Money Matters

Should your child do chores to earn an allowance?


Aug. 10, 2022

Few topics in personal finance evoke such strong emotions as the question of whether or not a kid’s allowance should be tied to chores. People have feelings about this.

I’ve heard many reasonable arguments on both sides of the debate. In the pro-chores camp: We all work for money, kids should learn to do the same. In the no-chores camp: I don’t get paid to wash the dishes, make my bed or rake the leaves. Kids’ should learn to do their share of housekeeping because they’re part of the family.

I’d like to offer an alternative point of view from Clifton Corbin’s recent book Your Kids, Their Money: A Parent’s Guide to Raising Financially Literate Children. Mr. Corbin, a financial literacy advocate with a background in business consulting, argues that the primary purpose of an allowance should be to teach kids about money. Just think of it as driving lessons, he writes.

“Consider small amounts of cash as their parking lot. A safe, confined space to make mistakes. … They are still holding the wheel, making financial decisions, but poor judgment will not cause damaging repercussions like missed bills or creditors starting to call.”

The allowance-for-chores approach becomes problematic when your child is fine with forgoing their pay, according to Mr. Corbin. You can’t fire them, so odds are you’ll be left to pick up the slack, and they won’t get to practice with their money. Kids should, of course, also learn about earning, but summer jobs can take care of that lesson, he writes.

Given my six-year-old’s track record of disdainfully declining candies for chores – simply talking to him about shared responsibility yields better results – I decided to go with Mr. Corbin’s approach. My kid has been getting $2 a week for a couple of months now, and his understanding of money has already made a huge leap forward.

Granted, I still get questions like: “Does our house cost more or less than $100?” But after a trip to the store in which he realized just how little he could buy with $5 (poor guy doesn’t know yet about the worst inflation rate in four decades), his grasp of smaller amounts of money has noticeably improved.

Case in point: The other day he asked if he could buy an upgraded spaceship for an aliens video game he’s been playing. When I pointed out the price tag – which was, I kid you not, $34 – he looked at me in shock. Without further ado, he closed the in-app purchase window, and that was the end of it.

It was a proud parenting moment.

How to Ride Out a Murky Economy

Important pieces of information arrived over the past few days, but they do nothing to clear away the fog blanketing the markets and the economy.

Is the economy lurching into a recession? Is inflation coming under control?

Clear answers are important for anyone who has a job or hopes to get one, anyone with bills to pay, a house to buy or sell, an apartment to rent, a loan to make or repay, or investments to worry about. Really, for just about everyone.

But nobody has those answers.

It would be better, obviously, if there were more clarity, but it simply does not exist. Prudent people will need operate on two tracks: preparing for short-term trouble while investing for the long term.

The Background

First, on Wednesday, the Federal Reserve announced that it was increasing short-term interest rates by 0.75 percentage points, bringing the federal funds rate to the 2.25% to 2.50% range — a sharp rise from nearly zero at the beginning of March.

Then, on Thursday, the Commerce Department announced that economic output, as measured by gross domestic product, fell in the second quarter at a seasonally adjusted annual rate of 0.9%. That was the second consecutive quarterly decline. The new data will be revised and does not mean that the economy is in a recession, but even so, this report prompted considerable hand-wringing.

Jerome Powell, chair of the Federal Reserve, said in a news conference Wednesday that the Fed had been deliberately “slowing the economy” to curb inflation. But, for what it’s worth, Powell said he did not believe the economy was in a recession — not yet, anyway. Jobs, for instance, are still plentiful.

As for where things will end up later this year or in 2023, he would not even try to make a firm prediction. The Fed will pay close attention to new information as it arrives, he said, and a short time later, there was some.

Two Democratic senators, Joe Manchin of West Virginia and Chuck Schumer, the majority leader from New York, announced that they had reached a sprawling deal on climate and energy programs, health care subsidies and prescription drugs, taxes and, probably, much more. They are calling it the Inflation Reduction Act of 2022 because over a 10-year period, the tax increases would surpass the expenditures. But the details are sketchy, and the bill’s chances are uncertain.

Read up on all of this news, by all means. Then, proceed with caution.

Unanswered Questions

There is considerable risk right now, even if we limit ourselves to the issues that directly affect the U.S. economy and markets — and, quite possibly, your personal finances.

