Between earning money for helping out around the house, extra chores and good grades, it can really pay to be a kid these days. Parents pay their children an average of $780 a year in allowance, according to a national phone survey conducted for the American Institute of CPAs by Harris Interactive.
Sixty-one percent of parents surveyed pay an allowance that varies by age and 89 percent require their children to earn their allowance through household chores. Once a child puts in the work to receive an allowance – approximately 6.2 hours each week – he or she is more likely to spend the money on toys or hanging with friends. Only 1 percent of parents witnessed their kids save their allowance.
“These findings make clear that it can pay to be a kid,” said Jordan Amin, CPA, chair of the AICPA’s National CPA Financial Literacy Commission. “Parents need to make sure they’re also passing along financial sense with those dollars and cents. Earning, budgeting and saving are all important lessons that can be tied to allowances – lessons that can help put children on solid financial footing.”
Talking about money and good financial practices is important and 81 percent of parents make the time to do so. However, it’s still not as talked about as good manners (95 percent), good eating habits (87 percent), good grades (87 percent), drugs and alcohol (84 percent) or smoking (82 percent).
“As parents, we feel a strong commitment to our children and ensuring they have all that they need to succeed,” Amin said. “One of the best gifts we can give them is a solid education on managing money.”
The national survey also found:
- 54 percent of allowance-paying parents began by the time their child reached 8 years old
- 48 percent of parents pay for good grades
- The average A is worth $16.60
- 47 percent of parents that pay an allowance expect to financially support their child until age 22 or older
To help parents as they prepare to teach their children about financial responsibility, the National CPA Financial Literacy Commission offers the following tips:
- Set parameters. Make sure children are aware of why they are getting an allowing, how to earn it and how they could lose it. For example, allowance could be contingent upon the completion of certain chores. For each chore that is not completed, a deduction is made. Aligning payment with a specified action teaches your child that money is earned.
- Set goals. Help kids learn the mechanics of budgeting by allotting certain percentages for long- and short-term spending and saving.
- Talk often. Talk to your children about money regularly and include them in family financial discussions such as planning for vacations or major house purchases. Ask them for suggestions on things that can be cut back to save for these items.