So I’ve always thought about writing this post and then assumed I wasn’t any sort of expert, financial or otherwise, so who wants to hear from me? But in the last month I have seen no less than SIX posts on Facebook from moms asking what others do about an allowance and I thought, “What the heck? I have thoughts on this. My husband is an account. I am a researcher. I nannied and saw it done different ways. We discussed and read things and came up with a solution we think is pretty great. Maybe someone else wants to hear about it.” So here you go, how we do an allowance in our home…if you don’t like it, go visit pinterest for approximately 3,758,964 other ideas about it…
Official Google Definition
So we started when our oldest turned five. He’s six now, so we’ve been at this a year. His sister will be five shortly. Nope, we are not long-term experts here. Our system might change. But this part I think is crucial – ask yourself WHY you are doing this. Do you want to teach them about financial responsibility? Do you want them to do more chores around the house and this to be their motivator? Do you feel like you need to because all of your kid’s friends get an allowance? I think there are probably about as many reasons as their are families and that is fine! But figure out why your family is going to start this allowance thing and then let that guide the how. For example, if your main motivator is that “everyone else is doing it” then by all means, ask your friends what they are doing…in that case, consistency across families may be key! For us, it was very important that our children learn, from an early age, all about money – it’s value, how to handle it, how to save, and overall basic financial education and responsibility.
So, our reason being established, we wanted to figure out how best to teach that. Well, obviously, they need money to learn about it! “Doing” is always best, when possible. But they don’t need a lot of money to learn about it, nor do we want our kids to have a lot of money at this age! (Plus, we are going to have four here soon and we aren’t billionaires! haha!) So at the ripe old age of 5, you get $2 each week (also makes for easier math, we will get to that in a second). And every year, you get an additional dollar. (There is opportunity to “earn” more…we will get to that…)
We were also very sure that we did not want the allowance tied to a chore list…in our house, you help out, where needed, because you are a part of this family. We all pitch in. Furthermore, we do not charge you rent (you’re welcome) so helping with dishes or keeping your room clean is just expected. This is a quick summary of expected help from our kids…
So anyway, they get $2 basically for the sake of teaching/learning about money. And that’s exactly what we told them. An allowance is a teaching tool, it is a privilege and it can be taken away, do not ever “expect” it, always remind us politely and say thank you, do not argue about it, and be truthful about how it is divided and spent. We don’t ever use it as reward or punishment, we don’t call it “earned”, we simply call it a tool for learning about money. For us, we make our son divide his weekly allowance into two jars, a “SAVE FOR COLLEGE” jar and a “SPEND” jar. Obviously, its easy to divide two dollars between two jars, but we do switch it up – sometimes he gets two dollar bills, sometimes all quarters, and occasionally I only have a $5 and make him figure out change! (love that it helps with math!)
The “SAVE FOR COLLEGE” jar is just that – money for college. The only time money comes out of there is to take it, with a parent, to the bank for deposit into his 529 college savings plan. That’s it. But the process is a learning experience as well. Not only can he count what is in the jar, but when it’s full, he learns all about the banking experience and even investing (try answering those questions from an inquisitive kindergartener!). We also feel that higher education is important, so we want him to get that message early on…saving for that is a sacrifice, but worth it! And, frankly, it’s a sacrifice you don’t get a choice about at this age! haha!
The “SPEND” jar is entirely up to him (I guess within reason, he can’t buy anything illegal or dangerous!) and he can chose to spend immediately or to hold onto it for bigger items. We provide our kids things they “need” (food, clothing, books, some toys, etc) so these are extras. It is curious, at my son’s school they can pay $1 on Fridays for free dress (they normally wear a uniform) and we have told him that since we bought the uniforms, he can wear that unless he wants to use his own dollar. He did that exactly one time and quickly realized that meant he would never save up for anything big and he has chosen to wear a uniform every Friday since! What a great lesson that he learned himself, I didn’t have to tell him! And besides that one single dollar, he has never spent any of his allowance! It’s so funny how kids’ personalities factor into this – I have seen kids (my nanny kids or friends kids) who run the gamut from never spending a dime to spending every cent immediately to everything in between! For my son, its totally his personality…he is saving for the supplies needed to build a “real robot” and he is a pretty determined little man.
Now many people ask about charitable donations or tithing. We are a giving family and donate both time and money to nonprofits, our local school, and causes that we champion. So of course we would like those lessons to be passed down to our children. And hopefully by seeing us do it and hearing us talk about it, they will learn! But I also had a very strong opinion about “forced” donations…mostly from what I’ve experienced as a nanny or as a teacher….what lesson would we be teaching our kid if he simply HAD to donate, dictated by us?! If he is forced to divide his allowance into three parts, never really seeing or counting that 1/3 (or ten percent or whatever), it is never really his anyway. Might help teach about taxes I suppose, but we were adamant that we wanted to teach about GIVING, which isn’t really giving if it’s spelled out as part of the terms of an allowance. So we’ve decided that if he so choses to donate, of course with our modeling or gentle suggestions, he can do so out of his SPEND jar. Again, that’s HIS money and he can spend it as he sees fit – we hope that he will chose to donate to those in need or a cause he feels called to, but we will never make him (because, again, that doesn’t seem like the right lesson). And lo-and-behold, we are doing something ok in this parenting journey because we were talking about his brother’s upcoming birthday and what charity we would support (check out my blog post on asking for donations to a charity instead of receiving birthday gifts) and he suggested that he could use some of his own money to buy the item(s) to donate. #proudmomma
Hmmmm, what else? Oh, another big one for me is that allowance and money never ever under any circumstances be tied to grades! UGH! I hate this! And I’ve seen the problems it can cause first hand…a first kid who always excelled in school, with very little effort, out “earning” a younger sibling who worked her butt off but struggled and never once got an A (but not from lack of trying). We think you should always try and we value education and hard work, but we also realize that a letter grade isn’t always the best representation of that hard work. And anyway, good grades (or at least good effort) is expected in this house, much like helping around the house – it’s just what our family does!
Now, if our entrepreneurial kids wants to earn more, there is certainly opportunity. No, I do not have one of those Pinterest-worthy chore boards with price tags or money clipped to a chore card. Why the heck am I going to do work in order to pay my kid?! And why do they get away with no using their brain?! Again, not exactly the lesson I am after. However, if my kids come up with something that they think I might want them to do or they see an opportunity around the house and they propose and negotiate payment, well then, THAT is a lesson I can get behind! This took a little explaining…and re-explaining…at first, my son just wanted to run around and pick up some of his brothers toys and ask for a dollar! (I let him do it, knowing full well what he thought was going to happen, and then when he asked for a dollar I promptly told him “no”). But he is starting to get the concept and has come up with some pretty great ideas. I love it because of what he is learning AND I usually get some extra chores taken off my plate! His younger sister has picked up on this quite quickly and even though she doesn’t get an allowance yet, she has come up with a few “extras” and earned some money!
I *think* that’s about it, although I’m sure I’m forgetting something! If you have questions, please ask below via comment! If you have feedback, again, comment. If you have thoughts, ideas, your allowance approach to share…yep, you guessed it…comment and let me know! 🙂 Thanks!