At the top of my list is inflation. Mounting evidence of runaway inflation has been shocking consumers and roiling the political landscape.

The last time inflation was this hot, Ronald Reagan was president and Paul Volcker was chair of the Federal Reserve. If you were not around then, consider that Volcker’s main mission was “breaking the back of inflation.” Powell has made that his mission now.

At the moment, oil and gas prices have eased somewhat but are still high. So are a lot of other things, including food at home and at restaurants, clothing, used and new cars, apartment rents and home prices.

Powell indicated Wednesday that, at the moment, he expected that the Fed would elevate the federal funds rate further: to 3.5% by the end of this year and perhaps by another half-point early in 2023.

An Ugly Link

Inflation and recession are connected, unfortunately.

That is because the Fed possesses only blunt instruments for taming inflation: raising interest rates, selling off securities in its $8.9 trillion portfolio and signaling its intentions with what it calls “forward guidance.” These measures influence the markets and, ultimately, countless daily buying and spending decisions. The Fed is using its tools to induce people and businesses to demand less in goods and services. Powell said he hopes to give the economy enough “slack” so that inflation will cool down.

The problem is that although the Fed can affect demand, it has no control over the supply of goods and services.

The pandemic and the war in Ukraine created many of the shortages and bottlenecks. Yet there are some signs that they are already easing.

The Baltic Dry Index, which tracks global shipping prices, has fallen 40% since its peak in May. And surveys of the economies of the United States, continental Europe, Britain and Japan show sharp declines in “supply lead times,” as well as in inventory buildups.

With business activity rapidly slowing, there has already been an economic “sea change,” said Chris Williamson, chief business economist for S&P Global Market Intelligence, which conducts these surveys.

“If the central bankers keep raising interest rates,” he said in an interview, “policymakers need to do this with eyes wide open. Because on the basis of this data, you will create quite a recession if you carry on.”

When Will We Know?

The National Bureau of Economic Research, which decides whether a recession has actually taken place, took 15 months to declare the end of the last one. It uses as much time as it needs to be certain while looking backward because it cannot get it right in the present tense. Guesses aside, I doubt that anyone can.

On June 9, 2008, for example — in the middle of what we know now was the longest and deepest recession since World War II — Ben Bernanke, then-chair of the Fed, said he thought conditions were improving.

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so,” he said. In reality, the housing market was already weakening, and the entire financial system and economy would shortly crash.

So we will not really know if we are in a recession soon enough for it to make a difference. Yet we will know when times feel tough. By that point, it may be too late to make preparations for it if you have not done so already.

What to Do Now

Right now, if you do not already have a comfortable cash reserve, conserve money so you will be able to pay your bills. Above all else, avoid revolving credit card debt. The average rate, 17.25% and rising, is already punishing.

Take advantage of rising rates for your savings. For example, money market fund rates lag about a month behind Fed rate increases. They are now well above 1%, and a month or so from now, standard money market fund rates should be above 2%. Certificates of deposit, short-term Treasurys and I bonds are good options.

Then, invest long term. Although stocks and bonds have performed badly this year, the outlook has improved considerably.

David Rosenberg, chief economist of his own firm, Rosenberg Research, has warned since the winter that a recession is coming, so he is bullish on Treasury bonds. “If there is a recession, you will want to be holding them,” he said.

I am agnostic on the recession question. Not knowing where things are headed, I always hold a mix of stocks and bonds and use cheap index funds to do it. Will the bear market in stocks end? Yes, if there is no recession. But if there is a deep one, stocks could take a further pounding. Nonetheless, for those with long horizons — a decade or more — buying stocks steadily, through broad index funds, is likely to be a good bet.

Vanguard said the pummeling that the markets have taken this year augurs well. “Long-term expected returns in both stocks and bonds have improved because prices are so much lower,” said Andrew Patterson, senior international economist at Vanguard.

Count on unpredictable markets. Learn to live with them by putting together a long-term plan for savings and investment. I will return with more suggestions on how to do that.

Once you set your plan in motion, try to forget about it for a while. With a little luck, you will find that you have protected yourself when the next unsettling news arrives.

