Studies have shown that most parents are poor financial role models for their children. So is it any surprise that of the money American kids get in allowance—a hefty $780 per year, on average—almost none is saved?
Like it or not, parents: Your children are taking their cues on how to spend money from you. The new study from the American Institute of CPAs (AICPA) shows that the most common ways kids spend their allowance money is by purchasing toys and hanging out with friends. That sorta sounds like the same way many parents would spend money that is suddenly handed over to them.
Truth be told, the majority of children aren’t given allowances with nothing expected in return. In nearly 9 out of 10 families with kids getting allowances, the children do at least one hour of chores per week. On average, kids chip in with 6.2 hours of work around the house weekly.
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In exchange for handling his or her duties, the average child with an allowance pulls in $65 per month, totaling $780 per year. As the AICPA report notes, the sum “provides a child enough money in a year to afford an Apple iPad and three Kindles and still have money leftover – money they’re most likely to spend.” In the survey, just 1% of parents say their kids save any portion of their allowance.
You can’t really blame kids for not saving a dime. After all, until recently, the national savings rate was in the negative. Surely, many of the 61% of parents who give their children allowances are handing over cash in the hopes that they’ll learn about money. While they’re certainly learning about spending money, however, it’s not clear what they’re learning about saving, other than that it doesn’t appear to be necessary. In fact, kids who receive allowances don’t seem to be learning much about paying their own bills. The study finds that parents who hand out allowances are “significantly more likely” than those who don’t to also be covering the costs of their kids’ mobile phones, movie rentals, digital downloads, and expenses related to sports and hobbies.
What, then, does an allowance teach a child? Entitlement, say many moms and dads who don’t give allowances, as well as personal finance experts like Suze Orman. Like many others, Orman recommends that kids be responsible for several non-paying household chores. On top of those duties, children can take on other work around the house that they could get paid for.
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Based on the survey numbers, it appears as if a significant number of parents have an arrangement somewhat along these lines in their homes. Many kids are required to do something more than just be kids to “earn” their allowances. But what about saving?
Many experts recommend that parents institute some variation of the “spend, save, share” rule, in which it’s just not possible for kids to blow all of their money on toys and “hanging out.” With this plan, children are allowed to spend some portion of money gotten through allowances, birthdays, and whatnot, but they must also devote portions to savings and charity as well. The idea is to teach kids not only about money, but values as well. Some families divide the portions evenly, with one-third earmarked for each category, but it’s up to parents to decide an arrangement that sounds fair and worthwhile.
The AICPA’s Clare Levison, speaking to Yahoo! Shine, said that parents should encourage kids to save at least 20% of their allowance money:
“There are a lot of things that people need to be saving for,” she explains. “People have a lot of wants and needs that can be met in the 80 percent, and so you want to save that 20 percent.”
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As for how much allowance a child receives, if any, that too is obviously up to the parent to determine. Bear this in mind, though: If 15 years’ worth of the average allowance ($780 annually) was invested and earned a 6% return, your family would have over $20,000 to show for it.
Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.