Allowance Isn't "Free Money"

By Alec Lindenauer, Chief Allowance Officer

Our member, Lisa D., asked this great question about allowance. 

We imagine she's not the first... or the last... parent to wonder this exact same question. 

"I am debating between conditional vs. unconditional allowance. The condition in our home would be completing chores. I understand Alec's point that in order to give his children the best opportunity to learn about money on this program, there needed to be a guaranteed income stream and there's obviously no guarantee the kids will do their chores. But the idea of "pulling your weight" in our house is a very important one.  If we don't elect to make our allowance conditional, how can we make it clear that the money we give our daughter on each Money Monday isn't "free"? That there is still a responsibility on our child to take this program seriously, etc.? Any tips on what to say in this discussion would be very helpful! Thank you!"

You’re asking a great question, and I don’t think there is a wrong answer here. Mostly because this isn't an absolute decision. You can even go with a hybrid solution. 

However, I went the unconditional route because I decided the primary objective for COR Day in my home was to teach them about money. I felt like I could find other opportunities to teach them about pulling their weight.

However, it was important for me to explain to them that financial education was my primary purpose for handing them money. So, periodically, I remind them why they’re getting allowance and interest.

In fact, during a recent COR Day, my older daughter expressed her delight at how much money she was going to allocate during our session. It was just after her birthday, and she was flush with cash, so she was feeling great. But she also expressed feeling a little badly for taking so much of my money. 

There is a lot to unpack here.

First, she wasn’t taking a lot of my money. But I loved that she was being considerate of my wallet. She felt that way because there was a sense of ownership on her part. I wasn’t getting that sympathy when I was just spending my own money at the toy store.

Second, when she told me how great she was feeling, I was quick with a clear reminder. I told her, “I’m giving you all of this money so you can practice spending, saving, investing and donating in the right way. It’s important to me that you learn how to handle your money so you can do it yourself when you get older.”

By using those words, I’m making sure she understands the money she receives isn’t free. There is a trade happening. It has value. The value I’m getting is an educated and well-practiced child.

In their younger days, I used the same words, and more often than I use them now. Now they’re just a reminder. 

As far as pulling her weight, she still had to clean her room and help with the dishes that day. I just didn’t tie those things to money. Personally, I like to tie those responsibilities to screen time, but that’s a personal choice.

One hybrid approach I’ve seen work is where one family gave money in three parts on COR Day instead of just my two (allowance and interest). Instead, they decreased the allowance a bit, and added chore income as a third component.

If their son completed a full chore chart that month, he earned his chore income. If he didn’t, then there was a penalty on that slice. This way, no matter what, they were able to have an effective COR Day each month. It was a little too complicated for my house, but they loved it.

Remember, the most important point I can make is to have a strategy. If you start with conditional allowance, but feel like it’s not working after a few months, switch it. But, I’ve found that most families who went unconditional have stayed with it.