Have you ever been in the check-out line at the grocery store and your kid is begging you to buy a chocolate bar they have on display? Your kid may be well-behaved but the temptation is sometimes too much for them, there is so much stuff at the check-out line! “Can I have it mom? Please, pretty please, please”. Sometimes it’s exhausting! Maybe it’s time to consider giving them an allowance?
In our case, we strongly believed giving our children an allowance would be a great tool to teach them how to manage their money early on. We felt it would be better to leave them the decision on how they wanted to spend their money instead of us having to decide.
If you are considering giving your kid(s) and allowance, here are a few questions you should ask yourself:
How much should you give them?
How much you give them will vary depending on what you expect your children to be able to pay for with their allowance. Whatever you decide, you have to give them enough so they can actually work with it. It may vary by age or it may not.
When our kids were younger, we expected them to pay for their own treats (check-out line type) and small toys or gadgets. They could have easily bought themselves a chocolate bar or two each week or could save for a few weeks or months to buy something bigger, it was entirely up to them. Whenever they were trying to save for something bigger, we would guide them along the way, making sure they didn’t spend a little fortune on some really crappy toy, but at the end of the day it was their decision to make. And they did learn from their mistakes!
Should they earn their allowance?
Before we started giving our kids an allowance, we researched this a little and found out that not everybody agreed on whether they should work for their allowance or not. Some experts said you should others said you shouldn’t, we sort of agreed with both arguments so we split their allowance in two.
We did want our kids to learn the value of getting paid for work done so half of the allowance was tied to specific weekly chores they had to do (age specific). It was up to them to decide whether they wanted to earn that extra money. Here are some of the chores they had to do:
- Take out the garbage bin to the street
- Bag the leaves
- Vacuum one floor
- Clean the dog poop
- Mow the lawn…
For the other half of their allowance, all they had to do was participate in our family life and perform small tasks such as:
- Set the table
- Clear the table
- Help with dishes
- Empty the dishwasher
- Feed the dog…
We never categorized these tasks as chores because we felt it was just part of being a family. We would let them get away with the off day once in a while (they are still kids after all) but only as an exception.
The only rule that applied to both type of allowance; they had to “be good”, not temper tantrum or bad behavior. We didn’t want to reward poor attitude because in real life you never are.
We tried the reward board, charts and the chores list but we usually got really busy and tried to remember who did what and when so it never worked for us. But we did have some pretty nice charts for a while. By having just a few main chores to keep track of, it was easy to manage.
How often should you pay?
Whatever you decide, stay consistent. You want your kids to plan and they can’t if you are not paying them on a consistent basis. I know we weren’t always on time but we tried our best. Sometimes we just forgot. I found paying the allowance weekly was too much for us to remember so we moved it to bi-weekly to coincide with our pay-day. It made it much easier to remember. Your kids will remind you as they get older but they may not when they are younger. At first we used cash but moved to bi-weekly transfer as they got older.
What should they pay for?
Decide what your kids will pay for with their allowance and stick to it. If you don’t, they won’t learn anything from it.
For example, when my kids were younger, they had to pay for their own treats and toys. As they got older, they had to pay for their entertainment and some clothing.
Sometimes you may be in a mood where you just want to pay for something you are not expected to. I wouldn’t recommend doing it when they are small as it may just confuse them. As they get older, make sure they know it is an exception and you are just being nice. They will appreciate it even more.
When to stop?
Let them know when their allowance will stop. When you stop the allowance, you also need to let them know what expenses you will keep paying for and what you expect them to pay for.
You may choose to stop their allowance when they are old enough to get a job or when they reach a certain age. We expected our kids to have a small job by the time they were 16 so the allowance stopped shortly after their 16th birthday. My baby turned 16 this past May!:)
What to do when they get a job?
You need to help them figure out how to manage their paycheck. Encourage them to set up automatic transfer to their savings account.
Whenever they plan to buy a big-ticket item, remind them how many hours they need to work to pay for it.
One of my daughters had been bugging me about buying a car. Apparently all the other parents are much better parents because they all buy their kids a car! Since I wasn’t going to buy one, I did a spreadsheet for her. I estimated how much a used car would cost, maintenance, insurance for a young driver and gas. Then I calculated the equivalent in hours of work . My spreadsheet showed she would need to work an extra 8 hours per week, just for the car. I also added her tuition at the bottom of the spreadsheet. Just so she could see how many hours she already HAD to work. The car topic hasn’t come up for a while now! Sounds like our bus system is not that bad after all.
What else can you do?
Lead by example.
No matter what you are trying to teach your kids, nothing will stick if you don’t practice what you preach. Show your children good spending and saving habits. Don’t teach them to save if you can’t manage your own money.
Talk to them about what you do to manage your money
Talk to them about your purchasing process. What you do before you make your purchase; price comparison, saving for big-ticket items so you don’t incur interest charges on your card, making a list and sticking to it, cost of impulse buying, why you buy certain item at specific times. Whatever money decision you make, talk to them about your overall process so they get a better understanding on what to do.
Help them understand the difference between needs and wants. They should always spend money on the things they need first. This is money management 101, it will help them make the right money decisions. Right now, both my daughters have to pay for their tuition. I got lucky in a way as they both decided to stay in town and the cost of University in Canada is nothing like in the US. They have to pay for their tuition before anything else and so far they are doing great.
Let them know how much things cost. This will help them figure out what they can buy with their money and how much they will need later. You can easily do it while grocery shopping, looking at flyers, before you make a big purchase.
Talk to them about your various investments and explain your thought process for some of your decisions.
At my house, dinner time is the best time for discussions so this is when I usually talk about money. Sometimes it’s about the mortgage on my rentals, sometimes about dividends or whatever other money matter I think is appropriate (some days I just don’t talk!). I always keep it short otherwise I just “lose” them.
The purpose of giving children an allowance is to teach them the value of money, become financially responsible and be more independent. If you are just giving them an allowance and still paying for everything then there is not value is doing it at all.
Be consistent with all your kids. Sometimes we forget what we did for the first one so write it down. My oldest one always tells me how she didn’t get what my youngest one gets. WRONG! and I know because I wrote it down!
My only regret is not making them put a small percentage aside for charities. It is something you may want to consider if you start to give your kids an allowance. It doesn’t have to be much but I think it is important. At the end of the year, they could buy a toy with their charity savings and bring it to a child in need. We have always participated in various charitable programs but always with our money. Even if we did do it as a family, it wasn’t as effective because it wasn’t their money.
The decision whether to give your kids an allowance should be based on your own values, what you think is best for them and your personal situation. Whatever works for someone else may not work for you.
How about you, are your kids getting an allowance? How do you make it work?