American parents give young kids an average of $1,360 per year in the form of allowance, rewards, gifts and bribes, according to a new survey.
In researching the money management habits of young people, coupon site vouchercloud.net polled parents about whether and why they give money to their 5- to 10-year-old children. Respondents reported doling out an average of $113 per month, with monthly allowance accounting for the majority of expenditures.
"I'm willing to bet that number is low," says Joline Godfrey, author of "Raising Financially Fit Kids" (Ten Speed Press).
When asked to choose from a list of reasons they give their kids money, 77 percent of respondents selected "monthly allowance," 61 percent picked "rewards for achievements" and 55 percent chose my favorite answer, "bribes to make them behave." Another 46 percent answered "special occasions," such as a birthday or holiday. (Respondents were allowed to choose more than one reason.)
The figures don't take into account clothing, toys or lessons paid for by parents — what Godfrey calls "the invisible allowance."
Godfrey, founder and CEO of Independent Means Inc., a financial education firm for families, says the number is probably closer to $2,000 per year and could be as high as $5,000 in some families, if parents take into account the money they routinely hand kids for snacks, activities and play dates.
Godfrey urges parents to calculate a realistic amount they're doling out and then talk to their kids ahead of time about how best to use that money.
"You could say, 'Let's look at the fact that we're spending about $2,000 a year and let's walk through what you want to do with that money from now on,'" she suggests. " 'How much do you want to spend on games? How much do you want to spend on snacks? Or would you rather save some of it up so you have money to spend on that trip with your grandparents?'"
Helping kids wrap their heads around the amount of cash they truly have access to annually can help them approach it more mindfully as they get older.
"They're so used to having money doled out to them in little bits that it never seems like very much," Godfrey says. "But when you add it up it's pretty significant. You want to help them have a bigger awareness about what a few bucks here and a few bucks there can really represent. You're teaching them about scale."
The survey also found parents aren't happy with the arrangement they've made. When asked, "How do you feel about the amount of money that you give to your children?," 65 percent of respondents said they would rather give their child less money.
When those respondents were asked why they give their child more money than they'd like to, 45 percent said they feel "in competition with other parents," 24 percent said they "don't want to disappoint their child" and 17 percent said their child "likes expensive things and needs enough to buy them."
Time for a reality check, says Godfrey.
"Kids don't understand boundaries around money because we give it to them without boundaries," she says. "We're giving them too much money and not enough of our time teaching them how to manage that money."