Should You Pay Your Kids an Allowance? Here’s What the Research (and Common Sense) Say

In our latest podcast episode, we wrapped up a deep dive on investing strategy with a surprisingly important topic: kids, chores, and allowances. It sparked such a great conversation, we figured it was worth turning into a blog post. (If you haven’t listened yet, check it out - there’s some solid wisdom in there for parents and investors alike.)

As financial advisors, we talk a lot about investing, wealth building, and market strategy. But one of the most important financial decisions you’ll ever make isn’t about your own portfolio—it’s about how you teach your kids about money.

That brings us to a question we get more often than you’d expect:“Should I pay my kids an allowance?”

Short answer? Yes, if you do it right.

The Case for Allowance: More Than Just Pocket Money

Research has shown that kids who earn an allowance—especially when tied to chores or responsibilities—tend to grow up with a stronger work ethic, better decision-making skills, and a healthier relationship with money. In fact, one multi-decade study found that kids who did regular household chores were more likely to become independent, collaborate better with peers, and become productive members of society.

In other words, teaching financial responsibility starts at home—and it starts early.

But this isn’t about just handing over five bucks and hoping they learn. It’s about creating structure, accountability, and opportunity.

How to Do It Right: A Simple Allowance System That Works

If you're ready to put an allowance system in place, here’s a method we’ve seen work well:

1. Tie It to Chores, Not Entitlement: Kids should understand that money is earned—not given. Tie allowance to age-appropriate chores like setting the table, cleaning their room, or feeding the dog. If the job doesn’t get done, the pay doesn’t come through. Just like in the real world.

2. Make It Consistent: Whether it’s weekly or biweekly, stay on schedule. Consistency helps build routine—and budgeting habits. Paying randomly or forgetting to follow through can send mixed messages about how money works.

3. Break It Into “Spend, Save, and Give”: Once they’ve earned it, help them divide their allowance into three jars (literal or digital):

• Spend for fun stuff like candy or toys

• Save for big-ticket items or long-term goals

• Give for charity or helping others

This teaches not only the mechanics of money but the values behind it.

4. Talk About It Often: Use everyday life as a teachable moment. Grocery trips, birthday gift budgeting, or even back-to-school shopping are perfect chances to let your kids think through financial choices out loud—with your guidance.

Why This Matters (Even for Adults)

We all want our kids to succeed, not just financially, but in life. Teaching them how to earn, manage, and respect money sets the stage for a lifetime of better decisions.

And here’s the truth: Kids who learn early grow into adults who don't panic over budgets, credit cards, or market swings. They build confidence. They build independence. And eventually, they might just start asking the right questions about investing - before their 20s.

That’s a win.

Final Thought:

Paying your kids an allowance isn’t about spoiling them, it’s about training them. With the right structure and mindset, you’re not just handing out money. You’re handing out lessons that compound.

And if that’s not an investment worth making, we don’t know what is.

Want more tips on raising financially savvy kids or building generational wealth the smart way? Reach out to the team at Fox Financial. We’re always here to help.

Do good. Be good. And raise ‘em right.