How much allowance is enough?
Updated: Jul 29
Giving children an allowance can be a big headache.
"I'm the only one who hasn't paid for the Science Center outing."
"I skipped recess so I can buy my lunch today."
Have you heard your children talking about not having enough pocket money or splurging excessively for their age before? For starters, we may not have any idea as to how inconsistent our children can be spending in their school. We worry about not giving enough to our children for their extra Co-Curricular Activities (CCAs) or supplementary lessons, or for the times they join their friends for meals outside of school or for the contribution of class and CCA funds.
It is not easy.
We empathise with you. Given the increasingly busy lives of adults today, we often overlook our children’s needs. More than just making sure that they have the money to spend, money-savvy parents know the importance of savings and will want to ensure that their children have enough to allocate some allowance to stash aside. The balance has to be struck between having enough in school and at the same time not overspending their allowance; to practice the habit of saving but not at the expense of their wellbeing.
How much allowance we give to our children may affect their money management habits more than we think it does.
It determines the money narrative of your children, how they perceive money would ultimately affect the way they manage it.
So how much is enough?
Instead of jumping straight into addressing the question of how much allowance is enough, perhaps we could first ask ourselves, what is the money narrative we want to create for them?
After speaking to a couple of parents, we realize that their greatest concern for their children is that they lack the independence to manage and budget their finances when they grow up. Therefore, many of them try to cultivate good money habits in their children from a young age. They encourage their children to save what is left in their allowance for the day, teach them to differentiate between their needs and wants and remind them to make smart purchasing decisions. Parents want their children to develop good money habits for themselves.
Here are three simple steps that you can follow once you figured out the money narrative you want to create for your child:
1. Find out their routine
Understand the items and meals that they purchase in school and their prices. Reflect this with their current allowance to check if there's enough, especially on days where they have their CCAs, supplementary classes or when they would go out with their friends. Be reminded not to come off as interrogative but ask genuinely or be clear on your intentions of providing enough.
2. Give a little more
It is also good to not be over limiting towards your child’s allowance. If you have the financial capacity to give more, give them a little more so that they have the ability to kickstart the habit of saving. What we want is for them to have the habit ingrained in them so that they will continue to save into their adulthood. It gives your child a little more ability to save, especially since he or she does not need to think of how to cut their necessary spending in order to do so. Perhaps this is also a starting point for them save for what they want and in the process learn to appreciate their belongings. But of course, giving more money does not necessarily mean that they would save, which brings us to our next point.
Nothing is more important than communication between you and your children. Communication is key to every successful relationship. It demands for time to not just speak but also to listen, empathize and teach your children, and vice versa. Explain to them the importance of cultivating good money habits. Share stories and engage them in the planning of the family’s or their own expenses. It gives them a rough idea of how much is needed to run a family. This may allow them to reconsider their expenditures. I would also advise us to share our earnings with our children to give them an idea of the family’s financial condition. Perhaps, this revelation will train them to be more prudent with their spending, reduce the number of times they come to you for more allowance and actually demand lesser items.
A last rule of thumb is to always give a fixed allowance to our children. This would let them know that money is not infinite and they should spend within their means.
At the end of the day, we encourage parents to communicate more with their children to come to an agreeable amount for their allowance. However, if you would still like to have a more concrete, quantifiable answer, we would like to refer you to an article written by MoneySmart.
With cashless payments growing in Singapore, Taby is a fun and intuitive pocket money app that helps parents cultivate good money habits amongst teenagers in the growing cashless society. What differentiates Taby from the other e-wallets is that it gives both parents and children co-visibility on transaction history through mutual consent so they can understand their habits better. Taby is a tool to teach money management by introducing the concept of interest rates and encouraging children to save through our rewards savings program.