From time to time I get asked about if we give our kids allowance money, or how we go about it. To be honest, this is an area that I myself often wonder what the best approach is.
For starters, I do not think our kids should ever be given "free money" on a regular basis (i.e. outside a birthday gift or something similar).
But on the other hand, I also realize that kids' earning power and opportunities are limited to non-existent, while they need to learn how to handle money correctly from a young age. And it would get very tiresome to constantly have them asking me for stuff they want, because they have no money of their own to spend.
Some families have a system of paying children for each small task, chore, or job they do. For example, a child might earn a nickel or dime each time they make their bed, brush their teeth, feed the dog, unload the dishwasher, etc. I can see the benefit in this type of system, but there is a definite downside in my opinion: this would be really hard to keep track of day-in, day-out, especially if there are multiple children and busy days. I cannot even remember to jot down everything onto my grocery list as needs arise, so I am sure that having to record each small earning for each child would fail because of my being busy and preoccupied.
A variation of this would be that children do NOT earn anything for doing their normal, fair share of the daily household tasks, or for taking care of their own responsibilities like grooming and maintaining their room. These tasks are all considered their fair share of helping the family. They only earn money for doing extra chores, and going above and beyond their normal fair share. The problem for our family with this approach would be that we divide all the work between all the family members who are old enough to help, leaving very few extra chores that would provide an opportunity to earn extra money. Since my main goal in providing children with an income is to provide opportunities to teach about saving up, giving back to God, investing, price comparisons, needs vs. wants, etc. having only very limited funds would greatly limit learning opportunities.
Also, just because we all are a family, and as such should expect to all pitch in and share the burden, I do feel that should be rewarded with some financial freedoms. For example, while I do not earn any money, and "only" fulfill my daily obligations as a mother, I still want to have the freedom to pick up a book I see and like, or stop for a treat at a coffee shop, or otherwise splurge on a whim from time to time.
Which led to our family adopting what is probably the most common approach: a regular, weekly allowance, without keeping track of who did what, when, for how long or how often. We typically start around age 5 or 6, depending on the child's maturity. As for the amount, we pay half their age in dollars each week (i.e. Solomon $5, Isaac $4, etc.). To some, this amount is very large, while many books and other sources I have read suggest as much as twice that amount. I guess it really would depend on what children are expected to cover themselves with this money. Personally, I think it is plenty of money.
Our kids are supposed to use this money for all their "wants", as well as for gift-giving etc., while we will cover their "needs". So while I will pay for their food, I do not feel obligated to pay for any books, toys, treats, outings, etc. outside their birthdays or Christmas. If we go to the zoo and they want to ride an elephant, they can do so if they have the money to pay for it themselves. Our family currently only has a zoo membership, if the kids wish to go ice skating, or to a theme park, or another fun outing, they must pay for it themselves (the only exception to this is if we are on a family vacation). If they see a cool shirt at the store, but I have no intention of buying it because they have plenty and don't need another one, they can use their own money. Same is true with buying food for their pet hamster that they wanted to have, buying inner tubes for their bikes when they bust them every month by riding off-road, etc.
I will say that some weeks, especially in the beginning, there was a temptation not to pay allowance because maybe we didn't have cash on hand, or the week had passed so quickly and it seemed too soon to have to pay allowance again, etc. But I think for this system to work right, and for the kids to learn financial responsibility, they must be able to trust the fact that they will get paid reliably, even if it is just a small amount.
Some rules we have made are:
- Before spending any money, you must first set aside your tithe (10% giving at church).
- No advances, ever, for any reason: Debt is a curse, even when you are a child. Besides, spending your last cent is always a foolish decision, and feeling the disappointment of not being able to buy something because the money has been lightly spent on something lesser drives this point home. It is always good to save some money for an unforeseen need.
- You must have your wallet in hand in order to get paid: This is to teach the younger crowd that this is cash, and should not be carelessly lost. If you lose track of your wallet, you will not receive any more money until you can produce it again.
- We parents retain veto power: Just because you may have the money to buy a ginormous building set, does not mean we are willing to buy a bigger house just to accommodate it (and a million other toys). Just because you have the money to buy candy or other junk food, does not mean I will let you - after all, we are the ones having to pay dentist and doctor bills.
This system has worked well for us, because the kids understand that they are getting paid in exchange for helping with the daily chores and responsibilities. Each of them has a very specific list of duties they are to take care of each day, as well as help with the weekly cleaning. Some of the things the kids help with are: laundry (everything from sorting to putting away), emptying the dishwasher, sweeping floors, dressing and helping younger siblings, cleaning rooms as needs arise throughout the day, all animal duties (we have a hamster, dogs, and chickens), cleaning bathrooms, making beds for parents and youngest siblings, help with food prep and cooking, taking out trash and recyclables, cleaning the van, carrying in groceries and putting them away, holding/watching the baby, etc.
One other thing I have recently started doing to further drive home the point that allowance is not "free money", but rather a compensation for the daily chores, is to put the kids' weekly allowances in small jars on the kitchen counter with their names on them on Saturday afternoon, after paying out for the past week. During the week, if the kids are remiss on a chore, go off to play when given a job, "forget" to brush their teeth, take an hour to finish lunch while the other kids are on to their after-mealtime chores, etc. I take a quarter out of their allowance jar, meaning they will not get their full amount on the coming Saturday. Losing money for a few infractions has been a lot easier to keep track of than paying for every little thing done correctly. Having money taken away also seems to get the point across better (because it is so visual) than to start out with $0 and build up any amount.
So that's what we do. Not a perfect system for sure, but it has been working well for us for several years now. When we first started giving the kids an allowance, they were not nearly as responsible and wise with it as they are now, so it is definitely working. For example, the kids are always looking for things to buy inexpensively at the thrift store, such as a bike. They then clean it up, fix inner tubes if needed, and sell it on craigslist at a profit. Over time, they have learned which items are easy to turn around and sell at a profit. At their age, I spent all my weekly allowance on candy machines, so they are definitely light-years ahead of me (and yet, I grew up to be
a tightwad financially savvy).
What does your family do to teach your children financial responsibility? Please feel free to share your suggestions in the comments below.