Jan 262012
 

Financial education. Woohoo! Our kids get so excited to talk about finance the tops pop off their little heads and dollar signs come swirling out.

Ok, realistically. They like talking about money when it’s accompanied by the phrase, “This is what I’m going to buy you.” At that point their pupils do actually deform into little dollar sign shapes. It does not happen very often.

Greed is a good motivator. It makes them stand up and pay attention. Although I think it’s going to take several repetitions of the financial responsibility speech to make them really understand what’s involved. Money, even though they’ve gotten their excited little fingers into the piggy bank, is still something of an abstract concept. The last step they really need to understand is how you get it. Because right now Mom and Dad are the money tree.

So we made the decision and said they can have an allowance IF they follow certain guidelines:

  1. Money will not shower on them like manna from heaven. I made an allowance log for each of them to track the money coming in and going out. Friday is allowance day. If they want it, they have to bring me the log so we can track it together. As of today they’re about two months behind.
  2. The allowance is split into three categories. Money to save. Money to give to charity. And money to spend. Embezzlement from charity or savings will be punished to the fullest extent of the law. We haven’t explored the idea of an audit – yet.
  3. They have to listen to my lectures on how money works. You do a job, you get paid, you spend the money on food, the house, and clothes. If there’s anything left over you can choose what to do with it. We encourage first savings, planning a certain amount to give to charity, and finally spending a little something on yourself.

Turns out they’re pretty good savers. Although our daughter is a bit worrying because one of her favorite activities is flipping through catalogs. When we get home from school we have to fight her for the mail. She’s also a big fan of window shopping and sparkly jewelry. We think she gets it from her grandmother. These things sometimes skip a generation.

Our son, with his hoarding tendencies, is much more the natural saver. Although when he decides to spend it’s on interesting things. A ukulele, a telegraph key, a vintage typewriter, a spool of copper wire. There’s something going on inside his head. We’re just not sure what.

In addition to the allowance they have a job. They take out the garbage for our retired neighbor and she pays them way too much. It works out pretty well for everyone because the neighbor gets regular visits from us and gets help with the garbage. We feel like the kids are getting some sense of responsibility and how the whole job/money thing works, and the kids get paid way too much.

Perhaps getting paid too much will teach them not to undervalue their work and maybe those little dollar signs floating out of their heads will buy us a retirement house on Hawaii.

 Posted by on January 26, 2012

  2 Responses to “The Allowance”

  1. After reading we isuittnted allowances for our 7-year old ($1/week) and 5-year old ($.25/week). It’s been about one year since doing and we’ll probably make an adjustment soon but haven’t decided how much.The allowance is not based on chores (they have to do those regardless) but we will pay for extra chores.We do not require savings or charity because enforced savings or charity is not teaching the correct principle of either. However our 5% interest per month (~70% annualized) helps solve the issue of savings as they quickly see how getting their money to work for them is exciting. We do weekly allowances (Monday when FHE is) and the first Monday of a new month we count up what’s in the jar and compute interest (helps teach math and basic counting).They can pretty much spend it on whatever as long as it doesn’t break family rules so no TV in their room for us.

    • If you don’t require your children to save or think about charity how do you teach them about it? Paying interest is a good idea but I hope that’s tied to a message that putting money into savings is what’s making the interest possible. And where is the interest coming from? Do you talk about how a bank uses your money and pays interest as a kind of fee for using your money? It’s very important to include these conversations along with the activity of giving allowance.

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