Five Reasons You Should Give Your Kids a Monthly Allowance

by Vered DeLeeuw · 37 comments


My husband and I started giving our children, ages 8 and 10, a monthly allowance a couple of years ago. Now that I see how valuable having their own money is, how helpful it is in teaching them important lessons and concepts in personal finance, I regret not starting sooner! Here are my top reasons for giving my children a monthly allowance.

Teach the Concept of Budgeting

An allowance is one of the best tools we have for teaching our kids the concept of budgeting. It’s not the only tool, of course. You can go into a store and give them a budget for that store, and it will work too. I often do that. But a regular, monthly allowance works nicely because it consistently reinforces the idea that they have a budget, and they need to find a way to fit their monthly purchases into that budget, because if they spend it all on the first day of the month, they would need to wait an entire month until they have money again.

Avoid Unnecessary Purchases

This is one of my favorite reasons for giving an allowance. Now that they get an allowance, we still buy their necessities (food of course, basic clothing and shoes, school supplies and books) but they need to pay for the extras. What are extras? Extras include Nintendo games, a Webkinz membership, fashion accessories, candy, and any other purchase which is not a necessity.

The beauty of the allowance system is, that when it comes out of their own pockets, the children are much more selective about their purchases. When it’s our money, they want to buy everything in sight, but when it comes out of their own allowance, they think twice before buying an item.

Teach Them To Save Towards a Bigger Goal

My kids receive $10 per month each, in addition to birthday and holiday gifts. They may also earn extra money when they do extra chores beyond their daily chores. Since we buy the basics, this gives them a nice amount of cash, especially if they manage to save. In fact, one of the best things about an allowance is that it enables kids to see very clearly that if they delay gratification for a while, those $10 will grow to $30, and combined with cash gifts they could find themselves being able to afford VERY nice items – whether clothing, accessories for their room or computer games.

Teach Them Responsibility

Now that the children have their own money, they learn responsible behavior and taking responsibility for one’s actions. For example, one of my kids used to always forget her jacket at school. When she was younger, there wasn’t much I could do except buying her new jackets. Last year, I told her that she may lose a jacket ONCE and we will buy her a new jacket, after all we all make mistakes, but if she loses it more than once, she would have to participate in the purchase of a new jacket.

She hasn’t lost a jacket since.

Give them Independence

Kids have so little independence these days. An allowance is a wonderful way to give them complete control over something and enable them to make their own decisions. I try very hard not to interfere with my kids’ decisions on what to do with their allowance. As long as they’re not buying something dangerous or inappropriate for a child, they can do whatever they want with their allowance. They love this independence and they absolutely do not abuse it – on the contrary, they are very responsible with their money and they spend it carefully and wisely.

Did you get an allowance as a child? Are you giving your own kids an allowance?

Btw, there's a pretty nifty tool that motivates your kids to do chores. It's called MyJobChart.com. With a free account, they can earn points for finishing jobs you assign them, good towards free merchandise. Give it a try. It's completely free!

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{ 37 comments… read them below or add one }

LoveBeingRetired September 16, 2010 at 7:07 am

All good points and very helpful to introduce kids to the reality of budgeting. The overarching theme is that trade offs have to be made when it comes to getting what you want. If you want the more expensive item, you have to forgo those little things in the short term in order to save. If you want a jacket and a Xbox, but can only afford one, you have to make a choice. You are never too young to start thinking along these lines.

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MoneyNing September 16, 2010 at 9:12 am

I keep thinking I need to give my daughter an allowance as soon as she is at an age where I can start verbally communicating with her.

I think by giving her some responsibility, it will give me more insight into her natural decision making ability so I can guide her to become a more sensible person.

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Olivia September 16, 2010 at 11:03 am

Our kids have had an age appropriate “chore based” allowance. Besides the usual “because you’re part of a family” dishwashing, bedroom tidying kind of stuff, they had a large less pleasant job to do each week. Now that the oldest is in college, and has a regular part time job, he’s hopefully transferring those skills onto his larger assets. We’re gradually transferring financial responsibility onto his shoulders. (Bus fare, books, and in January, clothes.) When he finally gets out on his own he should be much better prepared than I ever was.