Future Returns: Women Are the New Face of Wealth and Investing

As more wealth transfers to women, the face of investing—and philanthropy—is starting to change. 

By the end of this decade, women are expected to control about US$30 trillion, consulting firm McKinsey & Co. said in a 2020 paper. A separate report from the Boston Consulting Group, or BCG, in the same year said women are adding US$5 trillion annually to their wealth.

Women are inheriting money from their partners and parents, but they are also making it. A growing number of women are founders or co-founders of so-called unicorn companies—private businesses with a valuation of US$1 billion or more. Crunchbase, which tracks public and private companies, said 83 of 595 companies that gained unicorn status in 2021 were founded or co-founded by women, up from 18 in 2020.

More women founders are also exiting their companies through buyouts or public offerings, leaving them with wealth to give away and invest. A recent example is Sara Blakely, who in October sold a majority interest in Spanx to private equity firm Blackstone, which valued the women’s shapewear company at US$1.2 billion. 

Women’s growing wealth allows them “to really start to be important in the ecosystem of investing,” says Jennifer Kenning, CEO and co-founder of Align Impact, an impact investing advisory firm in Santa Monica, Calif. “If they invest differently than men, that will have a different effect on where assets end up going.” 

High profile examples of how women deal differently with their wealth are evident, perhaps most notably with MacKenzie Scott, who has given away at least US$12 billion directly “to support the needs of underrepresented people from groups of all kinds,” as she wrote in a March 23 Medium post.  

Melinda French Gates created Pivotal Ventures in 2015 as a limited liability corporation that can use different forms of funding to accelerate social progress, from grants to seed capital. Pivotal’s aim is to advocate for the power and influence of women throughout society. 

Women who make or inherit a lot of money don’t tend to hold on to it, Kenning says. “They give it away [until] they are uncomfortable rather than giving based on what [their] tax deductions are going to be.” 

The influence of female investors is showing up in the growth of startups focusing on access to capital; food, agriculture, and sustainability; and so-called femtech—healthcare technology companies focused on women, she says. 

Penta recently spoke with Kenning about the rising wealth of women, and how they invest.

Educated Risks

A lot of women have prepared themselves to inherit wealth by going to business school or learning from their parents or grandparents to be a steward of the wealth. Their aim is to demonstrate “they are capable, ready, and have the knowledge to carry it on,” Kenning says. 

And while female investors are willing to take risks, there’s also truth in the often-said statement that women are more risk averse. But that doesn’t mean they are putting all their cash into Treasury bonds. Instead, they are avoiding concentrating their assets into a single stock or investment category and are building more diversified portfolios, Kenning says.

Women are “willing to educate themselves, find the right advisors, and they are doing it in circles together,” she adds. “You’re starting to see women-only investing programs, where they are doing it as a collective.”

An example is Invest for Better, a nonprofit that provides education on values-aligned investing for women, and access to peer-led investing circles. Groups such as these introduce women to how to invest in clean energy, sustainable food and agriculture, women-owned small businesses, and femtech.

Tilting to Social Responsibility

Invest for Better’s values-aligned approach is consistent with research showing women prefer to invest in sync with their values. A 2020 report from BGG found women are more likely to invest to create a positive change, with 64% of women surveyed saying they factor environmental, social, and governance, or ESG, concerns, into their investment choices. Of the men surveyed, 96% said they “invest to increase their income.” 

That gap narrows when it comes to the wealthiest segment BCG surveyed, those with bankable assets of US$20 million to US$100 million. Among these ultra-wealthy women, 57% care about investing in “thematic” topics such as the environment, sustainability, and social justice, compared with 50% of ultra-wealthy men surveyed.   

Similarly, of female investors surveyed by UBS in 2020, 71% said they consider sustainability in their investment choices compared with 58% of men. The survey also found women are more interested in investing in women. 

Where Women Invest

For some female investors, that translates to investing in funds that are managed by women who are investing in companies that either have a woman at the helm or are delivering a product or service that supports women, Kenning says. 

Venture capital funding in the U.S. for companies founded or co-founded by women has been rising in recent years, according to Pitchbook. Last year, 3,945 female founded or co-founded companies raised US$56.5 billion in venture capital financing, up from 2,897 companies raising US$23.2 billion a year earlier, the Seattle-based financial data company found. 

