How to Set Up an Allowance System That Teaches Money

This guide is for parents and carers who want to give their child an allowance or pocket money that does more than fund sweets, and who are unsure how much to give or how to organise it. You will learn how to decide what the allowance is for, choose an amount and payment rhythm, pick a structure, set up spending, saving and giving, and adjust the system as your child grows. General information, not professional financial advice: rules on children's bank accounts, cards and apps vary by country and provider, so check the details with your bank or official consumer guidance.

Decide what the allowance is for

Before deciding how much to give, decide what the money is supposed to do. An allowance is most useful when it is a teaching tool: a regular, predictable amount that your child manages, makes choices with, and sometimes makes mistakes with while the stakes are small.

That means being clear about what the allowance covers. If you still buy every treat, toy and magazine on request, the allowance becomes extra money with no real decisions attached. If it covers specific things, such as sweets, small toys, or later on clothes and outings, your child has to weigh up choices, wait, and plan, which is where the learning happens.

• What will your child be expected to buy with it?
• What will you continue to pay for?
• What do you most want them to learn: saving, budgeting, waiting, giving, comparing prices?
• How much freedom will they have over how it is spent?

Choose a structure

Families usually use one of three structures, or a mix. There is no single right answer; each teaches slightly different lessons.

Many families find the hybrid approach works best. Everyday family jobs, such as tidying their room, clearing the table or putting laundry away, are expected because everyone helps at home, and are not paid. A base allowance is given regularly for the child to manage. Extra money can then be earned for bigger, optional jobs that you might otherwise pay someone for, such as washing the car or helping clear the garden.

If you do link money to jobs, avoid taking allowance away as a punishment for unrelated behaviour. It confuses the lesson. Keep money lessons about money, and use other consequences for behaviour.