Many kids first comprehend the value of the dollar at home: From allowance arrangements to tooth fairy transactions, cash is integral to many childhood milestones. But for parents hoping to raise responsible spenders and savers, it’s tough to know when and how much to give. Does rewarding kids with money reinforce good behaviors or spoil them rotten? Should cash always be accompanied by a budgeting tutorial, or must children learn fiscal prudence for themselves?
We decided to explore how parents teach their kids about financial matters, both in terms of giving them money and imparting the essentials of financial literacy. To do so, we surveyed 1,000 parents in early September 2018 about their approach to money with their children, asking about everything from allowance terms to cash gifts on major occasions. We also explored how they saved on behalf of their children to see if they were leading by example by anticipating future expenses. To learn how parents in American really handle money matters with their children, keep reading.
Kid Compensation – Earned and Otherwise
Our findings suggest most American kids enjoy an allowance – although most pitch in around the house to earn their cash. Seventy percent of parents said they offered their kids an allowance each month in exchange for completing chores. Another 29 percent said they gave their kids cash with no such strings attached, either in addition to or instead of chore money. In both cases, the average weekly payout steadily increased from elementary through high school. While some experts have suggested that weekly allowance amounts should equal the child’s age, respondents who compensated their kids for chores were typically far stingier. In high school, for instance, teens earned $30 for chores on average – but over an entire month.
In addition to rewarding chores, about a third of parents said they paid their kids for their academic performance. Among those who did, the average payout per “A” grade was $19. Interestingly, the average payout for C’s was actually higher than the going rate for B’s; perhaps a specific segment of parents are spending big just to convince their kids to pass. According to education experts, it’s unclear that monetary incentives actually lead to better grades. Some studies suggest that the more effective tactic is to reward earnest effort (such as studying) rather than outcomes.
Of course, special occasions are also an important source of income for many children: Ninety-two percent of parents gave their kids birthday cash, and 79 percent gave their children money on Christmas. The average amount received on these holidays increased substantially over time as well. On Christmas, for instance, girls in high school received $159 on average, and their male peers got $136. Conversely, Hanukkah and Easter gifts actually grew smaller as children got older, perhaps because some traditions (such as Easter egg hunts) are geared primarily toward youngsters.
Saving Strategies: Parents and Children
If money flows from parents to kids for allowances, grades, and holidays, how do children save their loot? Roughly two-thirds of parents forced their kids to put away some of their cash; as a result, the average American child had $353 in savings. For kids in high school, average savings were substantially higher: $693 for girls and $645 for boys. These substantial totals could reflect savings from gift-intensive events that typically occur in the teen years: Bar and bat mitzvahs and Sweet 16 parties can be cash cows for kids.
For major future expenses, however, meaningful savings are more often the parents’ domain. Fifty-four percent of parents said they’d saved money for their kids’ college funds, a wise choice as tuition rates continue to rise more quickly than financial aid awards. Interestingly, by the time their kids reached high school, parents with female children had saved substantially more on average. This gap also emerged for future wedding savings: Among the 11 percent of parents who had saved for their child’s future nuptials, those with girls had much more put away.
American Kids’ Average Earnings
After combining money earned through gifts and good behavior, the typical American kid receives roughly $600 a year. That may not seem like much to some, but it appears more significant in a global context: In the world’s most impoverished countries, many adults earn just slightly more. Of course, parents put away several times that amount each, saving over $5,000 per child on average.
While these parents’ savings efforts are admirable, they’re unlikely to cover a significant portion of their children’s educational or wedding costs. According to recent estimates, the average family has just $18,000 stashed away in college savings – not enough to fund a single semester at many universities. Weddings are no bargain either, costing over $33,000, on average, across the U.S. and nearly twice as much in some places. Perhaps because of these massive costs, however, experts note that the tradition of the bride’s family footing the entire bill is rapidly fading.