That funding dipped in the first part of this year “but the money is still pretty substantial to where we were a decade ago,” Kenning says. 

The public markets also offer an avenue for investing in companies with women at the helm, and that employ strategies in support of women and families—such as closing the pay gap and providing work-life balance policies—or that are changing their boardrooms with the addition of women and more people of diverse backgrounds. 

Kenning notes that there are at least two dozen gender-lens investing strategies in the public markets. According to Veris Wealth Partners, more than US$12 billion was invested in public gender-lens investing strategies (in both equity and debt) as of June 30, 2021. That’s up from US$2.4 billion in 2018.

A caveat has surfaced in the private markets, however. There, a recent study by the Wharton Social Impact Initiative at the University of Pennsylvania and Catalyst found that while there are more private funds with gender-lens strategies, they have not been able to raise their target levels of capital. 

One private-market vehicle that Kenning has invested in for clients is a US$150 million blended finance fund that supports microfinance institutions that provide loans to individuals that facilitate water and sanitation in emerging markets.

“It’s targeting women who are bearing the burden of collecting water in certain geographies [with] philanthropic grant funding and a technical assistance component,” Kenning says. The grants provide a cushion while senior-level investors take on secured debt, she says. 

For female investors who want to lift women out of poverty, Kenning may direct them to funds seeking to improve the lives of women in developing countries who work in factories making apparel or furniture. In such cases, a company’s objectives outweigh whether the founder is a woman or not. 

“What I see is women are coming in with the issue area they care about and then we have a discussion around where do women and girls fit in that picture,” Kenning says. “If they are focused on nutrition, well-being, and health, they are going to be focused more on food, food systems, sustainability, regenerative soil, agricultural products, less fertilizers...That’s where the conversation goes rather than, ‘is it women led?’”

4 Steps To Help Your Kids Build Smart Money Habits

If they’re on TikTok and Instagram, they’re getting money messages, and not necessarily the ones you would want—they may have heard more about the trendy stocks and buy now, pay later apps than about the importance of diversifying investments or building an emergency fund.

“If parents aren’t advising and guiding their kids about money, the void will be filled,” warns Shahar Ziv, a Harvard MBA who started a personal finance bootcamp for undergraduates. He now runs sessions for high schoolers, too, and reports that many are keen to discuss the “fun, sexy stuff” of how to get rich through investing but don’t yet have a grasp of the budgeting, credit and savings basics that can help get them in financial shape to invest.

Here are four steps to help your teens build the smart money habits to reach their goals.


Discuss with your kids the need to question both the expertise and bias of money sources.

Talk to your kids about what they’ve been learning about money, and from where—be it from the Web, their friends, in school or at home. (Don’t forget that your own financial behavior and choices send messages—intended or not.) Discuss the need to question both the expertise and bias of money sources. Is that influencer you so admire being paid?

“Objectivity is key,” Ziv says. “You want to ask, ‘Why is that person giving you advice? Are they coming at it from a selfless place?’”

A growing list of states require high school students to take a personal finance class to graduate, according to a new survey by the Council for Economic Education. In March, Florida became the most populous state to adopt the requirement. It’s a healthy trend. But don’t assume what kids learn in school is enough or always well-balanced. Example: Hundreds of thousands of high schoolers a year participate in stock picking games with play money, and some end up using high-risk techniques like margin borrowing and short selling to win the game. Gamification can be great at sparking interest, but has risk been fully explained?


If your teen is earning money on their own, consider a “parental match” to encourage saving.

Giving your kids a reasonable allowance—as opposed to simply buying them things they want—is a good thing. “It creates agency and responsibility,” Ziv says. “It also gives them freedom to make mistakes at a lower-stakes level. We’re all going to make mistakes. It’s better to make them early on where there are parental guardrails.”

If your teen is earning money on their own, consider a “parental match”—similar to an employer match into a retirement account —to encourage saving. The match can be into a regular savings or investing account, a college savings account or a registered account kids can open in their own names.

If your child gets a tax form showing their earned income, that’s the time to discuss gross and take-home pay—and taxes. The good news is they may be due a tax refund if they were a regular employee and taxes were withheld. The bad news is if they earned more than $400 in gig income from odd jobs like babysitting, tutoring or lawn mowing, they are required to file a tax return and may owe the government some money.