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Tyler September 16, 2010 at 11:50 am

Hi.
I got an allowance as a child, I think until teenage years, then I was on my own (mowing neighbors lawns, odd jobs, etc). I am doing the same with our three kids starting at 5. Our oldest (almost 6) has had her $5 a week allowance for almost a year. Part of the our money program for now is a mandatory savings at 20% of any money she gets from allowance, gifts, etc., in a separate envelope that can only be accessed for special purchases (Christmas, family vacations and the like). I also match dollar for dollar anything she saves, mandatory or otherwise, to emphasize that saving has its rewards.
She is still a little young to really understand budgeting, but there have been some lessons come up where she ran out of money at a fair, for example, and realized the importance of paying attention to what she had available and prioritizing what she wanted to do. The big benefits that I have noticed is that we spend time each week to sit down and 1) count what she has and practice some basic math, 2) talk about what she might want and/or need and why, and 3) spend some focused time together. I’m looking forward to watching how this develops for us over the years. Thanks for the article, I’m interested in what others have experienced.

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vered September 16, 2010 at 11:57 am

Five does seem like a good age to start giving an allowance.

Love the idea of parental matching.

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Megan September 22, 2010 at 1:43 am

wow that’s genius. I really like your ideas on this.

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B February 7, 2011 at 11:10 am

Instead of telling her that if she loses her jacket once that you will pay for it, offer her jacket insurance. Premiums are $2 per month and double with every claim in a 12 month period.

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jennie August 4, 2011 at 10:11 am

The coat insurance is a great idea. It would be a good reminder her that she needs to hold on to her coat and take care of it.

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TheGreatSpaces February 1, 2013 at 3:16 pm

The problem with jacket insurance or similar things is that as a parent, and presumably in North America, if your child loses all her coats there is no way you’ll send her out without a coat. So you are setting yourself up to break your own rules. That is the point at which your children will respect you a little less. I think that when issuing allowances parents should make a distinction between necessities and frivolities. Offer her insurance for some kind of superfluous electronic gadget (I won’t be specific since as soon as I write this it will be out-of-date!), because there is no chance that you’ll relent with that kind of thing, so you’ll stay consistent. At the same time you can still have the lesson-learning benefits Tyler mentioned.

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Venus September 16, 2010 at 12:20 pm

Great article. I like the idea of the monthly rather than weekly allowance for the delayed gratification aspect of it.

We also offer a 10%, compounding monthly, match for our kids if they save.

Thanks.

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KM September 16, 2010 at 1:37 pm

I am still deciding about this issue. I did not get an allowance when I was younger (I don’t think I knew about it either) and when I was older, I am glad I didn’t and even thought that it spoiled the kids who did get it. Now I realize that there are benefits to it, as you described, but I would need to think of a way to incorporate it into the kid’s tasks so that it would be more like earning the money rather than just receiving it. Like if he doesn’t participate in house cleaning, he gets nothing; if he helps out, he gets paid based on the quality and quantity of his work. That might be a good way to teach him to really apply himself instead of just half-assing everything.

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Mom of Two June 16, 2011 at 11:24 am

There is a little bit of a double-edged sword to having kids think that they are getting paid for helping out around the house. There are some things that we’ve worked hard to make sure our boys know is part of the responsibility our family has to each other – things like setting the table, cleaning up their toys, folding laundry, doing small household chores. We weren’t comfortable with the idea that these are things they get paid to do – they are part of keeping our household running and we all do our part. We will ‘hire’ them to do bigger jobs that are above and beyond, but allowances for them are more about teaching them to handle money responsibly and less about ‘pay for performance’. Just another mom’s perspective!

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Mary Anne July 10, 2012 at 11:22 am

I never paid my kids to do chores. They got an allowance to teach them how to use money and purchase the things they wanted or needed for personnal items. They were still required to help out around the house but they were lousy housekeepers as far as their rooms went. They are all grown and gone now but I see that their housekeeping skills have improved 100%. When old enough to secure part time jobs, they did. Allowances stopped but I still fed, clothed and gave money if they needed it for something extra like swimming, dancing lessons. My father never gave me money. He would complain when I asked for a quarter for CGIT’s. My mom gave it to me instead. I was too young to work and later quit high scho0l because I was under pressure to do so, or so I felt. I was 16.

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REALITY October 7, 2013 at 9:15 am

KM,
My husband and I used Dave Ramsey’s idea of commission instead of allowance. I made up a chart and gave them their daily chores and gave each chore a value. If it was not done correctly or I could tell there was no effort put into it they got paid only half of what that particular chore was worth. i.e. washing the dishes and out of 20 dishes, 3 still had food caked on them this chore may have been previously given a value of say $3.00 well now she may get $2.25 instead. It made my kids work harder to ensure that they did the job right the first time especially when there were weeks when they received a full $10 for doing a great job and the next week $7 because they missed some stuff.

