For the last year or so, I have been toying with the concept of allowance and how it will work in our household. As Big M’s fifth birthday approaches, I feel she’s ready to start learning about money. Of course, I am not one to implement something blindly; I painstakingly research all the pros and cons of every possible approach. Based on my findings, I make my decision. Seemingly, there is much debate around the topic of allowance. Here’s what I discovered.
It seems the biggest debate when it comes to allowance is most certainly regarding whether or not it should be tied to household chores. Suze Orman, well-known American financial advisor, advises never simply giving a child money. Money needs to be tied to an age-appropriate task in order to teach the lesson that money is earned (Orman). Many, including myself, disagree with her. Though I certainly want my children to learn that money is earned (I’ll talk about this later), the more important lesson for me regarding allowance is teaching my child to be financially responsible (Borba). If my child never has any money to “play around” with, how will she learn to manage her money properly? Of course, this approach doesn’t mean I will hand my child money whenever she asks for it. I will undoubtedly teach her about needs and wants, and she will learn quickly that she will be required to purchase her wants (Erickson).
Going back to the whole chore thing, it is most advisable to teach our kids that “there are certain things you do around the house just because you’re a member of the household” (“Should I Give My Child an Allowance?”). I will use chores to teach about chores and money to teach about money. I would never want my child(ren) to go to someone else’s house for a stay and not recognize the household “chores” that need to be accomplished (clearing the table, washing the dishes, picking up after oneself). I NEVER want my children to learn that we ONLY do these things because we are paid to do them. As an adult, “[I] do not get an allowance for what [I] do at home, so a child should not expect to get paid for doing chores, either” (“Should I Give My Child an Allowance?”). Jamie Erickson, on her blog theunlikelyhomeschool.com, says that “doing work with little to no reward is a part of life. If I ONLY made a meal when I was rewarded for doing so, my entire household would starve.” Though this method of earning money may appear to work at first, I’m convinced that over time, my children will “opt out” of doing chores because they really don’t need the money or they can earn more money elsewhere (particularly as they get into their teenage years) (Erickson). This is an obvious concern.
My only exception to this rule of no money for chores would be “extra chores” that go beyond every day chores and every weekend chores. These “extra chores” will be for money, as recommended on thechicsite.com (“Work for Hire Chores”). Here, is where my children will learn that money is earned (like Orman suggests), as they voraciously save up for a new doll or a new outfit and realize that their regular allowance just isn’t cutting it. These “extra”, work-for-hire chores may only be done AFTER everyday chores are accomplished (“Work for Hire Chores”).
So how exactly will I let my child “play around” with (and therefore, learn about) money? When Big M turns five, she will begin receiving $5 per week as her allowance (following the advice of $1.00 per year of age per week that many advise) (Lewis & Eneriz). What will she be allowed to do with her $5? Many advocate a three-way split: save, spend, and donate (Zina). One source even advocated a four-way split: family tax, save, spend, and donate. The family tax was implemented to educate children about the notion of income tax … all money you earn is taxed. The family tax money in this case is put towards a fun family activity. The advice regarding the amount to put in each jar varies. Erickson recommends 10% to the Lord, 40% for savings, and 50% for spending. On one site I visited, the author recommended putting two quarters in save, the next quarter in give, and the rest of the $3.50 for the week could be divvied up however the child chose. The interesting part about this setup was that the parent matched whatever the child put in the save jar (“Keeping a Ledger: Accounting for Kids”). I like the idea of rewarding your child for saving money, but doubling their input is not the answer as it does not represent the reality of saving money. It would be advisable to reflect interest rates in the real world more accurately … maybe requiring the child to keep their money in their save jar for a period of time before granting them “interest” on their savings. OR we could actually put their money in a savings account at a bank (Lewis), and then we as parents would not be required to provide interest on their savings.
Parents will have to determine their comfort level regarding how “spend” money can be spent. Zina. on her blog Let’s Lasso the Moon, advocates letting children spend their money on almost anything they wish, no matter how foolish. Many lessons are learned via money mistakes. Thankfully, when the money amounts are small and the children are small, the mistakes are small.
The most significant part of all this money stuff to me is educating my child on how to keep track of her money. After all, “it’s not what [we] do for [our] children, but what [we] teach them to do for themselves, that’s most important” (“2016 Project Organize Your ENTIRE Life Printables Now Available”). Big M (and later Little M) will have to keep an account ledger that tracks deposits, withdrawals, and balances (“2016 Project Organize Your ENTIRE Life Printables Now Available”). We will also have goal sheets identifying things they are saving for … a toy, a family trip, a new novel set, etc.
Many sites advocate setting up rituals around payment. Setting a specific date and time for payment is important (Orman); younger children especially need to paid weekly. Some people use “Money Mondays” for the alliteration effect. Mondays might be too hairy for us, especially if I want my girls to take the time to update their ledgers. One last debatable lesson I have to decide upon yet is whether or not I will require my girls to ask for their allowance or not. The lesson here is that in the real world people are required to invoice their clients or fill in a time card, essentially asking to be paid (Zina). I may implement something like this in the future, but not when they are five, which is when I intend to start this whole allowance thing.
Through my research, it became apparent that like any topic to do with raising children, there is much debate. Chores or no chores? How much money should I give? How often? Are there basic principles to follow? Etc. Though it is always wise (I think) to do our research and determine “best practice,” as mothers, we must mostly follow our guts. I’ve certainly revealed my intentions, but even the best of intentions can be completely derailed, and our best learning comes from the little people we are trying to teach. After all, too often “while we try to teach our children all about life, our children teach us what life is all about” (Schwindt). Let’s talk in six months, to see how the whole allowance thing is going …