Key takeaways

• Budgeting strategies like 50-30-20 can help kids decide how to spend their money based on their priorities.

• Using 529 plans and Roth IRAs can provide tax savings.

• Allowances can build trust and knowledge sharing across kids and their adults.

Today’s youngest American consumers — known as Gen Alpha and born between 2010 and 2024 — now drive $101 billion in direct spending a year.^1,2 They may be influencing parents to spend with their family’s cash and cards, though a popular question arises as children get older: Should kids get an allowance? The regular payments are another option to get kids started with money from an early age.

How much should kids get for an allowance?

According to Empower research, adults think a child’s average weekly allowance should be $36.52.

Why should kids get an allowance?

Learn to build a budget — and savings

Giving a child a certain amount of money a week is the traditional vision for an allowance, though monthly or yearly payments can also provide a learning and growth opportunity for kids to learn about money and start their own nest egg.

Regardless of the timing, deciding how to manage the money can get kids involved. The popular 50-30-20 budget framework can come in useful, providing kids guidelines in how they divvy up the categories. They can choose money goals that matter to them, such as charity/giving, personal spending money, and savings/investing.

Financial institutions may tailor services for kids including savings accounts, debit cards, and ways to invest.

Dive into investing and tax savings

A taxable brokerage account can be opened for a child by a parent or other family member, known as custodial accounts. Money in this type of account is owned by the child, and investments are managed by the assigned adult until the minor turns 18, at which they have full freedom to handle the account.

Read more: How to start investing: A beginner’s guide to investment basics

Some families may want to limit the access to the child’s investments or savings right at the cusp of adulthood, and 529 college savings accounts can be another option to house money to benefit a child — with additional guardrails.

529 accounts provide a way to save for eligible education costs, including tuition, tutoring, and test fees. Parents and other loved ones may contribute to the accounts, such as for birthdays or ongoing gifts, and the money can be invested into various funds to power potential growth.

These accounts have some flexibility should a child’s education plans change down the road. Assigning a new beneficiary allows the money to be transferred to another family member. Up to $35,000 may qualify to roll over into a Roth IRA retirement account, depending on when the money was deposited into the 529.

Read more: What can 529 funds be used for? Get a Sense Check

Kids who are getting paid — through odd jobs like babysitting or dog walking — may qualify for a custodial Roth IRA, a retirement account that can be opened by a parent for a minor who has earned income. Kids can benefit from potential tax-free investment growth and withdraw original contributions at any time, free of taxes and penalties.

Harness a longer time horizon

Kids have time on their side when it comes to money management and being able to stock away funds for when their expenses are likely to rise in the future. Empower’s free Investment Return Calculator can help visualize the power of compounding by showing how time can affect potential growth.

For example, over a period of 10 years, an initial investment of $10 (with $10 added weekly) could grow to $7,858. However, that amount drops to $3,188 (only 39% in comparison) when taking into account the same weekly deposits, though cutting the time to just five years.*

Empower research reveals that 43% of adults wish they could go back in time to start saving for retirement sooner. With people in their 20s now holding an average retirement savings of $127,166, according to Empower Personal Dashboard Data^TM, getting started early could help avoid some money regret down the line.

Have essential money talks

For families, allowances can benefit beyond dollars and cents. An Empower study found that nearly three in five Americans (77%) did not feel they understood how money works until age 18 or later. A regular allowance lets parents open those lines of communication and have honest conversations about ways to handle money.

The act of giving and receiving allowance on a recurring basis can provide kids predictability, a chance to interact directly with parents, and the freedom to choose how to divide up the funds. Academic research explains how children can thrive on routines, such as regular household activities.³

Meanwhile, high schoolers may encounter personal finance more in their academic lives, as more than half of U.S. states now require a standalone course to be taken before graduation. Giving teens an allowance can give them a chance to apply what they learn to their real life.

Reinforce financial basics

About one in two Americans (49%) said they wish they had learned more about credit and debt before using a credit card, according to an Empower study. Millennial parents in particular have been getting their kids more involved in money matters by sharing account logins and discussing investment strategies.

Since the length of a person’s credit history can account for around 15% of their credit score, some parents have also been adding their younger children as authorized users on their own credit accounts to start building a file for them early.

Read more: 5 terms to know to use credit cards responsibly

Being transparent with kids about their money can build trust in what an allowance can do. Younger adults today have shown an inclination to mind their money in real time: 24% of Gen Z and 21% of Millennials monitor financial accounts several times a day, more than doubling the rate for Boomers (10%).

When should kids get an allowance?

Empower findings show there’s no single best age to start an allowance: 33% think ages 8–10 is the right time, 24% choose 11–13, and 22% would say the 5–7 range works.

With around 53% of young people (ages 16-24) having a summer job in 2025, setting a foundation with an allowance may help as kids grow and have more sources of their own income.⁴

More than two thirds (67%) of American families emphasize the importance of saving and investing, and allowances can give kids an outlet to take another step toward handling money on their own.