Is there a right way to give your children allowances?

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When COVID-19 restrictions lifted and Denise Gray’s kids, aged 14 and 12, were back at school, they began asking for money to go out for lunch. Frequently.

“I would give them $10 a time and then I was like, okay, this is getting to be a little ridiculous,” says Ms. Gray, an associate registrar at the University of Toronto.

In the following months, she started perfecting a new allowance system that worked for her family, as she tweaked the amount of money she gave out and how it was delivered.

The same process has played out across almost every Canadian household with kids. At some point, they start asking about cash, and it raises all sorts of philosophical questions about building your child’s relationship with money.

The Globe and Mail spoke to multiple parents, children and financial experts about the best approaches to introducing children to having their own spending money. Unsurprisingly, parents had strong beliefs about the method that’ll best benefit their child’s development and financial literacy. But those beliefs differed wildly.

“My clients, and I think every parent doesn’t want their kids to be messed up … they really just want to make sure they do right by their child and make sure they impart the right values,” said Samantha Sykes, a Toronto-based financial planner, who says her clients will talk to her about allowance strategies to try to ensure their kids know how to budget and make good choices with money.

Some parents, such as 44-year-old Scott Maxwell in Castlegar, B.C., swear by using debit cards for their children, so the kids build better habits and make a connection between tapping a plastic card and money disappearing from their online account.

“I grew up in the eighties and nineties, and I saw a disconnection of the idea of plastic cards being plastic money, so it’s really important for them to link that when they tap this card, that’s real money gone,” Mr. Maxwell said.

Others think cash is the best way for kids to visualize how you divide money among different savings goals, and how it disappears when you spend it.

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Francine Lamoro, a financial literacy educator in Ottawa, said she loves allowance because it’s an ideal way to teach all the basics of being financially literate in a low-stakes environment, where the consequences of mistakes aren’t drastic.

But she agrees there isn’t a one-size-fits-all approach for some of the murkier questions. One of the most common: Should you tie an allowance to chores or have them separate?

“I can see both sides of that equation. And I think it really comes down to your personal values, and your values as a family,” Ms. Lamoro said. She personally chose not to tie her kids’ allowances to chores because there are some things in life that simply have to be done. On the flip side, attaching a value to chores helps give kids a sense of accomplishment and teaches the value of earning money.

“My concern as a young parent was my children would develop into transactional humans if allowance was tied to chores.”

Below, we outline different allowance strategies from families across Canada.

Fully incentive-based

Jillian Remulla and her husband are both children of immigrants, and growing up they watched their parents toil to make ends meet. The environment instilled a strong work ethic in them.

Today, that hard work has led to a plentiful life for most of Ms. Remulla’s family in the Toronto area. Money is no longer tight, and Ms. Remulla’s family can’t help but shower her children with presents.

The big question for Ms. Remulla was how to instill the same work ethic she learned to her 12-year-old daughter and seven-year-old son, while allowing them to enjoy growing up in a more stable environment.

The answer came in the form of an allowance system she started roughly five years ago that is entirely incentive-based: Each task is worth a specific dollar amount that generally averages to 10 cents a chore. Tasks include things such as putting away their toys and tidying the bed. Ms. Remulla joked she “padded the stats” a bit by including brushing their teeth and showering.

Do none of your chores? No money. Work extra hard? The sky’s your limit.

The reason the system works is because Ms. Remulla and her husband don’t really give her kids gifts. Even tooth-fairy money is contingent on the teeth being cavity-free.

“I know that sounds harsh,” she said, but it goes back to the sheer amount of gifts the kids get from the rest of their family.

At first, the system came out of her daughter’s desire for a $20 Star Wars lightsaber for a Halloween costume – it was a way she could actually earn it.

Eventually, her brother caught on to the system as well, and together they set their sights on something much bigger: a Nintendo Switch.

It would be a gargantuan task. The lightsaber cost $20, or about 200 chores. The Nintendo Switch would take roughly $600 worth of tasks, or 6,000 of them.

“We started this ridiculous Google Sheets document that tracked how many chores they did per day, and in separate fields it would count how many each of them had accumulated,” said Ms. Remulla, who said it became a great way to teach her kids about spreadsheets.

There were different fields that calculated their average pace and how many days they were from achieving the points goal.

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“It was fun to see them enthusiastic about earning rather than receiving by default,” said Ms. Remulla, who said they were doing tasks every moment they could.

All in all, it took just under a year until they were able to buy a console and game.

Stella Banerjee jokes that when her parents first brought up the allowance system, she was annoyed she had to do chores, but she was happy to at least get a lightsaber out of it. Now, she thinks it came with valuable lessons.

“One of the biggest lessons that me and Lucas learned is that if you want something, you have to work for it,” said 12-year-old Stella.

Ms. Remulla still wonders if her approach of manufacturing hardships she experienced is the best way.

“There are times when I feel like, is this punitive? Is this going to rear its head on a therapist’s couch one day?” Ms. Remulla said.

Ms. Sykes likes the consistency of Ms. Remulla’s incentive-based approach and how it incorporates math, spreadsheet skills and teamwork between siblings – a dream accomplishment she says.

Not tied to chores

The weekly allowance Ms. Gray’s kids get is not tied to chores.

