I was playing around with Microsoft Excel the other day, and saw a way to explain the changing role of the allowance over time. Imagine you have a number of expectations from your kids, and from their allowance. These expectations will change over time as the child gets older.
Before the age of four or so, there’s probably no need for an allowance. These are the years when you’re trying to teach kids what money is, how to count it, and how it is saved and spent. Once they start to understand that, you can start giving them freedom to buy some things.
At three or four, all of their money comes from you, and you manage their spending and saving. By age 7, they can start to manage some of their own saving and budgeting. By age nine, they can start earning some of their own money, through odd jobs around the house or in the neighborhood. They should also have more freedom in deciding how their money is spent, with a say in their clothes, shoes, and activities.
By the early teen years, children are ready to manage most of their own spending, including things that you used to spend quite a bit on. They have the ability to earn more money on their own, through yard work or babysitting, and should be very much in control of their budgeting.
By the late teens, they’re completely in charge of their allowance, and all record keeping, savings, and budgeting. They have many more opportunities to earn money, including a real job. They’re ready for the last step – which typically happens after age 18: moving off the parents’ dole and earning all of their money independently.
Hope this visualization helps – just remember that the allowance you give your kids today can be training for financial independence later!