American children take in an average of $30 a week in allowance, which could add up to a nifty $1,500 a year if saved. It isn’t.
Only 3% of parents in a survey released Tuesday by the American Institute of CPAs said their children mainly saved their allowance.
The Harris Poll conducted the survey by telephone within the U.S. in August among 1,002 adults, 273 of whom identified themselves as a parent or guardian of at least one child aged 25 or younger who was living at home.
Three-quarters of survey respondents said the primary purpose of providing children an allowance was to teach them about the value of money and financial responsibility. But allowance money is rarely saved, the results showed.
Forty-five percent of parents reported that their child’s allowance was spent on outings with friends, 37% said digital devices or downloads and 33% cited toys.
“One of the best gifts we can give our children is a solid education on how to manage their money,” Gregory Anton, chair of the AICPA’s National CPA Financial Literacy Commission, said in a statement.
“Simply handing money over to a child without guidance is a missed opportunity.”
Parents in the survey reported that children who perform required chores for an allowance earned on average $120 a month.
The AICPA noted that although the average hours of weekly chores required by parents to earn an allowance in 2019 were on par with 2016 — 5.1 hours vs. 5.3 hours — the hourly pay rate for children who had to work for their allowance has shot up by 38%, rising from an average of $4.43 in 2016 to $6.11 in 2019.
Eighty-six percent of survey participants said children should receive an allowance, with 52% insisting that every cent should be earned and linked to chores. Twenty-seven percent were more lenient, saying allowance should be partially earned and partially gifted.
Two-thirds of parents said they gave their child an allowance or spending money that the child was not required to pay back. However, four in five parents who did so said they expected their children to work at least one hour a week, for example, by doing chores.
Most parents stressed the importance for their child to understand how to effectively manage their money, and many appeared to be helping develop those money management skills.
Forty-nine percent of parents said they taught their child about money at least once a week, and 34% said the lessons/conversations occurred multiple times a week.
The AICPA said it was concerning that only 32% of parents taught their children about money once a month or less. Seven percent admitted that they had never taught their children about money.
“When it comes to managing money, a child’s first lesson should come at home,” Anton said.
The AICPA’s National CPA Financial Literacy Commission recommends that parents who choose to provide an allowance use it to help their children understand the value of money.
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