Most Americans Pay Their Children an Allowance. Here's Why You Should, Too.

A little goes a long way when it comes to our children's weekly allowance. How $5 today could turn into hundreds of thousands of dollars tomorrow.

Mar 29, 2014 at 5:00PM

Do you pay your children an allowance? If you do, you're not alone. According to a Harris Interactive poll released earlier this year, approximately 60% of parents with children ages 4 to 17 dole out cash on a weekly basis.


Source: flickr/401(k)2013.

It may seem ludicrous to pay a 4-year-old a weekly allowance, but depending on where that money actually ends up, it could be the best thing any parent can do for a child. Today we're taking a closer look at the Harris poll and considering the real power of a child's allowance.

Poll stats
Harris Interactive polled 2,311 adults on all things allowance-related last December. Though there were trends that emerged along gender and regional lines, the biggest dollar-amount discrepancies in the responses were generational. Echo boomers (known as millennials in some circles) and Generation X respondents were closely aligned when it came to appropriate amounts for a weekly allowance -- baby boomers less so. Take a look:



Kid's Age

Echo Boomer


Baby Boomer

4 to 9




10 to 13




14 to 17




Source: Harris Interactive 

Oh, to be the child of a Gen-Xer! These parents think children aged 14 to 17 should earn a weekly allowance of $18.80 a week! Interestingly, the poll also revealed that 86% of respondents believe a child should have to earn his or her allowance, and that it should only be paid if the child works for it.

Most importantly, however, is that 90% of respondents thought that an allowance was a good way to teach children about money. In theory, that is absolutely correct. It's hard to understand the power of a dollar if you've never earned one. And while one might argue that a 4-year-old is incapable of understanding this at all, a child of 7 or 8 is not. Financial literacy is a major problem in this country -- in most countries -- and if handing out an allowance can help change that, then by all means we should pay up.

But how many of us truly recognize the power of a weekly allowance? Consider those dollar figures from the poll. Let's take the midpoint allowance figure for each age range -- $5.10, $10.10, and $18.00 -- and encourage our child, Little Susie, to put every penny of it into an index fund. Assuming that Susie gets grounded for two weeks each year and doesn't earn an allowance during that time, she will contribute 50 weeks of savings to her nest egg every year. It will compound annually at the S&P 500's historical compound annual growth rate -- with dividends reinvested and adjusted for inflation -- of about 6.8%.

Susie's Age


Annual Contribution

Nest Egg

Age 4




Age 5




Age 6




Age 7




Age 8




Age 9




Age 10




Age 11




Age 12




Age 13




Age 14




Age 15




Age 16




Age 17




Source: Author's calculations.

On the eve of her 18th birthday, Susie will have grown her hard-earned allowance into $10,145. if she had simply left her allowance in her piggy bank, she'd only have $7,240. 

But maybe Susie isn't sold on a mere $10,145, so her parents sit her down and show her what it could turn into if she leaves it in the index fund:

Susie's Age

Nest Egg

Age 18


Age 28


Age 38


Age 48


Age 58


Age 68


Source: Author's calculations.

Provided the fund returns the 6.8% historical figures, even if Little Susie stops contributing any money to her savings, she'll have turned 14 years of allowance into more than $290,000 by the time she reaches retirement. It's not enough to retire on, but it is enough to make a point about the value of saving. 

Will Susie head to college and pursue a degree in economics or finance? Maybe not, but she will definitely understand the power of compound interest, something that will have an incredible impact on her for the rest of her life; say, when she gets her first credit card, pays off her student loans, decides how much to contribute to her 401(k), buys a house, and so on. This is the real power of a weekly allowance. The ability to confer financial literacy, which may be the greatest investment we make.

Teach your children to invest
In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. It's easier than you think. Click here to get your copy today -- it's absolutely free.

Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers