Although parents neglect to talk with their children about money, the majority of them pay a weekly allowance that almost all children spend in its entirety, according to a survey by the American Institute of CPAs (AICPA).
According to the survey, 61% of parents pay an allowance to their kids, with 54% starting by the time their child is 8 years old. The average allowance totals $65 a month, or $780 a year.
“These findings make clear that it can pay to be a kid,” Jordan Amin, CPA, chair of the AICPA’s National CPA Financial Literacy Commission, said in a statement.
However, it isn’t entirely a free ride. Nearly half of parents with children in school pay for good grades, with an A averaging a payout of $16.60. Plus 89% expect the children to work at least one hour a week to earn their allowance; although, children put in an average of 6.2 chores per week.
Only 1% of parents say that their kids save any of their allowance, according to the AICPA. This is disconcerting news consider only a quarter of adults actually have emergency funds in place.
“Parents need to make sure they’re also passing along financial sense with those dollars and cents,” Amin said. “Earning, budgeting and saving are all important lessons that can be tied to allowances — lessons that can help put children on solid financial footing.”
Instead, children have broad flexibility with their allowances. Furthermore, parents who pay an allowance are significantly more likely to also pay for sport- and hobby-related expenses, mobile phone service, movie rentals and digital downloads. Plus, 47% expects to support their child financially until he or she is at least 22 years old.
“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.”