Around the 1920s, a certain class of parents—those with enough money to indulge their kids from time to time—started to panic. Toy companies and trinket manufacturers were buffeting kids with ads, and children were pestering their parents for gifts. Many parents wanted their kids to have these new luxuries, but they also wanted them to understand that money had limits.

Parenting magazines suggested an intervention: small weekly payments, called allowances, that kids could squirrel away and use to buy toys or other treats on their own. The hope was that these payments would teach children to save rather than spend. But not everyone was a fan of the idea. Sidonie Matsner Gruenberg, an influential writer and educator, argued that some uses of the allowances confused “the give-and-take of family life with the buy-and-sell of the market place”; a 1935 article in Parents’ Magazine argued that the payments would turn a child into a “calculating, hard-bargaining adult.”

A century later, allowances are still around. According to a 2018 survey conducted by Merrill Lynch and Age Wave of 2,500 American parents, more than half of those with kids ages 7 to 17 gave allowances out. Earlier this year, a Wells Fargo survey of nearly 1,600 parents of kids ages 5 to 17 found that 71 percent of them gave allowances, with payments averaging $37 a week. These days, though, what an allowance is has expanded. Some parents still give cash. But as credit cards, digital investment tools, and “buy now, pay later” apps have proliferated, some parents (especially wealthier ones) are using the payments to introduce their kids to more complex aspects of the financial ecosystem: bank fees, interest rates, investing, credit scores, loan payments. Lisa Jacobson, a history professor at UC Santa Barbara and the author of Raising Consumers: Children and the American Mass Market in the Early Twentieth Century, told me that, essentially, these are “allowances supercharged for the era of finance capitalism.”

Allowances—and the squabbles surrounding them—have long served as a window into an era’s fiscal habits and anxieties. The payments “get continually reimagined as the political economy changes,” Jacobson said; after the Great Depression, for example, it became more popular for people to split payments for expensive purchases into smaller installments, so some parents started teaching their children the basic principles of credit and repayment. Later in the century, as more parents began opening bank accounts for their kids, those became a typical place to park allowances, offering children an early introduction to the practice of depositing and taking out money, writing checks, and interacting with a financial institution.

Today, as the list of skills required for self-sufficient financial citizenship has ballooned, some better-off families have taken allowances even further—and a new group of apps and games has popped up to help. Greenlight, for example, lets kids funnel their allowance savings into ETFs (a type of investment fund), play mini-games on the difference between credit and debit cards, and study the basics of maintaining a good credit score. Another app, Till Financial, encourages children to set up payments for platforms such as Spotify and Netflix to learn about the rhythms of subscriptions. It also creates incentives for kids to save by letting parents match what children have stowed away once they’ve hit their savings goals. (This is similar to Bill and Melinda Gates’s method: In 2014, Melinda said that they pushed their kids to save their allowance money for charity by promising to match those funds at the end of each year.) The app and debit card FamZoo suggests that parents give their children mock loans to teach them about compound-interest payments. Offline, some parents use games such as Cashflow for Kids (created by the author of the up-by-your-bootstraps book Rich Dad Poor Dad), which teaches children about investing in companies, “acquiring assets and dealing with the perils of liabilities.”

Of course, conversations about money (and allowances more generally) tend to look different depending on a family’s socioeconomic status, and most families are not using investment apps for their kids. But some middle- and upper-income parents see allowances as an elaborate instructional opportunity: The families put curbs on how much cash they dole out not because they can’t afford to spend more but to help their kids understand the limits of money. Those who encourage their children to invest do so not because they need the tiny dividends but to help kids learn.

For working-class parents, however, allowances are more likely to serve an actual budgetary purpose. Parents may say, “Here, you get $5 a week,” J. Michael Collins, a professor of personal finance at the University of Wisconsin at Madison, told me, because that is all they can afford to give their kid to spend for fun. But that type of budgeting offers kids a valuable lesson. It teaches them that “you can’t always ask me for something,” Joyce Serido, a professor who has studied family finance at the University of Minnesota, told me. “It’s up to you to learn how to manage your money.”

Many parents, as they prepare their kids for an uncertain economy, probably fall somewhere in the middle, neither setting up a diversified investment portfolio for their children nor limiting their kids to a physical piggy bank.(And plenty don’t give allowances at all.) If a child has a phone, they probably won’t have Greenlight installed on it—but they might have a payment app: According to the Wells Fargo survey, about half of respondents said they paid their kids’ allowance (at least in part) through apps such as Apple Pay and Venmo, direct deposits in a digital checking account, or prepaid debit cards.(Lots of banks offer accounts designed for kids, too.) The average parent probably doesn’t expect their child to act as a junior day trader, but many parents do talk with their kids, as they always have, about the modern nuances of how to handle their money. A majority of the parents who responded to the Age Wave and Merrill Lynch survey said they’d taught their 13- to 17-year-olds about “debt, credit, budgeting and the benefits of investing.”

Despite parents’ efforts, allowances aren’t necessarily minting a new generation of financial sophisticates. Overall, Serido said, the research on allowances is mixed. Families approach them so differently and inconsistently that it’s hard to make an overarching claim about how effective the payments are at teaching kids to use money responsibly. A 2021 paper concluded that receiving allowance payments early in life didn’t have a statistically significant impact on someone’s likelihood of carrying a credit-card balance or opening a bank account by early adulthood. People who’d received allowances as kids were slightly (7.4 percent) more likely than others to be paying their own bills as a young adult, but that was about the only evidence of a longer-term benefit.

Still, the impulse to try to teach kids to navigate a convoluted financial system is understandable, given that there’s so much else parents can’t prepare their kids for, economically. With homeownership slipping out of reach for many young people, student-loan debt rising, and AI scrambling the job market, many parents are worried for their children’s future—and teaching kids the nuances of bank fees, ETF investments, and credit scores may feel like a way to reassert control. Parents can’t predict what employment or housing will look like in two decades, but they can stuff their children with economic know-how and pray that it will be enough.

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