When The New York Times’ Ann Carrns asked me about an allowance amount last year, I responded almost reflexively with an industry maxim — “A rule of thumb is a weekly amount that is the child’s age in dollars: $5 for a 5-year-old, $10 for a 10-year-old and so on.”
A friend recently sent me this article and asked if the maxim “One-Dollar-Per-Week-Per-the-Age-of-Your-Child” — let’s call it ODAWPA for short — was still valid. A few questions about ODAWPA popped into my head:
- Is the amount still practical?
- Should it be inflation-adjusted?
- Does it apply to kids of all ages?
Is ODAWPA still practical?
“One-Dollar-Per-Week-Per-the-Age-of-Your-Child” is simple. A parent hearing this piece of information can act on it almost immediately or file it away for easy access when it’s time to start an allowance.
Like anything dogmatic, though, simplicity may also be its weakness.
ODAWPA oversimplifies the setting up of an allowance. Though it need not be complicated, establishing allowance does require that parents understand why they’re deciding to implement an allowance at all. ODAWPA gives no insight. No purpose. No why.
This is the dogma double-edged sword — the “answer-in-a-sentence” oversimplifies. Of course, allowance is a key to raising money-smart kids because, for example, it provides experiential learning. As researcher Ashley LeBaron said in our podcast discussion, “One of, if not the main way, that kids learn about money is through actually practicing themselves.”
Should ODAWPA be inflation-adjusted?
ODAWPA has been around for over a decade — enough time to consider whether it warrants an inflation adjustment. Using this handy-dandy US Inflation Calculator, I found that something that cost $1.00 in 2010 would now cost $1.18, at a cumulative inflation rate of 17.6%.
That’s a substantial enough change that we can’t ignore it. Even adding the (E)ighteen to our acronym might work — ODEAWPA. But rather than sacrifice the maxim’s simplicity, this might be the right time to mind the art in The Art of Allowance. For example, if you have a decade spread between your kids, then consider starting your younger child’s allowance with an extra quarter per week.
An inflation adjustment is unlikely to make a material difference in the effectiveness of your allowance. It’s more important to avoid a pitfall that many parents encounter — giving your kids too little. As First National Bank of Dad author David Owen pointed out on my podcast and in this post, we should be wary of making decisions based on our worrying that our children are going to make mistakes. Making mistakes — and learning from them — is a key point of giving your kids an allowance. My daughter’s experience from The Art of Allowance is instructive:
Making a small error now — and learning from it — is better than making a massive, more consequential mistake later. Choosing to purchase the My Colorful Unicorn set and seeing two weeks later that it’s bald and hornless starts to build perspective about the impermanence of stuff. You’re helping her to think about her choices, to “opt-in” to money-smart behaviors and to build good habits early. This outcome is much easier than having to break bad habits later.
This applies to kids young and old. Giving a teenager a pittance isn’t going to teach her to make smart money decisions; it’s going to tell her that you don’t trust her.
Does ODAWPA apply to kids of all ages?
ODAWPA works well as a starter allowance amount until your kids are ready for the Breakthrough Allowance. Here’s the introduction to this important next step in your allowance program in The Art of Allowance:
Your tween or teen is now ready for the Breakthrough Allowance, a major developmental step. She’s moving past the starter allowance detailed earlier. Her responsibilities will increase substantially. She’ll create a yearly spending plan, and her allowance intervals will change. You may even decide to incorporate a digital allowance…
ODAWPA remains a useful maxim. Its simplicity is both its strength and its weakness, and we should be mindful of that both as parents and, if we’re in this position, as teachers (of fellow parents). Of course, every family, every kid and every parent is different. You should feel free to adjust an allowance slightly based on your family situation, the place you live and your child’s money behavior, all while being mindful of why you’re making those modifications.
If you haven’t started an allowance, then I have a piece of now-familiar advice to help you get started — give your child “One-Dollar-Per-Week-Per-the-Age-of-Your-Child.”
Then revisit this blog or take a look at my book, The Art of Allowance: A Short, Practical Guide to Raising Money-Smart, Money-Empowered Kids, to help you along your money-smart journey with your family.