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Top 10 Allowance Mistakes Parents Make & How to Avoid Them

Allowances are a great way to teach kids about money management, but parents often make mistakes when giving allowances to their children. Here are the top ten allowance mistakes parents make and how to avoid them:

Not discussing money management


Parents may make the mistake of not discussing money management with their children. Even with an allowance, this can lead to a fragmented financial education.

Solution: Use allowances as opportunities to discuss saving, spending, and budgeting with your child.

Tying allowance to chores


Some parents make the mistake of tying allowance to chores, leading to a lack of intrinsic motivation and an expectation for payment. Unfortunately, you may also fall into the pay-for-chore trap.

Solution: Consider giving a base allowance so that your child has access to money to practice financial literacy habits. 

Not being consistent


Parents may be inconsistent when giving allowances. Doing so will prevent your child from being able to save and budget since they will not have a consistent source of funds. This could lead to more impulsive buying habits or, on the flip side, hoarding of money since they are unsure when they may get more.

Solution: Be consistent with giving allowances and follow through on any agreements or expectations.

Not setting clear guidelines


Parents often make the mistake of not setting clear guidelines for what allowances can be used for. This can lead to confusion and misunderstandings.

Solution: Set clear guidelines for what it can and cannot be used for and be firm.

Exerting too much control


Parents often make the mistake of trying to control what their child does with their money. Unfortunately, this can minimize what your child can learn from their allowance.

Solution: Set some guidelines for what allowances can be used for but do not be too prescriptive and allow your child to have as much autonomy as possible with their money.

Not allowing mistakes 


Parents often make the mistake of not allowing their children to make mistakes with their allowance, leading to a lack of learning opportunities.

Solution: Allow your child to make mistakes with their allowance and use it as a teaching opportunity to help them learn from their decisions. “Mistakes” are great conversation starters.

Giving too much or too little


Parents can find it challenging to find the right balance between giving too much or too little allowance. This can either prevent a child from having to save or delay gratification or struggle too much to save and get frustrated.

Solution: Determine an appropriate amount based on your child’s age and the family’s financial situation. Reevaluate the allowance periodically to ensure it remains appropriate. And if necessary and appropriate, encourage your child to find side hustles to earn more.

Financial conflict of girl and mother

Withholding allowance as punishment


Some parents may make the mistake of withholding allowance as a punishment. Unfortunately, doing so removes the opportunity for the child to learn how to manage money. And can also minimize a child’s ability to save and budget with an unreliable source of funds.

Solution: Use alternative forms of discipline that do not involve withholding allowance.

Giving in to demands


Parents may make the mistake of giving in to their child’s demands for more allowance. 

Solution: Manage expectations by letting your child know when their allowance will be raised and by how much. Birthdays are good milestones for raises in allowances.

Not modeling good financial habits


Parents may make the mistake of not modeling good financial habits, leading to confusion and undermining the financial education you are trying to provide.

Solution: Practice good financial habits and involve your child in age-appropriate financial decisions and discussions to help them learn by example.



In conclusion, allowances can be a valuable tool for teaching children about money management. But it’s essential to pair the allowance with discussions and to avoid some of these common mistakes. Manage expectations by defining clear guidelines for the allowance, but allow your child to control their money and make mistakes. By doing so, parents can help their children develop financial literacy and make informed decisions about their money.