The 2020 school year marked an important time for our 8-year old. Not only was he excited to finally go back to school in person, but he started getting a regular allowance. He earns his weekly allowance by completing a chore chart, homework, and being responsible for his possessions.
Determining a family allowance Strategy is an exercise in trial and error. Not all strategies will work for all kids. After having three boys, I can say that no kid is truly the same. The goal of an allowance isn’t to simply giving equal pay for equal work, but rather to create teachable moments. By providing a weekly allowance, we are consistently reinforcing positive money messaging with our kids.
Common Allowance Mistakes
With the implementation of any financial practice, it is common to make some mistakes in the beginning. We made some simple mistakes in giving our kid an allowance that can easily be avoided.
Starting Too Young
We first tried giving him an allowance around 5-years old, this proved to be nothing more than, “here you go, put it in your piggy bank.” That is fine in that you are getting them started saving money at such an early age, but we realized that there was little room for understanding. He simply wasn’t old enough to benefit from what we were trying to do.
Not Being Consistent
Consistency is key. The constant reinforcement of ideas is essential to building lifelong habits. As a parent, it is easy to start a practice of positive lifestyle change, but not stick with it. Doing this could begin to create a negative relationship with money and at a minimum, won’t accomplish the goal you set out to achieve. Creating positive, teachable moments around money.
Holding High Expectations
Kayla and I are both guilty of setting a high bar for our children. The result, we have respectful, enjoyable kids that are really great to be around. Sometimes, these high expectations are completely unwarranted. Like expecting them to care about money as we do. As a parent, it is easy to build up expectations and have them crushed when your kid shrugs their shoulders and goes back to playing Minecraft. Money has a different meaning to kids as it does adults and we can actually learn a lot from their attitude towards it.
Giving Too Much or Too Little
I recently read an article that claimed the average allowance in America is $30 per week but didn’t delineate between age groups. $30 a week may be right for a teenager, but not an 8-year old. We had to realize that it isn’t about the amount of the money, but rather the regular practice and teachable moments. If you give too little, they won’t build up enough to go to the store and buy something they want as well as build up enough to give frequently.
Creating a Transactional Relationship
When money is given for chores, it is easy to get yourself into a pickle as a parent. We don’t want chores to be done simply in the pursuit of money, but rather because we are thankful for what we have and we want to live in a clean environment. If chores are tied directly to money, then what if your kid decides they don’t want money?
We want our kids to know that chores a condition of the household. They are going to do them either way, but we are providing them an allowance because they are working hard, being responsible, and deserve to learn how money works.
How Much Allowance is Enough?
Determining the proper amount of cash allowance your kid gets per week is doesn’t have to be overthought. We have found that it is about the frequent practice of earning the allowance, receiving the allowance, and learning how to allocate the allowance that is the most meaningful.
Our 8-year old received $8 per week. This gives him enough cash to spend on things that he wants frequently. If he has to save for 6-months just to buy a video game, he is not getting the frequent practice of going to the store and exchanging his earned income for something he wants. We feel this is an essential part of the practice of understanding how money works. It also gives him enough to start to save for the future as well as for giving.
Spend Some, Save Some, Give Some
Of the $8 he earns each week, he has to save $3 give $1, and that leaves him $4 to spend. In a month’s time, he will have $16 to spend, $9 of savings, and $4 of giving. Each week the allowance is given, we sit down with him and clearly explain these different categories and why we are teaching him to do it this way.
He has three different containers for each of these categories. The spending container is a physical wallet that he can put his cash in. This acts as a temporary savings vehicle until he decides there is something worth spending on. This is different than the savings container as I will describe below. The savings container is a piggy bank and the giving container is a jar for no reason other than we didn’t have two piggy banks.
Learning to Spend
Spending is the fun part. Humans love to spend money and often spend more than they earn. We want to program it into our kids that this is not a healthy lifestyle practice. For the same reason, we try to feed them a healthy diet, teach them to brush their teeth, and make them play outside we want them to have a good understanding of how healthy people handle their money.
