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Is Allowance Like "Welfare for Kids"?

Posted by on Jun. 4, 2011 at 3:43 AM
  • 6 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 3:43 AM
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by on Jun. 4, 2011 at 3:58 AM
I got allowance, unconditional, I have a very good work ethic, and my mom was so impressed with my brother and Mine saving skills when We went to buy a nintendo she upgraded it for us and bought us each an additional game. I started working at 13. And have always been a good saver. My son is 3 he doesn't get the difference between a token and a quarter
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by on Jun. 4, 2011 at 4:00 AM
Allowance isn't "welfare" unless you make your kids earn it and teach them how to properly manage money. If more parents did that we wouldn't have our congress full of complete morons.
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by Barb on Jun. 4, 2011 at 4:08 AM

I think that everyone in the family needs to share in the running of the household and everyone on the family should get a part of the household income. As long as the children are doing their chores for the household, they should be allowed some of the money.

by Platinum Member on Jun. 4, 2011 at 5:57 AM

DD is 5 so she gets a base allowance and a chance to earn more money doing various household tasks as well.  I resented the fact that my moms husband would withhold "allowance" if one chore wasnt done to his standards .  As soon as i was able, i Got a job and told him i wasnt doing chores that were demeaning towards me.

by on Jun. 4, 2011 at 8:50 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 9:04 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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