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Is Allowance Like "Welfare for Kids"?

Posted by on Jun. 4, 2011 at 3:42 AM
  • 15 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?

by on Jun. 4, 2011 at 3:42 AM
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Replies (1-10):
by on Jun. 4, 2011 at 10:12 AM

my son is 4 no allowance yet

by on Jun. 4, 2011 at 10:17 AM

I never got an allowance growing up

my oldest is seven and we haven't given him an allowance yet...we prob. won't

I did promise him five dollars though if he made all A's this six weeks- I don't think he remembers me saying that though LOL       but he does have all A's with only four days of school left :)

by on Jun. 4, 2011 at 10:17 AM
No I don't give my kids allowances but they're only 6 and 2. If they want to at some point, we'll talk to them about it and if they don't do their chores then they won't get it. I used to get one when I was younger but my parents wouldn't give it to me if I didn't finish my chores.
by on Jun. 4, 2011 at 11:44 AM

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

No. I do not. Done correctly it's not. My kids always got one dollar a week and the chance to earn more through good grades, working around the house and getting a job.

As a result both have learned to save and be frugal in spending. It was particularly important for my, now adult, child. She had a good bit of money she inherited. She needed training in saving and spending before she got her hands on all that money.  The amount might seem large at first but in reality could be run through and gone very quickly by someone who was not wise about it.

Do your kids get allowance?

My teen does but he soon won't. He is getting too old for it.

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

I don't remember getting one. I have good financial habits but I believe that was because my parents were such terrible money managers. I wanted to be sure I didn't follow in those footsteps.

by on Jun. 4, 2011 at 11:50 AM

We are talking about this with my 10 year old. She wants an allowance. I say do extra work, not just her regular chores. She lasted 1 week doing extra and then it was no more. If she puts in the effort and does more than her regular chores (those are expected as she is an active member of this family) then and only then will she get allowance. We shall see. I will not give her allowance just because. She will have to earn it.

by on Jun. 4, 2011 at 11:53 AM

I didn't get an allowance as a kid and I never gave Shannon an allowance.  I don't believe in paying a child to live under the roof I provide, eat the food I provide or wear the clothes I provide.  and I certainly didn't give birth to my daughter to have maid service (chores) The only thing I required Shannon to do was pick up after herself in the "common" areas of the house and to take care of her room.  When she got old enough I even taught her to do her own laundry (I worked outside the home and if she wanted something for a particular day sometimes she had to do her own), quite often she would do the rest of the laundry as well to help out and that was rewarded not in money but in extra privileges (extra television/video game time, or a trip to the bookstore).

by on Jun. 4, 2011 at 2:01 PM

We don't give allowance for chores.. The kids will have a chore chart this summer and they will earn their privileges through it..Like computer time..

We DO give them loose change for extra good behavior(the older 2 anyway)as like a reward.. Not a lot(well it's a lot to they are 6 and 7)like 50cents here a quarter there.. They have their own change jars and they their change in them.

by on Jun. 4, 2011 at 8:09 PM

I do not believe in allowance at all.

I do believe in chores, do not see it as maid service at all. See it as helping in the household, as all others have to. I would see no chores at all as them learning to get everything handed to them, without having to help the household. When they have their own place, they will have to do dishes, or laundry, take the trash out or cut the grass. That is just how life is. 3 people in the house, then we all share things that need done.

So chores should be done to be part of the household, not something you get paid for. I don't really agree with "over & above" chores like I have seen other parents do. Sometimes in a household we need to do more than our norm to help out the family. You don't get paid or more money for this either.

by on Jun. 4, 2011 at 8:52 PM

I don't see it for welfare for kids (and even for adults I think welfare also has positive characteristics and gets a worst rap than it deserves but that's another topic.)

I didn't get a regular allowance growing up just occasional money and my mom always taught us to put 10% in a little bank and when we had enough we got to pick a charity to send it to. I did that with my kids when they were younger too.

We couldn't afford to give 5 kids weekly allowances but we do pay them for out of the ordinary or bigger jobs like seasonal yard work or painting or cleaning out the garage or basement.

All of our kids seem to be really good about saving and none of them believe in credit cards as role modeled by Todd and I.

by on Jun. 4, 2011 at 9:05 PM

For any parents who give their kids allowances without expecting them to follow thru with expectations and chores they are doing their kids a great disservice

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