfare.  I didn't get one and only really got clothes bought for me for my B;day, Christmas and before school started.  Dh and I have great financial habits.  We started saving from minute one of our marriage with 401K's and stocks etc.  I had stocks already because at 21 my Mom gave my stock for my B'day present. 

by Gold Member on Jun. 4, 2011 at 9:11 AM

Our boys did not get allowance. We believe that as a family we take care of our home because it s a valuable place. We take pride in our things looking nice and being taken care of. Our boys did get money when needed to go the movies, bowling etc.

I do see how giving an allowance can turn a child from wanting to work. Most of my sons freinds never worked , even through HS. they were given $100 week for expenses and fun! Soome had credit cards by freshman year. We don't believe in that. We believe in working for your needs.

No neither dh or I got allowance as a child. We both come from fairly poor families where allowance was not affordable.

by on Jun. 4, 2011 at 10:46 AM
What a bunch if bull. And the difference in the financial test scores were very very close. Not a difference to me.
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by on Jun. 4, 2011 at 11:12 AM
We give each of our kids $50 a month because we got tired of being nickle and dimed every time they had a school game, movie or whatever. This taught them to budget and is a lot less stress for dh and I. Our oldest dd (19) sucks at finances and has entitlement issues, 2nd dd (17) got hungry for more money and got a job as soon as she could to have more. 3rd dd (15) budgets that $$ to get her through the month. When she does want something she saved up for it. 4th kid ds (13) is a total saver! He thinks about every dime he spends and out of his $50 he usually only spends about $10 and saves the rest. We've done them all the same but they are each differant. I think its more personality than anything
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by on Jun. 4, 2011 at 11:13 AM

Do you think allowance is like "welfare for kids"? Yes, considering that most parents already provide what the child needs, and most of what the child wants.

Do your kids get allowance?  NO, none of our children have ever received an allowance. I do however pay them for doing "extra" JOBS for me, such as detailing the interior of my van (not a basic "clean it out guys" - they actually scrub the interior, including carpet and seats) which had actually cost me almost $200 to have it done professionally the first time. My opinion on allowances for doing household chores is: this is MY home, in which they live room & board free, plus they get all the fringe beneits (more than the "necessary" clothing, internet, phone usage, use of the utilities....) why would I feel I need to pay them to help make sure it is a clean home for THEM to live in, clean clothes for THEM to wear, and food to keep THEIR bellies from moaning? Just never made sense to me!!!

Did you get allowance as a child/teen and if you did or didn't affect you and your financial  habits as an adult? No, and considering that I grew up an a 181 acre dairy farm, I would wager to say that my chore list was a whole lot longer and most chores were much harder than "most" children of today's generation has.

I also don't feel that not getting one has had any affect on my financial habbts as an adult!

by on Jun. 4, 2011 at 1:33 PM

 i did as a child.  I learned to save and spend it wisely and yes I think it helped me to learn for the time I'd be on my own.  I used it to buy things my parents didn't get me like albums, toys and later concert tickets.

by on Jun. 4, 2011 at 3:13 PM


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