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Miranda September 16, 2010 at 6:41 pm

Great post. My son has an allowance, and he is learning loads about saving up. He saves 20% of is allowance right now. He has also been treating his things more thoughtfully since I instituted a “you ruin it, you help buy it” policy. He ruined his good shirt for church, and I had him pay me back for half the new one. This new policy has done wonders for the way he treats even things that we buy for him. He knows that we’ll get him what he needs, but if he ruins it through carelessness or willfulness, the next one he gets will cost him.

I also like the idea of parental matching @Tyler — it’s sort of like the 401k.

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KaseyS September 17, 2010 at 2:24 pm

Wow Vered. $10 a month is a little stingy if you ask me :)

I got $2 a week, but that was more than 20 years ago. I think you definitely need a cost of living raise here. (just kidding around)

However, I also saved up money so I could buy birthday and Christmas presents for family and friends with my own money. I started saving up in July – but it was definitely a good lesson.

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Derek September 18, 2010 at 1:52 am

I never had an allowance when I was a kid, and I don’t think it hurt my financial learning, but I was always a wise spender and carefully considered the pros and cons of every purchase. I do see the benefit though. I think I will start to give an allowance when I have children – it’s a great way to make them aware that money is not an unlimited resource, as many children do.

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Steve Jobs September 22, 2010 at 7:58 pm

Giving kids their monthly allowance is actually the best way to teach them how to be responsible and how to budget their money. As early as grade school, I already gave my children their monthly allowances so that they can manage their money and their expenses and learn from their mistakes. It is really a good idea to give them the freedom to control their budget.

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Andrew September 23, 2010 at 12:34 pm

We have our 5 year old on a “chore based” allowance. He has 4 chores to do each day: 1) Make his bed
2) Clear the dinner table and put the plates and silverware in the sink
3) Feed the cats
4) Pick up the toys he and his brother (he’s 2) have strewn about the house

Each chore has a different monetary value and we have a weekly chart showing all the chores. When he does one, we cross it off the chart and he earns the corresponding payment which he then receives in bulk at the end of the week. If he doesn’t do a chore, he doesn’t get paid for it. If he does everything, he can earn up to $1.00 per day.

He’s really into Transformers and the ones he wants are expensive (~$30) so he’s been saving up and at the end of the month we’ve been taking him to the toy store to get the next one on his list (and he has a loooong list).

What’s nice, though, is we told him candy comes out of his allowance, too. His desire for Transformers far outweighs his want for candy so his cnady consumption has gone way down since we started this system up in March.

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Kimberly October 2, 2010 at 10:26 pm

I just started an allowance program with both of my kids (6 and 12 years). Before I ever started them on an allowance – we sat down and discussed the rules and expectations. On our family whiteboard we wrote the rules. Also, I have 2 baggies of money posted next to the rules with their names on it. ($5 for each – per week). And I also have a bigger jar of money with lots of dollars (I started with $50) so they could see how much more they could earn.

The rules I set were:
(1) if they both misbehave or individually misbehave they have to “pay the jar”

(2) if one child is being bothersome not respecting one another they have to pay each other (ie: my son has to pay his sister if he interrups her during homework, or my daughter has to pay her brother if she walks into his room without knocking or tries or bosses him around)

(3) if they do something extra (good grades, extra helpful, getting along) they can take a dollar out of the money jar.

(4) they have their regular chores/responsiblities such as homework and 1 chore each per day (daughter cleans the catbox and my son helps with the trash) if they don’t do what is “expected” of them, they loose a dollar. I wanted to also show them that they still have to contribute with or without a money incentive.

(5) If anyone takes money out of the jar or their baggie without asking – they loose all of their money + any money they have saved + extra chores for the week + fines. Stealing is NOT acceptable and comes with serious concequences.

Every sunday night they get their money bags which we call pay day. It can be more than $5 if they have had good weeks, or less.. depending on their behavior. The reason why I put it in clear baggy is for them to get a clear visual of how much money they have been earning or loosing for the week.. Once they get their money they can put it in their wallets or piggy bank in their room for savings or purchases they want to make.

What I also do is if we happen to be out and they don’t have their allowance, they may ask me for a loan and I make the purchase. However I will write a “bill” and place it in their baggies. Once the bill is paid off – then they can start recieving money again. They are only allowed to have 1 loan at a time.