“I want us to foster a sense of, this is our house and it’s our responsibility to take care of it together,” Ms. Gray says. “I don’t want them to feel like contributing to our community and our house is optional.”

By giving her kids an allowance, Ms. Gray hopes they will learn and enjoy the autonomy of saving for something special they can purchase on their own – and the prudence that comes with it.

“There’s a lot of times when the kids have asked for something and I’ll say, ‘You have money, you can buy it.’ And then they choose not to buy it because suddenly it’s not as valuable to them anymore,” Ms. Gray says.

Ms. Gray and her husband first decided to give the kids $10 each a week to do with as they please, amounts that eventually got changed to $14 and $12. The dollar amounts are pegged to their ages – an easy strategy that many parents use.

The money is transferred each week directly to their Mydoh cards, a no-fee Royal Bank of Canada account especially for kids that allows them to track their spending on their cellphones.

You might say she’s hoping to teach her kids there’s no such thing as a free lunch. Instead, the lesson she’s hoping they’ll learn is more complicated: that money is limited, and you have to decide what is important to spend it on and what isn’t.

“I think those are important lessons to learn. Because if you don’t learn it now, then you’re going to become an adult who just spends beyond their means,” Ms. Gray says.

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As Ms. Lamoro said, she likes the strategy of separating allowance from chores because that strategy instills a sense of what needs to be taken care of.

“In adult life, there are tasks we must perform without compensation,” she said. “We do them simply because they must be done.”

Contingent on chores

Allen Gudani’s daughters, aged 10 and 8, began asking questions about money a few years ago.

“They were asking questions around money – how much money do you make, and how much things cost around them relative to, like, you know, candy and things like that,” says Mr. Gudani, a teacher in Toronto who is married to another teacher.

Their oldest daughter was also interested in saving for a used Apple Watch.

Mr. Gudani and his wife decided a good way for their children to learn about money was to actually have some of their own.

At first, they got $1 for each household chore – walking the dog, making their beds and so on. But that system quickly became too onerous.

“It was a lot to keep track of. It was a lot of maintenance,” Mr. Gudani says.

The parents decided to instead give each of their kids $10 biweekly for fulfilling their duties around the house.

Getting money of their own also means the children learn the importance of delayed gratification – they have to learn how to save for the things they want, Mr. Gudani says.

His oldest daughter managed to buy that Apple Watch after saving up for a year and a half, he says.

Tying allowance not to specific chores but to maintaining “overall tidiness” at home is a way of encouraging his kids to grow into responsible adults, Mr. Gudani says.

“Both my wife and I have always been big on the gradual release of responsibility,” he says. “They really get a charge out of being able to do an adult skill, like washing dishes.”

His oldest daughter has recently become interested in cooking and has started preparing basic meals.

That is welcome proof that tying allowance to the upkeep and functioning of the home is working, Mr. Gudani says.

“It’s been quite quite interesting to watch them grow and take on things that we didn’t tell them to take on,” he says.

Ms. Lamoro likes that Mr. Gudani’s approach develops a sense of accomplishment through earning money with chores. She also likes that Mr. Gudani found a solution to the time-intensive process of tracking each chore with a dollar amount.

Base allowance plus extras

At the wise old age of 9, Alice Maxwell has accumulated a bank balance of $1,000 after two years of saving allowance.

Alice already feels the same way a lot of us adults feel about our bank balances: “I don’t want it to go away,” she said, adding that she likes the idea of having savings if she ever needs them.

Her father, Scott Maxwell, gives her a base allowance of $10 a week, which is not tied to any tasks at all. Remarkably, she’s saved the vast majority of it.

But she’s still able to spend when she wants to because Mr. Maxwell allows his kids to earn up to an extra $15 a week by doing optional extra chores such as cleaning the bathroom or taking out the recycling and trash. That’s on top of mandatory chores such as cleaning their play areas and putting their lunch kits in the dishwasher. (His kids lose screen time if they don’t do those tasks.)

When Alice wants to spend money on a stuffed toy or some clothes, she works for extra spending money.

“If something I want is $10, I might work an extra $10, so I save the same amount of money,” Alice said.

“She doesn’t want to part with her nest egg because she understands the work it took to get that money built up,” said Mr. Maxwell.

His 11-year-old son has a remarkably different approach. He spends the vast majority of his money on video games such as Roblox and graphic novels. He talks about saving for something big, but Mr. Maxwell says he has “never even come close.”

The kids rarely reach the maximum $25 they can make in a week, and the amount of extra chores they do is clearly tied to when they have a new purchase at the top of their minds, he says.

Mr. Maxwell doesn’t get too involved in spending versus saving yet. He just wants his kids to understand how their debit card works, get familiar with the online banking system they use and understand how money disappears quickly in the real world.

Ms. Sykes is a fan of what she calls the universal basic income approach, in which some allowance is given regardless of chores. “This gives opportunity for real parenting conversations to be had on saving, spending, investing and philanthropy,” she said. It’s also good that there are other clear consequences when expected chores aren’t done.

Age 9 might seem a bit young, but Ms. Sykes said there’s room to start talking more about how to maximize your savings with interest and investing, since Alice already has a major sum in her bank account.

“Kids understand more complex financial concepts at a younger age than we give them credit for,” she said.