Expert: Paying Kids Allowance Is ‘Cruelty’

The great allowance debate has reached a new level with financial-education pioneer Lewis Mandell asserting that unconditional weekly payments are so detrimental as to constitute "cruelty"

  • Share
  • Read Later
George Marks / Getty Images

The great allowance debate roars on, and may have moved to a whole new level with a personal-finance scholar’s recent assertion that a “regular, unconditional allowance may be akin to cruelty to children.”

As a teaching tool, allowance isn’t just ineffective — it’s detrimental. So says Lewis Mandell, professor emeritus of finance and managerial economics at SUNY Buffalo.

Mandell is a pioneer in the field of financial education, and for a couple of years he has been questioning the educational benefits of kids receiving a regular allowance. In a discussion this week on public radio he upped the ante, saying that paying an unconditional allowance is one of the worst things a parent can do for the personal-finance development of their kids.

(MORE: Coming Soon: New Standards for Teaching Kids About Money)

Mandell’s extreme view is at odds with most of the thinking in financial-education circles. The main point of contention has long been whether or not to tie allowance to chores — not whether to pay an allowance at all.

But Mandell says in most cases allowance, as a tool for learning, just doesn’t work. He notes findings from a series of financial-literacy assessments by the Jump$tart Coalition for Personal Financial Literacy. These surveys show that high school students who receive a regular allowance test the poorest and exhibit the weakest behavior in personal money management. They are also more likely to be “slackers” as adults. Hence the cruelty assertion.

It’s important to note, however, that Mandell is concerned with broad national trends. He believes parents who pay an allowance and understand personal financial issues themselves and take the time to talk to their kids about budgeting and credit can reasonably expect good results. So too can the 25% or so of kids who are motivated learners and will go on to graduate from college. Says Mandell: “Those kids get it almost automatically.”

The problem is the other 75%, where there is less emphasis on higher education, and working parents have little time for the kind of discussions about money that should accompany an allowance. In most households, Mandell says, the top reason for giving kids a weekly allowance is to minimize the time they must take dealing with kids and money issues. On top of that, the parents generally aren’t qualified. “Most parents are themselves financially illiterate and pass down an oral tradition of misinformation,” he adds.

(MORE: Kids’ Money Made Simple: It’s All About Goals and a Budget)

Most experts agree that informed discussion is a key part of any allowance system meant to teach kids about money. But in the absence of such discussion, is paying allowance really cruel?

On the same program, Bill Dwight, CEO of the family-finance website FamZoo, said he was “not moved by research” that Mandell cited, adding that it is “inconceivable” that the kind of practice kids get deciding how to spend their own money won’t make them better at it. I’m with Dwight.

As a nation, we need more research as to how to reach that 75%. Hats off to Mandell for raising an important issue. But as individuals we can help our kids get it, financially speaking, right away. The key: paying an allowance needs to be seen as a way to start and sustain the conversation — not a way to avoid it.

54 comments
JonSea31
JonSea31

I agree that allowances are a target for trouble when it comes to kids.  Kids probably treat allowances like it's "free money" when the kids think the parent is transferring ownership of some of her hard-earned money and abuse it by spending it on items the kids are addicted to (fast food, comic books, junk food, etc.).  I have had my allowance removed on multiple occasions due to behavior that was likely linked to what my parent suspects I spent my allowance on - sugar addiction.  Having gone through that trouble, if I were married and had kids, I would never approve of giving my child an allowance - EVER.  If I were to reward my child, I would give them a reward of something that is not obsessive or not addictive, and I would not give it to my child on a recurring basis.  It would be given on a random basis - at a time when the child least expects it to happen.  Just goes to show that allowances are not for everyone, especially when the child takes advantage of such money.

emcourtney
emcourtney

I run my household under the communist system; from each according to her ability, to each according to her need. Which is really how a family ought to be run, I believe.  Kid's abilities include: dishes, laundry, vacuuming, cleaning their room, emptying the cat-pan, etc;   kids needs are $60 per month cash plus additionals like: needed clothes, school supplies, enrichment activities etc.  I emphasis to them that this is not a quid pro quo arrangement, but individual contributions to a collective effort.  Well see how they turn out.

Rio
Rio

That's because money and wealth building are ignored in schools.  With reason.  How will a employer get people to stay working for low wages?

achex
achex

I just turned 26 (today! =)) When I was a kid, I did chores. I grew up in a single parent household with my dad (not my mom--she was an alcoholic and unfit to raise my sister and I). 

Anyways, we would cook, clean, feed the dogs/horses, muck stalls, stack hay, pull weeds from the garden in the summer, help burn brush in the spring, and gather firewood in the fall. 

I never expected to receive an allowance for doing these things, and my dad never expected to give us one. However, when there was a school dance or trip or flute lessons or anything else like that, which required money, he had no problem paying for it. Toys/games/etc came on birthdays and Christmas, not every time I wanted something while we were at the store.

When I was 16 I started working (two jobs, mind you!), I paid half of my own auto insurance until I was 18, and bought my own school clothes/etc since I was working making my own money. I never resented not getting an allowance, or not having my parents pay for every little thing I wanted.

