Old-fashioned allowance had its place, but can it actually do more harm in today's society than good? We look at why creating jobs at home for kids to earn money is better than the "pay up" mentality of just a few years ago. Here are five great consequences that can come from the experience of having kids, at any age, earn their keep. (For related reading, also take a look at 7 Things Kids Can Definitely Do Without.)

TUTORIAL: Introduction To Banking And Saving

Curbing Entitlement
Society, as a whole, generally frowns on the concept of a capable adult receiving weekly payment in return for doing absolutely nothing. This idea of unearned benefits is one that understandably has a place - especially in a short term arrangement - but is not the goal that most parents have for their children. Professional mentor "Marnie" of Marnie.com makes her opinion of this very clear to her own children. "Allowance is simply welfare for children. Within a matter of weeks, the child feels entitled to receive money, at specific intervals, as payment for not working."

What then, can parents do to nip the feeling of entitlement in the bud? As soon as they are old enough to pick up their own toys, for instance, it's time to expect some additional and age-appropriate chore work from them. While kids that don't work will still have their basic needs met, the video games and fancy extras will wait until they are willing to pitch in around the home.

Working Towards a Goal
One of the obvious benefits of having kids earn their cash is that it helps to draw a direct correlation between work and rewards. Erica Sandberg, author of "Expecting Money: The Essential Financial Plan for New and Growing Families" couldn't agree more. "As a mother to an eight year old daughter, I put her to work all the time. Right now Lillian is saving for the new American Girl doll, which is very expensive."

Tasks that may be appropriate for a child in this age range include organizing toys, clothes or books, and folding and putting away laundry. By starting at an age when kids begin to ask for particular consumer items, you can help them to see that nothing in life is truly without a cost.

Valuing their Possessions
If parents find that kids are continually leaving expensive gadgets or collectibles underfoot, it may be the perfect time to stop buying these items for them altogether. By having your son or daughter pay up for their gimmee list, they will associate all the hard hours with the value that item now has for them. While painful for a parent to watch, just one instance of leaving a hard-earned possession on the bus, in the wash or where the dog can get it is usually all it takes to learn this lesson.

TUTORIAL: Budgeting Basics

Prioritizing Needs vs. Wants
Parents have the daunting task of feeding, clothing and caring for the basic and very important needs of a child. They do not need to feel responsible for succumbing to every fashion trend or consumer fad, however. When kids identify that they "need" anything that isn't truly an essential, this is the perfect time to incorporate an at-home job. Kids can learn so much from the process, and it will better equip them to differentiate between the "must-haves" and the "nice-to-haves" as an adult. With the glut of consumer credit now available to adults, this is a skill that they can't afford not to master.

Creating an Entrepreneurial Spirit
Not only can having your child work for you from home help them meet significant short-term goals, it can instill just the initiative they need to accomplish big things in their adult life. Watching a self-employed parent work from home, for example, can be one piece of the puzzle, and if kids are enlisted to help in the family business, their chances of becoming a self-starter increase dramatically.

Business owner Erin Cheyne shares "when I was about seven or eight years old, my dad quit his day job and started his own company full time. I started getting an allowance when he needed help sealing and putting stamps on about a hundred letters in those first few weeks." This ambitious task was a main factor in the business leader's own success.

The Bottom Line
As with any important lesson in the life of a child, the values taught with a chore-based earnings system will take time to truly grasp. Mistakes will certainly be made, and it requires more discipline than just handing over a $10 bill every Friday. If done correctly, however, the life application can have an enormous return, one that goes far beyond the value of the actual currency. (For additional reading, also check out 5 Financial Lessons You Must Teach Your Kids.)

Related Articles
  1. Budgeting

    6 Cost-Effective Tips for Raising Your First Child

    The excitement of welcoming your first child to your family shouldn't prevent you from making good cost-effective decisions.
  2. Investing

    Why to Buy Term Life Insurance with a Conversion Option

    Why you should always purchase a term life insurance policy that allows for an unrestricted conversion option.
  3. Budgeting

    Top 10 Ways College Students Can Save Money

    College costs are soaring, but fortunately, there are several ways for college students to save money - and some are quite painless.
  4. Personal Finance

    8 Ways to Find Cheap Textbooks

    Textbooks are so expensive. What are the tricks to find cheaper books?
  5. Credit & Loans

    Why Ignoring Your 529 Plan Could Cost You Big

    Saving for your kids' college tuition can be difficult. Here's how a 529 plan can help and how you, too, can help your 529 plan.
  6. Professionals

    The Pitfalls of PLUS College Loans

    Here's how parents can avoid the pitfalls of PLUS Loans when it comes to funding their children's college education.
  7. Professionals

    Getting a College Student to Love ... Investing?

    College students have a big advantage over many other investors: time. Here's how to get them interested in investing.
  8. Insurance

    What Does It Cost To Raise a Child in America?

    Having a family can be an expensive proposition, but couples who know the numbers can strategize to lower the costs.
  9. Personal Finance

    How To Get That Entry-Level Financial Analyst Job

    Landing a job as a financial analyst takes study, strategy and a lot of hard work. Here's how to hone your competitive edge.
  10. Personal Finance

    Does It Make Sense to Go to College in Europe?

    If you're deciding whether to get a degree abroad, first do your research and talk to alumni who have completed the same program.
  1. Student loans, federal and private: what's the difference?

    The cost of a college education now rivals many home prices, making student loans a huge debt that many young people face ... Read Full Answer >>
  2. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
  3. How do alimony and child support factor into my taxable income?

    The Internal Revenue Service, or IRS, applies a different tax treatment to alimony than child support. Most forms of alimony ... Read Full Answer >>
  4. What are the differences between an annuity derivation and perpetuity derivation ...

    The differences between an annuity derivation and a perpetuity derivation of the time value of money is due to differences ... Read Full Answer >>
  5. How does accrued interest work on student loans?

    Using private and federal student loans to finance a college education is a common funding strategy, but students are often ... Read Full Answer >>
  6. What advice has Tim Cook given to would-be business leaders?

    Billionaire tech tycoon Tim Cook appeared at an event to discuss leadership with the would-be business leaders of Duke University's ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!