NEW YORK (Apr. 28, 2016) – Children have it easier these days, right? Perhaps not as easy as you might think when it comes to how they get their spending money. A new survey found while seven in ten parents (68 percent) currently give their children an allowance, the children are working for it. In fact, these children are spending an average of approximately six hours a week on chores to earn their allowance. The average hourly rate of “pay” comes out to $4.43 an hour, which is a nice sixteen percent raise from the $3.82 they were making in 2012. Regardless of if allowance is tied to chores or not, the AICPA’s National CPA Financial Literacy Commission recommends that parents use it to teach their children financial responsibility.
Children receiving an allowance isn’t a new concept. Fifty-seven percent of American adults received an allowance when they were growing up. Of those, the vast majority (90 percent) say they had to do at least some chores to earn it, and of those who did, 70 percent say they had to earn every last penny. Only ten percent received their entire allowance as a gift. These are among the latest findings of a new telephone survey of 1,005 U.S. adults conducted in March by Harris Poll on behalf of the American Institute of CPAs for Financial Capability Month.
“Providing children with a regular allowance gives parents a perfect opportunity to have a discussion about the basics of saving, spending and budgeting. Parents should talk to their children about financial responsibility and the value of money on a regular basis - this should not be a one-time conversation,” said Gregory Anton, CPA, CGMA, chair of the AICPA’s National CPA Financial Literacy Commission. “Instilling basic financial literacy in children when they are young will better prepare them for the financial decisions they make as young adults and serve them throughout their lives.”
The good news is that nine in ten Americans (92 percent) agree that allowance serves a purpose, with 81 percent saying that it teaches children the value of money and financial responsibility. Others cited giving children the ability to purchase their own things (9 percent) and letting kids afford to do many of the same things as their friends (3 percent). However, the onus is on parents to make sure that the lessons are sinking in.
“One of the ways that parents can use allowance as a teaching tool is to encourage their children to save ten percent on a weekly basis and match the savings if they do. This simple, effective tool will better prepare them to contribute to a 401(k) account and take advantage of any matching offered by their employer,” added Anton.
The AICPA’s National CPA Financial Literacy Commission offers the following tips to teach children about financial responsibility and the value of money.
Use an allowance to teach children the principles of saving and budgeting for the things they feel they must have (even though you know they may not really need them).
Let your child set their own goals, and guide them towards them. This helps them learn how skipping the short-term wants – like candy – can help them reach their long-term goals –like a new cell phone.
Have your child open a bank account. Although interest rates are currently very low, they can still learn about compound interest.
Take advantage of the articles on the AICPA’s 360 Degrees of Financial Literacy website about talking to children about money.
For older children with earned income, establish an IRA with part of their earnings (perhaps adding a parental match) to teach them about investing and saving for retirement.
Other findings from the survey:
Among U.S. adults, men (62 percent) were more likely to have received an allowance when they were growing up than women (52 percent).
On average, children currently receive $67.80 per month ($814 per year) in allowance.
More than one in five parents who give their child an allowance (22 percent) give their child $100 or more per month for an allowance
For more information on the AICPA survey or to speak to a member of the AICPA’s National CPA Financial Literacy Commission, contact Marc Eiger at 212-596-6042, firstname.lastname@example.org or James Schiavone at 212-596-6119, email@example.com.
About AICPA Financial Literacy Initiatives
360 Degrees of Financial literacy (www.360finlit.org) is a national volunteer effort of the nation’s Certified Public Accountants to help Americans understand their personal finances and develop money management skills. The AICPA and Ad Council have developed the Feed the Pig program (Feed the Pig), a national and localized PSA campaign designed to improve financial literacy among Americans aged 25–34 by encouraging them to make savings a part of their daily lives.
Harris Poll has conducted an annual survey for the AICPA since 2007. This year’s poll was conducted by telephone within the United States between March 18 and March 27, 2016, among 1,005 adults (517 men and 488 women aged 18 and over), including 499 interviews from the landline sample and 506 interviews from the cell phone sample. 295 identified themselves as parents of children 25 years or younger.
The 2012 study was conducted by telephone within the United States between July 12 and 15, 2012, among 1,006 adults (505 men and 501 women aged 18 and over) including 756 interviews from the landline sample and 250 interviews from the cell phone sample. Of these 1,006 respondents, 268 respondents qualified as parents of children 25 years or younger.