So far it’s working. They like checking to see how much money they have in their baggies – and can’t wait for allowance day. It has saved me from the little pleads of surpies, video games and music downloads.

Glad to see other parents are using allowances.. I think as soon as kids can understand the concept of money / buying – parents should really consider an allowance.

(3)

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Monica October 18, 2010 at 1:13 pm

I received an allowance that allowed my sister and me to see a movie every Saturday afternoon and buy McDonald’s for lunch. We always felt so lucky to have a bit of autonomy.
When my two daughters hit middle school they each received $30.00 a week.
Their primary job was to do well in school, chores did not factor into the allowance.They were required to buy their school lunch and any extra’s they wanted. At lunch they were allowed to buy a cafeteria line lunch for $3.00 or select from different food stands around the cafeteria that might cost $5.00. It was a lesson designed to help them eat healthier (the stands had mostly fried foods) and learn to budget and save. We hoped this would partially mimick the real world.
At the high school level it appears our plan has been a success. They both have several hundred dollars stashed.

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Riaz November 28, 2010 at 12:53 am

I used to give allowance to my daughter. My wife think it had a negative effect. Now my daughter will only do things if she gets paid. So I think it is important to also include “chores that you have to do because you are family” and also rewards you get because you are family.

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Grizz July 27, 2012 at 6:01 am

“rewards you get because you are family” includes food clothing and shelter, if your kids don’t appreciate that, you need to educate them. It’s very simple, immediately cut off your non-essential spending on her. No chores, no pizza, she gets thrift store clothes and toys. One trip to the Salvation Army store should be enough to scare a spoiled girl straight, lol. When luxury is the baseline, any thing less feels unacceptable. Kids will generally do what is required of them.

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Still Learning November 29, 2010 at 10:53 am

I am leaning towards giving my kids an allowence. I think once I decide it will be important for the kids to know that there are certain chores around the house they do because we help our family and extra chores that they will get paid for. I like what someone else said earlier, that their kids get paid for things that are bigger tasks. Right now we have an 8 year old, a 3 year old and a baby so our system is that the boys have to help out with stuff around the house (appropriate for their age) and we buy them extra toys and what not, it has been working so far but we are facing problems with the 8 year old because his mom (I am his step-mom) gives him money for EVERYTHING. She gave him $10 for not crying when he got a shot at the doctor’s office, I think if he cries at the doctor’s office that is fine, shots hurt… She also started giving him $1 for every goal he scored in soccer which quickly back fired (I think) in that when the coach wanted him to play goalie for a game he threw a big fit and sat down in the middle of the goal and refused to play, he had to be pulled out. I think allowence is best when you are rewarding or paying for something that you want them to LEARN or contribute to the family.

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Sondra July 15, 2011 at 11:55 am

Our 6 year old gets a weekly allowance, but I agree with previous posters – a monthly allowance sounds like a better idea because of the budgeting and delayed gratification aspect of it. I am going to talk to my husband and get his thoughts, but I bet he’ll agree.

We also have basic chores that our 6 year old does and those do not count towards her allowance or take away from it if they are not done. Like another person said, those chores are “the cost of doing business” and part of the upkeep of our home. Everyone in the family is expected to contribute, down to the 18 month old, who is very good at picking up and putting away things already!

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dawn August 15, 2011 at 8:06 am

i don’t think allowance should be tied to chores.as a kid i baby sat my younger siblings.i rarely got momey for that.when i did,my parents borrowed it,and rarely paid it back.my daughter get $20.00 per month from me,and $60.00 from her father.she has saved to buy her own things,like a computer(desktop),clothing,and her yearly trip to comicon.she is so frugal that she rarely needs any extra money from us.chores are part of being a family.i think she is a better kid than most,but she is 16.she has been getting allowance since she was four,to handle herself.she is going to her convention with over $600.00 after buying costumes.not to shabby.

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BOTR December 11, 2011 at 5:06 am

I never got an allowance growing up (I asked once when I was ten and nothing came of it). I didn’t have any money to buy stuff I wanted/Christmas presents for my parents until I started working when I was 19; before that my mom/dad would buy the stuff then put my name on them.

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Mareeyah January 10, 2012 at 9:16 pm

I love this post! I do not have kids yet, but I’ve already been planning how to my future kids so they will become financially independent as early as possible. Giving them monthly allowance would be a wise step. This would help parents stay within the family budget better, and the kids learn about saving and money management earlier. I’ve seen many parents overspending on what their kids want, and the kids don’t even know how to take care of the stuff their parents bought for them because they don’t understand the value of money.