Learning to Save
Saving is a critical part of a healthy personal finance lifestyle. Our kids are not yet intelligent enough to understand investing (neither are most adults), but our 8-year old can understand saving. He currently saves his money in a piggy bank because we want him to be able to see the savings grow in real-time. Seeing a bundle of cash is more impactful than seeing a number in a bank account.
We teach him that saving isn’t intended for a future toy or car or even college, but rather it is saving for a time of need and for a future investment opportunity. While he may not fully understand that statement today, it is fine. He knows he is amassing money today for something better in the future.
Learning to Give
Giving is a critical part of the equation. It is money that he has earned, but that he will be asked to give away to someone in need. Learning to be ok with giving is a practice that I have struggled with myself. I have always felt that if I can get my household to a place of financial freedom, then I will have so much more to give than if I give a little today. The reality is, we will never be in a place where I feel comfortable giving my hard earning money away. Learning to give when you have a little is crucial in avoiding that negative thought process.
Earning the Allowance
We don’t ask a lot of our kids, but they do have some small tasks to be responsible for. Our young boys simply need to pick up their things when we ask them to without throwing a fit. Asking much more of a 2-year old and a 4-year old is asking to be let down. They also don’t earn an allowance yet.
Our 8-year old has a chore chart with a few select chores. The goal isn’t to eat up an hour’s worth of his day, make him feel like a maid, or do things we are unwilling to do ourselves. It is simply to start a practice of taking responsibility for the things we have and the ability to earn an allowance. We have 3 boys, 2 cats a beagle, and a 3,400 sq foot home. For the sake of our sanity, we need to teach our kids to clean up after themselves and participate in the household chores.
Each day, he has these chores to complete:
Clean his room and make his bed
Clean his bathroom (toothpaste in the sink, flushed toilet, and pick up clothes)
Pick up dog poop
On the weekends he also has to:
Vacuum the upstairs
Put his laundry in the laundry room
His weekday chores can be completed in 10-minutes or less if he gets after it. Rather than letting his bedroom, bathroom, and the dog poop pile up all week, he is learning that daily upkeep is much easier. We keep a chore chart on the fridge where he can check the box when he completes each task and we can follow up to make sure he did a good job.
Losing an Allowance
We have found the allowance to be an effective tool for learning to be responsible for your possessions. Our oldest has gone through some phases that we didn’t expect. One example was the cutting of the power cord that goes to his alarm clock. When asked, his response was, “to see what would happen.”
These actions are frustrating as it costs us money to replace things that he has to have. We began to take money out of his spending allowance to pay for the damages he caused with the explanation as to why it was happening and what it means for his ability to buy toys. The money taken is nowhere near the value of the item that was mistreated, but again, it is about the practice, not the value. Kids do not perceive the value of money as an adult. $100,000 is no different than $10,000 do a young person.
We are looking to tie the result of his actions to the reduced ability to buy things that he wants. For example, “because you broke your alarm clock, I am taking $5 from your wallet and that is $5 that you cannot go to the store and buy Pokemon cards with.” We aren’t looking for immediate repentance, tears, or anything other than the consistent reinforcement.
Deciding to give kids an allowance can be so much more than simply giving them money or making them do chores. There are many life lessons to be learned in being grateful for the things we have, understanding what it takes to earn the money to buy those things and that we all have responsibilities to each other to carry our own weight.
We love our kids deeply and that is why we have rules that they must follow and why we are teaching them personal finance at a young age. They are much smarter than we give them credit for and by teaching them young, we are able to increase the chances that they will grow into adults who understand how to properly handle money.
There is no one-sized solution when it comes to teaching your children money lessons. Kids respond differently to different practices and it is up to us as parents to align the lessons we want to teach with the way that our children want to learn.