Kids' Allowances Keep Climbing

Kids' Allowances Keep Climbing

Blame it on the Joneses.

Thanks to a recovering economy, wealthier parents and, possibly, too much peering over the fence to see what the neighbors have, kids today are raking in more allowance than ever.

"The numbers are definitely going up," Dan Zevin, a father to a 10-year-old, told Reuters. "And the only thing that matters to your kid is what Richie Rich's parents are giving down the street."

According to new numbers crunched by T. Rowe Price and Reuters, 4% of American parents now shell out between $41 and $50 a week to their little ones—almost four times the amount that kids received several years ago.

Meanwhile, the number of moms and dads doling out $10 a week or less decreased from about 77% to about 68% over three years, and there were sharp jumps in the percentage of parents handing out larger amounts ranging from $21 to $30.

Experts say the increased generosity may stem not only from growing confidence in the economy but also from parents' desire to involve their kids further in financial decisions. The children may be earning more, but they might also have greater responsibility for covering personal costs, like their clothing or movie tickets.

Still, some experts wonder if hefty allowances do more harm than good. "The prevailing wisdom is that allowances are a wonderful way to train kids to be financially literate," says Lewis Mandell, former dean of the management school at SUNY Buffalo, who has studied allowances. "But looking at the research, I was surprised to see that the kids who did worst on financial literacy tests were the ones who received an unconditional allowance."

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