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Eric March 7, 2012 at 12:37 pm

I’ve never before heard of a monthly allowance. When I was a kid in the mid-1980s I and everyone in my school all got weekly allowances. Some got $5, some got $10. There might be some benefit to changing it to monthly however. Especially in the economy we have right now, teaching a child how to spend wisely and learn the importance of sacrifice can go a long way. When you want that Skyrim but only have $10 a month then the child will either save his allowance with determination, or find other ways to make money, or get bored and decide to get something else once he has enough money. Kids can be fickle.

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Mark June 20, 2012 at 7:04 pm

We have yet to pay our 6 or 4 year old girls an allowance, but will start the older onest on one soon. We are still ironing out the wrinkles, but there will certain chores she is expected to do as part of the family.

One thing we are still struggling with is the basic message that this whole arrangement sends to a child. I imagine it can shape their whole future relationship to money. So, we are putting considerable thought into what, if any, conditions we attatch to it. Basically, we are asking ourselves “what sort of relationship to money do we want to encourage?”

One sort of relationship is entitlement. Hand $5 a week over to someone automatically and pretty soon they expect $5 a week. They feel entitled to it. Not everyone in their lives is going to pay them just for showing up.

Pay them for doing extra chores and you are preparing them for corporate life. “Go work for a company, they will tell you what to do. Do it, get paid”. And after a while, expect to get paid for everything, or they don’t do it “Not my job!”.

We aren’t sure that either of those models will fully prepare them for life. So we are toying with the idea of an entrepreneurial model, where we reward them for doing things they like, that we value. Maybe we’ll help them set up a stall out the front of the house. Or maybe we’ll pay them if they paint a nice picture or have a great idea or organise a family outing. We’ll see. A bit harsh on them? A bit arbitrary? Punishing failure, a bit unpredictable? All those things are true, but of course we have the discretion to massage the figures behind a closed door and ensure an outcome that perhaps teaches them some useful lessons about knowing your customer, managing costs and income and thinking outside the box.

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Bri October 19, 2012 at 5:50 pm

Why not pay them for doing their “job” which is going to school, learning, being cooperative, doing homework, acting responsibly, etc. If they see that they are earning money for contributing to “society” like adults do, perhaps that is something that will help them value their money and place in life.

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guest September 15, 2012 at 1:39 pm

for the grades system for full addendence 25euro for tests as would be 20 euro ,vochers trip to movies trip to letterkenny derry bs would be a 10euro ,vochers trip to to park with treat at the shop trip to local cafe cs would be maybe a new magazine or 2euro for an a in good behaviour 10 euro for an a for exams as 20euro bs 15euro cs ten euro d owe mum 15 euro f owe mum 20 euro it is the begining of the school year i just had my first maths test on friday so hoping i did well so i can get somthing nice ps last year i got nothing and was always studying i always did well motly 100percents in test i am the smartest in my class the rest of my class does really care about grades or studying i care about both this is a nice treat this year to be payed but i would still study and do well in school because i fined school a really cool place i love learning new things with or with gifts i will still do well

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guest September 15, 2012 at 1:40 pm

sorry i made mistake i meant the rest of my class does not really care about about grades

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guest September 15, 2012 at 3:35 pm

i have autism adhd and asberger i will be getting 200 euros amonth 8o euro amonth school luches 6o amonth pocket money 28 amonth for afterschool club 32 amonth for credit union also ican earn money or nice treats with good test results or grades with my 60 euro a month pocket money i will put away 4 euro for big ticket item 5 euro for holiday 3 euro for chrismas and 3 euro to spend each week

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Guest September 16, 2012 at 11:51 am

I think kides should save thier allwance and only spend a little

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garyn November 14, 2012 at 10:14 am

yo im a panda

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Anonymous November 28, 2012 at 5:51 pm

I never got an allowance as a kid, because my parents didn’t like the idea of giving me money. We tried to attach chores to it, like someone above said- each chore had a monetary value. The problem was that my parents put a 1-10 cent value on each chore (this was about 5 years ago) so my brother and I could only earn about $3-$6 a month and we wanted to save more to get what we wanted. If you do an allowance like they did and put a monetary value on it, make the money worth doing the chores or they’ll never get done.

I’ve always been conscious of money and how much I spend, but having an allowance would have made it easier for me to save more money to buy Birthday and Christmas presents, save money for something special, or buy a toy.

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