Before I launch into why it is useful to have something called an “allowance contract” when introducing allowance to your child, I want to quickly revisit something I said in my last post and give you some concrete suggestions on how to teach children the all-important four choices they have for money: save, spend donate and invest first before you introduce allowance.

Children first need to think in terms of money choice before they begin to manage allowance. Most children will think spend and only spend so you may need to devote some time reminding a child to think in terms of choice each and every time they have money to work with.I have learned over the years that kids learn best when they have a hands on tool to work and play with to help them make and remember their money choices. That’s why, after several years of teaching kids about money, two of the tools that we have developed to help you teach your kids about money come to mind and are worth mentioning.

After working with children in the classroom for several years, I invented the Money Savvy Pig, which works best for kids ages four to eleven, and the Cash Cache Beginning Personal Finance Organizer, which is really aimed at older kids from ages twelve to about fifteen. The Money Savvy Pig is a piggy bank that has four sections: save, spend, donate and invest. It is translucent, which means you can see the inside and watch the money accumulate. It comes with a booklet that includes goal-setting stickers to help parents teach children how to set goals and make meaningful financial decisions. The Cash Cache is based on the same approach. It is a zippered binder with four see-through mesh pockets for each money choice. The booklet that accompanies this money tool offers templates for setting goals and managing budgets and covers all four money choices as well as checking, credit and budgeting. (More information can be found at

Ok, now, back to allowance. First, to recap, middle school is the best time to introduce allowance. In middle school, your child can easily manage one months worth of expenses. Sit down at the kitchen table with your child after dinner tonight and agree on three expenses he or she wants to manage. This list should be unique and specifically tailored to your child. The expenses should be things they really want to control like clothing purchases and possibly lunch at school. Once the list is created, estimate what you spend per month on these items. Then, hand over that amount and the responsibility for the expense. Now comes the allowance contract. Spell everything out in writing. Both of you should sign on the dotted line before any money changes hands. Remind your child to keep all receipts. Make this a requirement for the next months payout. This is another chance to stop and think about money. The dollars are significant when you’re talking about covering an entire month. Many parents are not sure about giving their kids that much cash. (My own father called to check on my sanity when he read that I give my girls $80 a month for allowance.) I assured him that giving the girls $70 for clothing and accessories expenses saves me money (not to mention that I no longer have to say no all the time) and helps them prioritize.

Here is a sample allowance contract to help you get started.

You may wonder if it makes sense to start your younger child on an allowance at the same time you are doing this with your older child. The answer is NO. This will dilute the importance of this rite of passage for your older child. The older child has earned the privilege. The younger child needs to wait — and watch, listen and learn.

I am still not done with allowance. Next time I want to look more closely at how you can use allowance to teach your children how to budget and also address the common question of should I pay my child money for chores.

Share this article:
Susan Beacham
Written by Susan Beacham
Susan Beacham founded Money Savvy Generation in 1999 after almost two decades in private banking and investment management complemented by considerable time teaching at the elementary level.

Leave a Comment