American Express Serve® Resource Center

Allowance: Small Amounts Can
Teach Big Lessons

A kids allowance can show children how to budget, how to spend and how to save. Healthy habits established early on can lead to smart money decisions later in life when the stakes are higher.

Encourage Good Financial Behavior with your kids by giving them a budget

Kids typically learn their first lessons about money at an early age. Parents often find themselves explaining that toys and food cost money, but it's hard for children to truly appreciate the value of a dollar until they are responsible for handling money themselves. An allowance can teach children how to earn money, but it can also show them how to spend and save it responsibly. Developing these skills at an early age will help children build a foundation for managing their finances as adults.

An allowance for kids can help create a sense of worth. Children should be expected to do their part around the house. But when real value is attached to their efforts, they're often motivated to work hard. An allowance can also teach children basic budgeting skills. Kids will learn to balance what comes in with what goes out and make choices about how they spend their money.

When parents give a child allowance, they should encourage them to put money aside. Saving for big purchases can be incredibly rewarding for children. It can also help them establish a pattern of saving, which will benefit them in later years.
Determining the right amount of allowance for kids depends on several factors. As children get older, their rate should increase. But more money needs to reflect greater responsibility and a better understanding of how to actually manage their kids' allowance dollars. During high school (and eventually college), parents can easily dole out allowance with a prepaid debit card like American Express Serve®. Parents can create Subaccounts for their children, deposit money right to the card and even set spending limits. And with Reserve, kids can set aside a portion of their allowance for savings.

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