Add your teen as an authorized user to your credit card—it can help them build both experience using a card responsibly and a credit history.

In the past few years, a raft of fintech startups and established banks, brokers and credit unions have rolled out new savings, spending, budgeting and investing accounts for kids. They come with a variety of educational features and parental controls, but most are app-based and include a debit card that teens can load onto their smartphones. “Today’s youth are more likely to leave home without a wallet than without their phones,” Ziv observes.

Note that kids can’t legally open regular bank or brokerage accounts—so these are all technically parent-owned accounts, or joint accounts or old-fashioned “custodial” accounts (the money in a custodial account legally belongs to the child, and they get control at age 18 or 21). Shop around, since the features, fees and parental controls vary widely.

Also consider adding your maturing teen as an authorized user to one of your credit cards—it can help them to build both experience using a card responsibly and a credit history. That history could help them later, as a young adult, to qualify for their own credit card, car loan or mortgage. Personal finance talks should be ongoing, Ziv says. A monthly discussion about what’s on the credit card bill is one way to pick up the conversation—along with a lesson on the importance of paying off that balance each month.


You can lecture all you want, but modeling responsible financial behavior is crucial.

Broaden the financial conversation with your kids to include what money can and can’t do for you—and for others. Lan Nguyen Chaplin, an associate professor of marketing at the University of Illinois at Chicago who has studied kids and materialism for two decades, says parents who give children everything they ask for or pay them cash for A’s in school may unintentionally be setting them up to feel like they never have enough, or that money defines their value as people. Little actions can send a big message. Example: The professor and her husband make it a point not to upgrade their cellphones every time a new model comes out to show their two teenagers that you can be happy without the latest, most expensive gear.

“By focusing on what you have, the abundance becomes so clear, you’re not yearning toward what you don’t have,’’ says Chaplin, who is moving to Northwestern University in June.

Modeling responsible financial behavior is crucial. You can lecture all you want about the dangers of spending money you don’t have and then undercut your message when the kids see you paying a high interest rate on a credit card balance you ran up buying something you didn’t need. “Are they going to listen to what you’re saying or take a cue from your actions?’’ Ziv asks.

You can also demonstrate the importance of sharing your good fortune through family participation in charitable giving and volunteer work. Having grown up relying on hand-me-downs from strangers, Chaplin now volunteers every summer with her children and students at a charity that collects and sorts goods for families in need. “When you donate, you need to be thoughtful,” she says.

The Best Ways for Couples to Manage Finances

Money can be one of the most contentious aspects of a relationship or marriage. One in five couples identifies money as their greatest relationship challenge, according to a 2021 Fidelity Investments survey of individuals ages 25 years and older in a married or long-term committed relationship.

Sometimes the challenge is about who spends too much or who doesn’t save enough. But perhaps the most difficult issue is more basic than that. It’s about how to combine finances, if at all. Is it better to keep everything separate? And if you do join forces, who keeps track of the spending and saving, and how do you do it?

Of course, there is no single right or wrong way for couples to divvy up their finances and financial duties. How tasks and decision-making are split can depend on a partner’s existing financial know-how, interest or willingness. Some people want a 50/50 split of duties; some defer all tasks to one partner. Others, meanwhile, have each partner focus on their individual strengths: One person may be a good at the nitty-gritty of budgets and bills while the other is a big-picture thinker when it comes to money.

We wanted to know the different approaches that couples and partners take. To that end, we asked three groups of people to tell us what they do in their own relationships: professional advisers, academics who study financial behavior, and Wall Street Journal readers. Here are some of their responses.

There’s my money, and there’s your money

Unlike many working professionals, when we got married, my husband and I decided not to combine our finances. Although there is some empirical research showing that people who combine their bank accounts feel a greater sense of “financial togetherness,” which can in turn promote relationship satisfaction, we prefer the feeling of personal control that comes with maintaining separate bank accounts.

