Should I Give My Kid a Virtual Allowance?

How in-app purchases have left me and my husband stumped. By Sierra Filucci
Should I Give My Kid a Virtual Allowance?

My 6-year-old son is completely obsessed with a virtual world app called Tiny Monsters. All his friends are, too. And while his friends' parents feed their kids' iTunes accounts, enabling these tiny monsters to quickly grow into bigger ones, my son is stuck waiting and waiting for them to grow without the added boost of an in-app purchase.

When I brought up the idea of allowing our son to spend his $1 per week allowance on his favorite game, my husband was flatly against it. His reason -- that this virtual spending would nix any potential learning about money management -- seemed valid at first. If our son doesn't hold the dollar in his hand and pass it over to a cashier or slip coins into a slot, how will he understand that the money is no longer his?

But were we being old-fashioned? Isn't our society moving toward digital payments for everything? When was the last time we used actual cash for anything? And doesn't our son need to learn how to manage money in whatever form it comes?

Another mom suggested we were being control freaks by dictating what our son could spend his allowance on. "Isn't the point of allowance to let him make his own decisions about how he spends his money?" she asked. Good point, I thought, but I wouldn't let him spend his allowance on guns or 10 pounds of candy. Is this different?

Ultimately, we decided to hold off on letting him use his allowance on the game. It's not a forever decision, but for now, given the impulsive nature of his personality, we want him to have a bit more experience with spending on tangible goods first. And hopefully he'll soon be mature enough to think through his financial decisions with care, rather than be at the mercy of a game designed to entice him to spend, spend, spend.

About Sierra Filucci

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Sierra is a journalist with a special interest in media and families. She has a master's degree in journalism from the University of California at Berkeley, and she's been writing and editing professionally for more... Read more

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Comments (31)

Adult written by J W

The best way to learn is to make mistakes. My daughter had to learn the hard way about claw cranes because she saw these huge stuffed animals and it was "only" $1. She spent all her money and ended up with nothing. It had to happen five times before she finally got the message that claw cranes are a rip-off. Hopefully, she will avoid gambling when she is older. The payoff now is I never have to hear her beg for money. My kids get an allowance and (after putting money towards charity) they can spend it on anything they want. If they ask me to buy anything, I tell them to use their own money. Now that my daughter is 8, she is able to borrow money from the Bank of Mom but I charge 2% interest. We track on a piece of paper and it takes weeks to pay me back. Sometimes I ask her if she even remembers what she bought. Too many kids don't have any experience with money when they turn 18 and wind up with serious money issues. When my kids want to buy something online, I tell them to give me their cash and then I can pay for it virtually. I definitely don't think you should automatically put $1 week on his game. But hand him his allowance and if he wants to spend something online, just have him hand it over to you.
Kid, 9 years old

Ask him. Do you really want to spend your allowance on a monster game? What other fun things can that dollar pay for? Is saving up the better answer?
Adult written by Elodia Buffington

It is not being an old-fashioned, It's being practical. I think its a waste to spend money on a game and their is other way to make his tiny monster to quickly grow without paying for it, he just need to wait. It's not about competition with his friends, what's important is his having fun playing.
Kid, 10 years old

Elodia this is not for you this is for the FOUR YEAR OLD above me: erm seriously??? Four...? But why would you even say you were four...
Parent written by JustBob

Personally, I think you are asking the right questions, which means you have clearly put allot of thought into this. The question you posed about virtual money boils down to one question I think. Does your child understand the value of money or just knows that money is required? If he is starting to understand what things cost, then it might be time to allow the virtual money. Perhaps it's time for a raise in allowance? $1 per week in real life and $1 per week for the game?
Adult written by krishalei

As parents, before we let our child have what he wanted nor requested, we should think it over and consider several reasons on why we should or should not let them have it.Financial experts have generally advised against giving gift certificates previously. They are cash-like commodities, but with more limitations. So why not just give money instead? However, their reputation is on the rise, unaffected by that logic. So, if we are likely to keep giving them, there are some things we ought to know. You can use a short term loan to help pay for your holiday gifts.
Parent of a 8 and 11 year old written by mbruin554

