When my daughter Hannah turned four years old I decided to start giving her an allowance. I started with $2.00 each week, thinking it would be enough that she could save up a little and buy something she liked, but not enough to flood my home with cheap plastic crap. In retrospect, I don’t know what I was thinking. She discovered the toy section at Value Village in pretty short order, with its multitude of cheap toys, and within a couple of months my home was quickly filling up with her purchases. And while she very quickly cottoned on to the fact that she could buy stuff, she was still far too young to really understood how money worked.
The allowance ended up going on hiatus for a couple of years. When Hannah was six years old or so, we started up again. I’m thinking I’ll start giving Jacob an allowance once he’s around six years old, as well. The second time around, I decided to go with a monthly allowance, mostly because it’s easier for me. I don’t have to come up with exact change every week, and I can pay her in paper money, which also happens to be a lot lighter. Right now, she gets $15 each month. Sometimes I think that may even be a little bit more than is necessary, but since it’s established at this point I can’t very well go back.
As a seven-year-old, Hannah is actually starting to understand how money works. She’s also getting pretty good at understanding how much money is worth. She can figure out how much she has, and whether or not that’s enough to pay for something she wants. When it isn’t, she will save up her allowance until she can afford to buy the object of her desire. For example, she recently saved up for three months in order to buy herself a bear at Build-a-Bear. It was her first, because that is something that I am not willing to buy.
One recommendation that a lot of financial experts make around allowances is to set up a system of saving and spending for kids. The “three piggy bank” approach is especially popular. The idea is that your kids allowance is divided into three categories, usually spending, saving and sharing. The “spending” money is theirs to do with as they wish. The “saving” category is to save up for something special. The “sharing” is for charitable giving. In the process, you’re trying to instill good financial habits and generosity in your kids.
Personally, I have rejected the three piggy bank approach. For one thing, it’s more work for me, because it would mean that I need to make sure that I give the money in the exact amount for dividing. But for another, I think that the lesson around spending and saving is automatically built into an allowance. If Hannah spends all her money, it’s gone and she can’t afford something really big. To get that Build-a-Bear she needed to plan ahead. I kind of like the idea of teaching my kids to be generous, but there are other ways to do that, such as modeling it for them, or volunteering together.
In October I’ve gotten serious about getting my kids involved in keeping our house clean. They don’t have assigned chores yet per se, but I think I am headed in that direction. For now, I give them jobs that vary with the situation and my mood. Getting my kids to help makes my life easier. It also helps to teach them responsibility, and teaches them how to do basic household tasks. The idea is that by the time they leave my house, they’ll already know how to use the washing machine, how to vacuum and how to cook, for example.
I don’t tie my kids’ allowance and chores together. There’s a debate on this, and I come down on the side of separating money from housework. I believe family chores are something that we all need to do, because we all live together as a family. I don’t get paid for housework, and I’m not paying my kids for it. Plus, it’s not optional. They can’t opt out of helping set the table and just take a cut in pay. Mostly, though, I don’t want to have to police how much work they’ve done, and haven’t done, and how much money they’re owed as a result.
It’s important to me that my children develop good financial habits, and a healthy work ethic. I’m doing my best to teach them. Truthfully, though, I don’t know how well it’s going. Maybe one day I’ll regret not setting up the three piggy banks, or not requiring them to work for their money. Maybe one day I’ll wish I had been more stringent with chores and set up a jobs chart when they were still toddlers. I don’t know. For now, I’m just doing what makes sense to me, and doesn’t make my life too hard, and hoping that my kids are learning something. Honestly, I think that’s all that we can really do as parents most of the time.
Do you give your kids an allowance? Do your kids have regular chores? And do you tie allowance to chores? I’d love to hear your thoughts!