Did you receive an allowance as a child? How to teach kids about the value of money is on my mind constantly. As I begin to think more about money in the context of raising my kids, I am formulating philosophies and plans of which I will share with you and hope that you find useful. My goal is to inspire you to think about a “money” topic, in this case the “allowance”. In light of everything that has happened over the last few years, one thing is for sure, we need not take the topic of financial responsibility lightly.
1. Make allowance part of a greater system – I was raised on an allowance. We scrubbed toilets, pulled weeds and mowed lawns (to name a few chores). My mother and somehow we kids knew that the money, although certainly a nice benefit, wasn’t the point. I believe the reason an allowance was so successful in our household was that it did not come alone; it was part of a greater system. We also had a paper route, worked seasonal jobs at the mall, established savings accounts, paid for entertainment, babysat, worked our tails off during the summers and when paying for education finally arrived – the loans, the grants, the actual quarterly payments – was 100% a team effort. All of that added up to an appreciation for money and financial responsibility.
2. Scale chores and $ earned – Assign $ amounts for level of difficulty of chore
3. Use Paypal or a check to facilitate the actual payment of work on a “payday” rather than simply handing your child cash. Less cash in hand, as we all know, the less likely your child will spend it right away. This approach might help kids get banking a bit more too. Paypal will go directly to a savings account as will a check.
4. Integrate charitable giving as part of the allowance and there are some amazing organizations that make charitable giving fun, especially for introducing your children the concept. Heifer.org is a great example.
5. Integrate “fees” for not doing chores that are expected – what a real life concept, huh?
6. Integrate a bonus system. If your child goes above and beyond the “job description”, reward him or her
7. Consider The Saavy Piggy Bank or some version of it. Introduces the concept of “net pay” versus “gross pay”
8. At an earlier age before establishing an account at a “real” bank, create your own Family Bank. You can go to extremes teaching kids about debt and earning interest. For example, you could have interest compound daily at 10%, or focus more on long term savings.
9. Introduce the concept of a budget: A budget worksheet divided by “fun”, “gifts”, “charity”, “savings”, etc goes a long way as a tool to teach children about financial responsibility and trade-offs in real life money choices
10. Establish from the start a “stop date” for paying an allowance. At what point should your child consider a part time job? Alternatively think about the appropriate “start date” to introduce the concept of “money” via an allowance