Very interesting question. I am a co-founder of Tykoon – a site helping families with the very important ‘money conversation’. We started Tykoon because our kids were increasingly asking for in-app virtual purchases and my wife and I needed a solution to manage this difficult conversation. We believe it’s important to have a tool to reflect a child's available spending money – regardless for what’s being purchased (real or virtual). We found that in our family we weren’t having fact-based conversations with our kids. My kids simply weren’t presented with a “balance” and established guidelines that they could reference, and we could stick to in order to teach them how we wanted to manage money and the “I want” impulse. Starting with the facts and some general guidelines as to how your family will spend money on all purchases is an important first step. Presenting kids a chance to learn about smart money decisions through real life experiences is a major tenant of how we are approaching this issue - even if this means buying virtual things that interest them. We want Tykoon to serve as a basis for families to convey their individual and unique values around money – whether its around virtual purchases or savings goals. I recently wrote a blog post on this same topic. Was psyched to see it discussed on CSM!
Parent of a 9 and 12 year old written by chris2365

I follow Duct Tape Parenting's advice on allowances. So yes, my kids can spend money on virtual items. Hey, I spend $7.99 a month on Hulu Plus which is virtual entertainment, right? I want them to learn to handle money, make mistakes, etc., now, when the repercussions are small. If I micromanage their spending now, are they miraculously going to be able to do it as adults without my telling them what to do? Not so much.
Parent of a 8 and 11 year old written by ReadingMomma

We use the allowance option on iTunes for our sons, ages 11 and 8. They have $10 per month to spend as they choose: music, apps, etc. once it's gone, it's gone. No amount of cajoling can entice us to add money to their account or to let them use our credit card info. I think it's been a good lesson for them in budgeting. Interestingly, it is my older son who is apt to be "broke" during the first week and my younger son who often carries a balance month to month.
Adult written by Titusaki

I think that you should not give your kid a virtual allowance. Noone should waste their money on anything that is virtual. My opinion is, that its a waste of money. It would be better to teach your kid to be patient and have him save up his money, then when it is saved up to a good amount, tell your son that he can buy what he wants as a reward for saving his money. Then it would be, as if he had earned his reward by being patient. I think that he would be happier. Just because other kids can buy into virtual things, doesnt mean that your son has to. Why have your son be like everyone else?
Adult written by Bletsos Constantinos

In my point of view it is a matter of priorities inside the family setting.I would like to hear your son's voice. How important is this situation for the kid....How can such a thing affect his social network and the relations with the peer... How does he feel....What does he think..and so on.... We must keep in mind "That virtual is as real as its consequences that affect our lives" Levy
Parent of a 7 and 9 year old written by Regalos

How about giving him the option to buy a gift card (at the supermarket) and then let him manage the balance? He would still buy it the old fashion way, and he would have the ability to manage his balance by seeing it decrease as he spends it!
Adult written by Ettina S.

Be careful with that option. I got a pre-paid Visa for my iTunes account and accidentally tried to buy more than the card had. They locked down my iTunes account and refused to let me cancel any of the purchases. I switched to Android in disgust.
Adult written by Taryn Degnan

I love this idea! It's a great way to demonstrate that feeling of buying something tangible and teach the value of money at the same time.
Parent of a 6 and 8 year old written by Sierra Filucci

I love hearing everyone's ideas for how to manage this issue. It's definitely giving me different ideas to think about moving forward. Thanks everyone!
Parent written by Sheltiegal

