Allowance vs. Earnings

Empowering Kids with Financial Literacy from a Young Age

By Dané Potgieter

 

What if kids could grow up knowing how to save, spend and make smart money choices – just like grownups? That is what financial literacy is all about. One of the best ways to start learning it is by getting real experience with money. The big question remains:
Should kids get a regular allowance, or should they earn their money through chores or small jobs?

 

What is the difference?

An allowance is money given to kids on a regular basis – monthly or weekly – usually not linked to specific chores. It gives children the opportunity to practice budgeting, saving, and planning. With their own money, kids can choose: Should I spend this now, or save it for something bigger?

Alternatively, earning money means getting paid for doing chores – eg. washing the car or walking the neighbour’s dogs. This helps kids connect effort to reward. They learn that money comes from hard work, not just showing up.

 

The Case of Allowance:

Allowance provides a platform for children to practice delayed gratification. With a consistent sum, kids can learn to allocate their funds towards wants, needs, and savings. The routine also opens the door to discussions about setting financial goals, distinguishing between essentials and luxuries, and understanding the value of money. Allowance can also create a safe space for making financial mistakes. When children overspend or forget to save, they experience the natural consequences in a controlled environment, encouraging better habits over time.

 

Why Earning is Powerful:

When kids earn their money, they often feel more responsible with it. It builds confidence and teaches a strong work ethic. It can encourage kids to be creative – start a mini-business, sell crafts, or offer to help neighbours with small jobs.

 

The Best of Both Worlds:

Most experts (and many parents) agree that a mix of allowance and earnings works best. A small, steady allowance gives kids a chance to learn money skills. Extra chores or side hustles let them earn more and understand the value of effort. This combination builds both financial smart and motivated children.

 

Why it matters:

Learning about money now helps kids grow into adults who can manage real-world finances. Whether they are saving for a toy, a bike, or one day for university, knowing how money works gives them power and freedom.

So, whether they are getting money as an allowance or earnings it through effort, remember: Your children are not just getting money – they are gaining life skills that last forever.

 

Read more about Ascor® Financial Planning Services

 

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