We use an expense tracker to equally split bills and daily expenses. When it comes to personal items—like new clothes or videogames—we purchase those from our independent accounts. This means we don’t have to ask our partner for permission to make the occasional luxury or experiential purchase. Importantly, this approach to keeping our bank accounts separate doesn’t mean we don’t talk about financial decisions. When it comes to both major decisions like investing and minor decisions like making purchases for our home or buying a toy for our pet, we make these decisions together. Our general rule is that if the other person is going to split the expense, we ask for their input before making the purchase. Our daily purchase discussions about needs and wants for our family allow us to experience financial togetherness, despite having separate bank accounts.  

Ashley Whillans, assistant professor at Harvard Business School

Three different buckets

In our family, it’s all about setting up a “divide and conquer” strategy while maintaining our unique financial independence. We combine our income and it essentially hits three buckets monthly—after we’ve saved 20% off the top. Bucket No. 1 (a joint checking account) is used to pay monthly bills. That gets 70% of the income. Bucket No. 2, which gets 5%, is a savings account for my spouse for buying gifts, entertainment or personal items. Bucket No. 3, which also gets 5%, is a savings account that allows me to do the same. Giving each partner a safe financial space—where they can have some money to do what they want when they want without having to ask—is a really important step to a healthy marriage when it comes to money.

My spouse is the chief financial officer and manages paying the monthly bills. She’s also in charge of making vendor changes when she feels it’s appropriate. My role is the chief investment officer, and I’m responsible for picking our investments, managing our real estate and allocating our 401(k)s. We act as a joint team when it comes to making financial decisions regarding our children—whether it’s allowances, mobile phones or the credit cards they use.

We act as co-CEOs when it comes to mapping out financial family goals and objectives. Each year, we assess our one-year goals in terms of savings, net worth or possible purchases. We review our long-term financial plan to make sure we are on track for goals such as college education and retirement. Having an open and transparent relationship with our money has allowed us to minimize arguments and discrepancies and focus on maximizing our mutual financial goals.

Ted Jenkin, co-CEO and founder of oXYGen Financial in Savannah, Ga.

It’s all in the prenup

My husband and I have a prenuptial agreement and we are both responsible for our own debts. Because we live in my husband’s condo, he pays the mortgage. I pay the association fee and buy the groceries. I am also responsible for my own car payment and car insurance. I collect rent from my former home. We both had assets when we got married, and he does have children from a prior marriage, so this arrangement seems very sensible for us. We both have separate bank accounts and credit cards. In addition, we have separate retirement accounts—both personal and from our employers.

When we purchase a house together (currently under construction), we should maintain our current arrangement, minus the mortgage; we’ll just divide the mortgage payment in proportion to our salaries. If we eventually sell the house, we will split the proceeds depending on how much we’ve invested in it individually. 

WSJ reader Jessica Moran, Fullerton, Calif.

A monthly financial meeting

My husband and I have been together for over 10 years and combined our finances after we married in 2015. One tradition we introduced when we started living together was to have a conversation about our finances the first day of each month when we develop a spending plan that we create on a shared Google spreadsheet.

In the spreadsheet, each row represents a smaller category of purchases like groceries, entertainment, and clothing that we earmark a certain amount of money toward for the month. We then log any purchases we make on the spreadsheet, and typically don’t discuss these purchases unless they are unexpected and large (like a dental bill). During our monthly financial meeting, we assess how we did with our spending and adjust for the month going forward. We added two new categories to our plan this year: a personal spending account for me and one for him. These accounts allow us a bit of privacy if we make a purchase we don’t necessarily want to share. (This was introduced after our tracking system ruined the surprise of gifts we gave each other over the holiday.)

Tracking all our purchases was painful when we first introduced it, because it focused us on the pain of parting from money. But it quickly became a source of strength, because it has encouraged us to have more regular check-ins with each other about the lives we want and how we can use our money to get us there.

—‚ÄčGrant E. Donnelly, an assistant professor of marketing and logisticsat Ohio State University’s Fisher College of Business

Joint accounts (except for retirement)

I am the appointed CFO in my household. I remember when I approached my wife and kindly suggested that we hire a financial planner to take a fresh look at our own financial planning. She replied, “Isn’t this what you do?”

We handle both of our incomes in a joint checking account from where expenses are paid. From this checking account, we have monthly electronic transfers going out to an online bank joint savings account for short-term goals. Other transfers go out to brokerage accounts for longer-term goals. We each have our own retirement plans that I manage.<