We ran into the same issue a couple of years ago (Snoopy Street Fair, Dragonvale, Tiny Tower, etc.). At first, we were allowing the in-app purchases but that stopped quickly. Then we played the games with him and set an example of being patient and allowing things to build rather than speed everything up with gems and coins. He learned this pretty quickly. He knows my iTunes password but never uses it without permission (I let him know that Apple always sends mommy a receipt, so I'll know if anyone's purchased anything). Now when we evaluate a new app, we look at the details to see if there are in-app purchases and he has occasionally changed his mind when he sees that they are part of the game. On the other hand, we do give him flexibility to use his allowance or gift cards if it's something that he really wants. After all, virtual purchases are all around us. There's nothing really tangible about spending money at a movie or for Netflix, or to go to a ball game (unless you also spend money on the program, souvenir cup, etc.); it's all just for entertainment. If we're creative, we can turn anything into a good teaching opportunity!
Parent of a 6, 7, and 14 year old written by NewYorkMom

I share your frustrations. So my solution was to have her save her money and we deposit it into a Bluebird card I set up for her. She's 7 and very money wise (better than her parents, sadly!). She wanted to play Animal Jam and wanted the paid account. I agreed if she agreed to maintain the balance. After two months she asked to cancel the subscription! She didn't feel the online value was worth the real world value. May I add we take all the cash and change she saves and she knows she has to wait for a Walmart trip to deposit. We go maybe once a month. And sometimes she forgets to being the money. Caution: Walmart only accepts a few dollars in coins. My daughter didn't want to use the coin star machine to cash in and lose the .7/1.00$. We finally twisted the managers arm and made the deposit from her change jar :)
Adult written by kavmonkey

We give our daughter $1/year of age allowance (which may sound like too much), but it is split as follows: -10% charity of her choice (Church, Heart Foundation, children in Haiti, etc.) -15% retirement (explain that one to your child!) -15% long term savings (both retirement and savings have an account at the bank that she went with us to open) -60% spend She uses this to save for any apps, American Girl, ice cream Friday at school, DS/Wii game, etc. It has taught her that she has to save, and that it is gone when it is gone. She is only 7 1/2 and I'm guessing she knows more about money than I did at a much older age.
Adult written by J W

I bought my kids Moonjars to divide their allowance into Spending, Savings, and Sharing (charity). They've used their sharing money for the animal shelter and Toys for Tots and some local things like the new library. We started at age 5 with $3 and one dollar into each spot. Now, my seven year old get $5 - $1 for sharing and $2 each for spending and savings. My eight year old gets $7 - $1 for sharing, and $3 each for spending and savings, and she has to buy her own socks and underwear. All money gets divided - birthday money, extra chores money (but not regular chores - they don't get paid for that), I also pay them to make a healthy lunch for school (must include a protein, grain, vegetable, and fruit) - no money if they get the school lunch and they must pay me back if they get an ice cream. Every week, they count their savings and get 5% interest. Once they get to $100 in savings, it goes into their bank account and we start over for savings (5% gets to be a lot!). They can borrow money from the Bank of Mom but I charge 2% interest and the max is $40. The more their allowance goes up, the more things they are responsible to buy themselves - eventually they will be responsible for their own school supplies, lunch, and clothes (although that is years away). When their allowance gets to $10, it will be set at 10% sharing, 45% savings and 45% spending. Once they get a paying job, it will be 10% charity, 15% retirement, 15% long term savings, 15% short term savings, and 45% spending (as long as they live under my roof anyway). They've already made mistakes with their money and I'm so grateful they are learning these lessons now. If it takes ten years to learn how to manage money then they will be doing great at age 18. Hopefully, they will also learn it's better to pack your lunch everyday. I found out that our credit union lets 13 year olds have debit cards so I've already decided when their 13 they will get their allowance directly through the bank. Then I can stop dealing with having enough $1's and change!
Adult written by kavmonkey

We also let her purchase iTunes cards (or use the ones she receives as gifts) to purchase apps on our accounts.
Parent of a 8 year old written by albidnis

I think holding off is the best thing to do. There is no need to rush our children’s growth just because others are doing something. This is another way to show our children that they need to be leaders not followers. They may not like it initially but they will understand what you were trying to do eventually. I set up an account that uses my paypal services on their iPads. They are only allowed to use their iPads on the weekend for gaming and during the week for education purposes. I have also setup security controls so they cannot make any purchases without my consent.
Parent written by SM1