I made it through high school without getting pregnant, graduated second in my high school class, have a four year degree from a great university, and am now working as a scientist at an environmental firm. 

Not being handed every thing as a kid, and working/helping out around the house as a child, and earning my own money helped me become a successful adult. Plus, my dad taught me how to cook and my boyfriend appreciates it =). When I was living in the dorms in college I was one of the few that knew how to do laundry and things like that. It was shocking to me.

All in all, I don't thing kids should be handed money for nothing, and to me doing chores and helping out around the house is just what family should do. 

DeweySayenoff
DeweySayenoff

If a parent wants to prepare their kids for real-world financial conditions, they should make them "work" for their pocket change.  Start off small - and pile on the responsibilities as they get older.  But don't increase the amount paid - ever.

This pretty much mirrors the marketplace where an employer will hire someone at entry wages, then add responsibilities and duties without adding compensation for them - especially when finding other jobs is difficult or impossible.

Once the "child" reaches a working age, they can pay rent and food and their share of car insurance.  After all, there's no free lunch and everyone should learn to pay their own way.  Once a "child" gets tired of that, they'll move out, better prepared to face life in the real world.  After all, if you have to pay your way at home, why stick around?

Consider allowance only in exchange for work provided.  Be sure to undervalue the work provided.  Be sure to prepare your child for the same treatment out in the real world.  Because if you hand kids stuff on a silver platter, they'll think that's the way the world works.  Those "My child is an exceptional student at Blah Blah Elementary School" bumper sticker nonsense may temporarily boost their self esteem, but it does major long-term damage to their life skills.  Unconditional allowances tell them they will get something for nothing - an event in the real world only experienced by the scions of the self-made wealthy.  For the puling masses, we will mostly not be paid what we are worth - especially during  times of economic hardship which always seem to last longer than the times of economic boom when we actually achieve parity between the worth of our labor and our wages.

Like the Easter Bunny, Santa Claus, every monotheistic religion and the American Dream, the lies we tell our children give them an entirely false impression of what the world is like.  And as each of those lies is exposed for the fraud it is, the disappointment that child feels is repeated over and over and over again until you arrive at someone not unlike me.  Only my allowance was earned.   I've been working outside the home since I was ten, left home at eighteen, and run my own business today.  And I barely get by.

The lies parents tell their kids got in my way.  At least they taught me one thing: There ain't no free lunch.  And for that, I can almost forgive them for the rest.  So if nothing else, use the "allowance" system to teach your kids about the real world.  They're going to learn about it sooner or later.  The sooner they do, the better they'll cope with it.

gigicd86
gigicd86

@TIME @TIMEBusiness I suppose that when you spend your entire childhood waiting to have some money, you really value it once you have it

cocobinay
cocobinay

If a father, pays his children a quarter for a hug and kiss, one should not be surprised to see those children, when they grow up, charging a little more to strangers for the same gestures/services. 
 This is how we built a society where every service must have a price. Even in the cases where this system of incentives is effective; the most lasting message to the child, I'm afraid, is that it's worth doing only when it pays. 

Whereas allowances help kids to understand how things work in the real world (and this is wonderful), I don't think it would hurt to raise children who DO NOT think that any kind gesture must be driven by profit; I truly doubt the allowance system helps in that regard!

jbksmith6
jbksmith6

You use the allowance to instill the value of working and creating a living for your self. At least that what it was about growing up in my house. Well until I hit 13 and got a job as a tutor and was able to earn a bit of cash for myself.

cpd623
cpd623

@k3v2 Interesting. I tied allowances to grade in school ($7 per pay cycle in 7th grade). If they want\/need more they can work and all 3 have

SteveFolino
SteveFolino

I did it a little different with my children, now 27 and 31.  They were give an allowance each week, on Sunday that was placed in a cup on their dresser.  Everytime their mom or I had do one of their chores, we removed money from their cup to pay us for doing their work.  So if my daugther received $5.00 per week and I had to make her bed on Tuesday after she left for school, I paid myself .50 out of her cup.  If their mother had to pick up dirty clothes off their floor, she charged her .25.  It's amazing what happens when a child watches their money slowely dissappear. Come Saturday, whatever was left was theirs.

Rhonda Jones
Rhonda Jones

It's cruel to show kids the value of their hard work by paying a commensurate allowance and to encourage them to delay gratification by saving their earnings until they have enough to realize their goals? With or without an accompanying lecture (likely to be ignored), kids gain valuable practice in managing money and learn important lessons when paid allowances. What kids actually have the capacity to learn from this experience doesn't even seem to be tested by this researcher. What is tested doesn't seem correlative.

Daniel Pon
Daniel Pon

My kid seems to like her allowance.

Bridget Klotz Kostello
Bridget Klotz Kostello

I think it teaches my kids good money management skills and the value of earning money.

Louie N. Reyes
Louie N. Reyes

People have too much time on their hands to be discussing this.

dgdoesstuff
dgdoesstuff

More a curiosity issue: what's the difference between these 2 situations in this context?

