AICPA Survey Reveals What Parents Pay Kids for Allowance, Grades
New York (August 22, 2012) — The average allowance 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. Indeed, only 1 percent of parents say their kids save any of their allowance.
Those are the findings of a national phone survey conducted for the American Institute of CPAs by Harris Interactive that explored what parents pay their children. The survey found that 61 percent of parents pay an allowance to their kids, with the majority, or 54 percent, beginning by the time their child was 8.While the amount varies by age, the average allowance totals $65 a month, or $780 a year. Nearly half of parents with kids in school, or 48 percent, also pay their kids for good grades. The average rate for an A: $16.60.
“These findings make clear that it can pay to be a kid,” said Jordan Amin, CPA, chair of the AICPA’s National CPA Financial Literacy Commission. “Parents need to make sure they’re also passing along financial sense with those dollars and cents. Earning, budgeting and saving are all important lessons that can be tied to allowances – lessons that can help put children on solid financial footing.”
The vast majority of parents do require their children to earn their allowance. Eighty-nine percent expect their children to work at least one hour a week and, on average, children put in 6.2 hours per week on chores. But money is not a top topic for conversation. According to the survey, parents are more likely to have talked with their kids about the importance of good manners, 95 percent, the benefit of good eating habits, 87 percent, the importance of good grades, 87 percent, the dangers of drugs and alcohol, 84 percent, and the risks of smoking, 82 percent, than about managing money wisely, 81 percent.
Children have broad flexibility with the money they receive. They most often use their allowances to buy toys or to hang out with friends, according to the survey, as parents handle other purchases. In fact, parents who pay an allowance are significantly more likely to also pay for discretionary items such as sport- and hobby-related expenses, mobile phone service, movie rentals and digital downloads. Nearly half of parents, or 47 percent, said they expect to financially support their child until age 22 or older.
“As parents, we feel a strong commitment to our children and ensuring they have all that they need to succeed,” Amin said. “One of the best gifts we can give them is a solid education on managing money.”
The National CPA Financial Literacy Commission offers these tips for parents:
Set parameters. If you decide to pay an allowance, make sure your children clearly understand why they are getting it, how to earn it and how to lose it. Some families, for example, condition allowance on the completion of specified chores and make deductions for those that aren’t finished. Others set a base allowance and provide bonus opportunities for extra chores that are completed. No matter your approach, make sure that you align payment with action so your kids understand that money must be earned.
Set goals. An allowance is a great gateway to budgeting. Rather than giving your children money to spend at will, consider an allocation process that rewards a focus on short- and long-term thinking. You could, for instance, allow your child to set aside 25 percent for short-term goals like a new game or toy and 25 percent for immediate or impulse decisions, like outings with friends. You require that the remaining 50 percent be set aside for long-term goals like college and match those dollars to reinforce the reward of saving.
Talk often. The more you engage your children in financial discussions, the more likely they are to learn lessons and make good money management part of their daily life as they get older. During dinner, talk about saving for a big purchase, such as a family vacation, and how it might impact the budget—where will you cut back to save? Ask them to weigh in and help you think through the options so they learn how to do the analysis.
In addition to these tips, the CPA profession has a comprehensive financial literacy program—360 Degrees of Financial Literacy—to help Americans achieve long-term financial success. A robust Web site (www.360financialliteracy.org) is the centerpiece of the program with tools, calculators and advice to help Americans understand and manage their financial needs during 10 life stages, from childhood to retirement. Another program Feed the Pig, created in conjunction with the Ad Council, provides tools, tips and resources specifically for youth and young adults.
Methodology Harris Interactive conducted the telephone survey on behalf of the American Institute of CPAs within the United States between July 12 and July 15, reaching a nationally representative sample of 1,006 adults aged 18 and older by landline and mobile phone. Of these respondents, 268 qualified as parents of children aged 25 years or younger living at home with them. For full results contact James Schiavone at 212-596-6119 or jschiavone@aicpa.org or Jonathan B. Cox at 919-402-4499 or jcox@aicpa.org.
How to Create a Budget with Your Spouse (And Stay Married)
Written By Erika // Budgeting, How To Guide, Personal Finance
For the past three to four months, we’ve actually been budgeting together, and it’s been working! We changed the way we handle the budget and this is what’s worked for us.
Start With A Clean Slate
We began a new approach to the way we budget. We swiped clean what we had been doing, since what we had been doing obviously wasn’t working. And we started fresh. We created a budget from scratch that suited both our needs and both our wants. Starting over meant we both got to have input into how our money is spent.
Patience
There were many times during our budgeting process that we would start to feel our temperatures rise and our cheeks flush. It was important to keep our emotions in check. It helped to plan our budget with a glass of wine to calm the nerves. And it also required a lot of understanding. A long-standing sore subject in our marriage is the amount of money he spends on food. I pack my lunch every day, whereas he is forced to pay for lunch and dinner every day per firehouse rules. It’s not his fault it’s a requirement. But it puts a big dent on our budget.
Allow Fun Money
We both came to the agreement of Fun or Free Money–money that can be spent any way we please and the other partner can’t say anything about it. If I want to go to happy hour with friends, I use my fun money. If Eric wants to spend his money on fast food even though we have perfectly good organic food at home, he’s free to do so and I can’t say anything about it–not one little thing. Obviously I’m not bitter about his choices, right? Of course.
Create Duties
We each have our own duties now when it comes to the budget. I budget the day to day in a notebook, and every week or two, we get together and my husband manages the monthly and yearly budget in our Excel Spreadsheet, making sure we’re on track. Having him in charge of the spreadsheet means he feels included in the process, rather than before when I would simply spew the numbers at him.
Remember Your Goals
We always like to set financial goals for ourselves. It helps us stay on track in those moments where we’re fed up of being frugal and really just want to splurge. Because of sacrifices we’ve made, we’ve been able to stick to a good portion of our financial goals, such as paying off credit card debt, contributing to our 401Ks, and paying off student loans.
Money is often cited as one of the number reasons for divorce. Don’t let finances ruin your relationship. Remember that you were both put on the same team to win. It’s not a contest or a his vs. hers. As they say, keep calm and carry on.
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