I also think holding off till he understands spending money digitally or otherwise, is a wise decision. I created accounts for my kids where we put money they got from birthdays and allowances. If they want to buy anything, it comes from there. A decreasing balance line makes them think twice on purchases.
Adult written by atkinsww

There is a problem with iTunes and other "stores" that want to keep a credit card on file for purchases. Since I don't trust my child I'm not comfortable having my card accessible with a "buy", which means getting gift cards and dealing with that.
Adult written by Parenting Power

Hi Sierra, Our latest blog Kids and Money reminds parents to consider what they want to teach their kids when they start an allowance. If allowance is about learning that when we spend money on one thing, we don't have it for another, then it makes sense to let him spend it. Perhaps you could put a limit on how much to spend virtually. This would be teaching him the idea of allotting a certain amount of money for different things. Good luck with your decision.
Adult written by Paulsifer

My daughter isn't old enough to want to buy in-app stuff yet, but I've been thinking about this more and more. I'm a pretty big gamer, but to me, app type games should be free, because their substance isn't worth any more than my time. As soon as I feel like real money is the only way to proceed, I stop playing the game. It's not worth real world money. So, how do I balance my opinions with letting my child make choices? How do I help her see that the app will likely only be interesting for a few months and the money she spent will essentially be wasted (vs. games on discs that can be played years in the future)?
Parent of a 8 and 10 year old written by celinac

Isn't this the reason why the CSM review itself doesn't recommend this app until age 8? We ignored this advice at our peril, and deleted the app within a week. It was like crack - the pleas for in-app purchases were incessant. We tried again at age eight, with a much better experience. Now our daughter complains about how the app just wants to get her to spend money, and how annoying that is... BTW, our allowance is all virtual. The money automatically goes into their savings accounts, they can see their balance on my phone, and when they want to make a "withdrawal", we make the transfer on my phone from their account to mine and give them cash (or just charge their purchase on my card - including apps. These are no different than buying a toy or candy). They love watching their balance grow week to week. We have very few limits on what they can spend it on, but at age six, I would have refused to let her spend it all on making a virtual monster grow faster. Feels too much like taking advantage of her. Now at age eight, I probably would - and the first time she wanted something else and didn't have any more money, she would probably start to think twice.
Parent of a 6 and 8 year old written by Sierra Filucci

I agree. I think at 6 he is too young to understand that he is being manipulated by the app. He's stuck with it without the ability to upgrade anything though, so hopefully he's learning lessons about patience, and maybe he'll tire of it when he can't make enough happen without spending the extra money. Great ideas about letting kids watch accounts grow virtually!
Parent of a 11 year old written by skwirler

We do 2 things to allow my daughter to spend virtual money. The first is she takes her cash allowance and pays us buy credits. In this way she does see the cash and she does have to physically spend it. I don't see that it makes a difference whether she pays a cashier, me or a friend. When the money is spent is goes. The other is we earn virtual money by searching at Swagbucks. We all contribute to the effort of earning points, but we let her have most of the credit when we earn enough to buy $5 gift cards at Amazon. She's spending it from her kindle, so that is convenient. I think itunes sells cards at Swagbucks, but the denomination is higher, so it takes longer to have enough points to redeem. When we first let my daughter spend money at the Kindle store she went hog wild, but soon after the first time she ran out of money, she became much more conservative.
Parent of a 7 and 9 year old written by Ingrid Simone

Not quite the same as an allowance, but I have used app purchases and in-app purchases as part of my son's reward chart system. As he met certain milestones he was allowed to choose from rewards that included digital options like buying an app, upgrading to a full version of an app, buying virtual currency, hints, level skips, etc. He basically earned credits that were separate from his allowance, which he tends to use on real-world goods (he's also not allowed to buy 10 pounds of candy!).
Parent of a 6 and 8 year old written by Sierra Filucci

Great ideas Ingrid! I like that he gets to choose different options -- you give him some choices but still control the boundaries.