1. Jane pays her kid Mike $20/month. Jane pays for food. Mike has to pay for his own clothing with that money. Mike doesn't "work" for it, but it lets him pick the shirt. 

2. Joan pays her kid Mitch $20/month, but drags him along and pays for his shirts. Mitch can use the money to pay for whatever he wants. 

Obviously, Joan needs to "reign in her kid" financially, but Mike? O.o? 

LoriMackey
LoriMackey

His findings are right; it’s been proven giving kids money for nothing creates entitlement attitudes. Money is earned… period, through jobs, careers, investments, selling, and money can earn money through interest.

The sooner children learn that there are many ways to earn money the more successful their financial future will be. These lessons should start when kids are learning how to read, write and understand arithmetic.

It’s a parents job to teach their kids life lessons, money being #1.Yes it’s true parents feel inadequate to teach their kids money lessons, so they teach nothing at all.

Simple solution, stop buying your kids their –wants - let them earn that money through an allowance. Let your kids spend their own-hard-earned-money and Whalaa… your kids will never spend their money like they will yours! 

WandaThibodeaux
WandaThibodeaux

I totally agree that it has to connect to discussion. The bigger picture there is that there needs to be parental involvement. Schools can supplement, of course, but ultimately, the parents are the role models. I combine an allowance with chores, using sites like http://www.bankaroo.com, etc. to get things going with my own kids, and they're excited to save their pennies when we add up everything in the evening.

FamZoo
FamZoo

When an allowance is really a structured budget for things that a parent is already purchasing on behalf of their semi or fully dependent child, it becomes less "monstrous" and less about "free money" (see earlier comments) and more about the child learning to make their own spending decisions in order to live within reasonable constraints and to delay gratification through medium to long-term saving. Personal finance is like any other skill or habit - it requires practice. If a parent of a youngster is always making the spending decisions on the child's behalf, the child isn't getting any hands-on practice. That's like your kid watching you drive from the back seat, never getting behind the wheel in driver's ed, and then you suddenly tossing the keys to them at 16 saying "all yours!" It's bound to end badly.

pudge1954
pudge1954

@eddieawad @TIME But you only get your allowance if you've done your homework and your chores to Mom and Dad's satisfaction, right?

Michelle Sova
Michelle Sova

That is what is wrong with kids today. The entitlement generation. An allowance allows kids to learn to 1. earn the money and 2. the value of money and saving.

Matthew Abbott
Matthew Abbott

Not everyone who calls themselves an expert actually is one. I know, I'm an expert on the subject.

Jen Otis
Jen Otis

Cruelty is far-fetched. Let kids have their money and spend it, if the parents want. It's not going to kill anyone. It's not my choice for my kids but i'm not knocking anyone else for doing it, different strokes or different folks.

Barry Mc Cann
Barry Mc Cann

Totally disagree, rewards are a great incentive from a pschological perspective.

Andrea_Gilders
Andrea_Gilders

@TIME I agree with him, no one gets 'money for nothing' in the adult world.Why not start out how they'll need to continue?Linking value to $

Sara Mohsin Awan
Sara Mohsin Awan

Seriously? Only a few years back even I was getting my allowances and as far as I remember the entire acctivity taught me a lot about expense management, classifying my needs and limiting myself to the given budget. Moreover allowances are fun! I don't agree with the subject line but would have to go through the entire article to comment.

Makiss Ironhat
Makiss Ironhat

Opposed to no allowance which would be what in this person's eyes then?

Sandra Ankenbrand
Sandra Ankenbrand

Hmmm, I would have had a hard life without "pocket money" - as I was not allowed to work...

Joseph Weiland
Joseph Weiland

Right, I fail to see how this is outright cruelty seeing as there are far more cruel things going on around the world, but I should read the full article in depth before assuming such.

Adam Henderson
Adam Henderson

this guy is a bone head. i loved getting my allowance as a kid.

souzou_no
souzou_no

@TIME @TIMEBusiness the rule in my house is this: it is my daughter's job to be a kid.it is my job to be the adult and work.

Lee Ann Smith
Lee Ann Smith

Allowences are only to be given when all chores are complete, grades well matained, behavoir is good. You earn an allowence as if you were working a real job. Thats how I grew up & the max was $5 a week.

Joe-Allen Doty
Joe-Allen Doty

We were not wealthy when we were growing up in the 1950s. We didn't get an allowance. But, from time to time, our parents gave us spending money.

k3v2
k3v2

@cpd623 It seems the "cruelty" part is giving kids a weekly allowance just for the sake of doing it and not discussing finances w\/kids.

LoriMackey
LoriMackey

@dgdoesstuff Mike & Mitch need to earn their own money, in both the parents are paying... they should be allowing them to earn.

eddieawad
eddieawad

@pudge1954 @TIME Yes, but that's half of it. The other half is to teach them how to use the allowance money responsibly.

pudge1954
pudge1954

@eddieawad @TIME Nods, and they might even pay attention to your lessons if they had to earn the money in the first place.