If the average kid has a substantial chunk of cash at his or her disposal, who controls purchases made with that spending money? Roughly 4 in 10 parents said their kids were empowered to decide what to buy, a dynamic some experts suggest could help kids form solid financial habits at a relatively early age. The most common approach did involve parental approval, however: Fifty-seven percent of respondents said they had to consent before their children moved forward on a purchase. This method likely reflects health concerns as much as the desire to instill fiscal responsibility. A kid who spends big on candy, for example, may suffer dental consequences.
Only a tiny fraction of parents said they exercised total control over the purchases of their children. But even for the strictest of parents, controlling kids’ spending in the digital age poses unprecedented challenges. In recent years, Amazon has had to refund millions to parents for unauthorized purchases: Without their permission, their kids had bought in-app upgrades while playing games on digital devices.
Financial Education by Sex and Subject
When it comes to sharing financial wisdom with their children, parents were more likely to emphasize certain subjects over others. Moreover, some interesting contrasts emerged between the instruction of boys and girls. Female children, for example, were more likely to be instructed on certain matters of fiscal restraint, including tracking spending, budgeting, and savings. Conversely, male youths were more likely to receive advice related to credit scores, taxes, and bank accounts. Boys also learned about donating from their parents more often than girls, even though women consistently surpass men in charitable giving.
Despite these differences, our findings suggest that most girls are receiving substantial financial information from their parents. This trend might help reverse the longstanding financial literacy gap between genders, which currently poses problems for older generations of women as they approach the fiscal hurdles of retirement. In fact, some experts suggest financial savvy is especially important for women, who confront another frustrating disparity: lower average earnings than their male peers.
It’s one thing to teach your children financial lessons in abstract terms, but many parents walk their kids through initial financial experiences as well. Roughly three-quarters of girls and two-thirds of boys experienced making a budget with their parents, doing so at age 8 on average. Now, there’s even an app for that: A number of digital platforms claim to help kids manage their allowances and expenses. Parents are even more likely to assist their kids in opening their first bank account: 74 percent of boys and 77 percent of girls experienced this rite of passage.
Parents were less likely to teach the lesson of opening a credit card: Just 8 percent of boys and 18 percent of girls had their parents help them apply for their initial credit card. Employment assistance was somewhat more common: About 4 in 10 boys and girls had their parent help (or force) them to get a job. Experts tend to voice mixed opinions on the impacts of teenage employment. While some teens benefit from professional experience gained from a part-time gig, others find it impossible to balance schoolwork and professional obligations.
Roles Models on Money Matters
The results of this project suggest that parents in America employ a wide array of approaches to introduce their kids to basic fiscal principles. From devising allowance agreements to supervising spending and saving, many families are active in instilling financial literacy. Yet, beyond the intrinsic value of budgeting skills, these parental lessons on monetary topics may provide a different kind of value entirely. When parents engage their children in meaningful discussions about finances, they can also transmit other essential ideas, such as the importance of hard work and humility. There’s more to life than money, but a conversation about cash can quickly become a more holistic heart to heart.
Here’s value parents and children alike can appreciate: making the most of what you’re given. In that spirit, don’t let your unwanted gift cards go to waste. At Cardpool.com, we give you cash for the gift cards you don’t plan to use. You can also put that cash toward discounted gift cards from your favorite brands, letting you buy things you actually love. To see just how much you could be saving, explore our affordable gift cards and exchange opportunities today.
We collected responses from 1,000 parents from a survey that was run on Amazon’s Mechanical Turk. Respondents who did not have a child between the ages of 5 and 18 were disqualified. We used the children’s ages to group them into grade levels. Children 5 to 11 were grouped as elementary school students. Children 12 to 14 were grouped as middle school students. Children 15 to 18 were grouped as high school students.
With the data we are presenting coming from a survey, the results are self reported. Self reported data may have responses in which selective memory, telescoping, attribution, and exaggeration, amongst other things, may have had an effect.
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