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Sometimes what I’m blogging about lines up perfectly with what’s happening in my life, and this week is one of those weeks. With three kids at 1, 3 and 6, the topic of allowances for kids was bound to come up eventually!
You’d think that as a personal finance blogger, I’d be right on top of rationing money out to my kids and teaching them everything I know about using it wisely, but it just hasn’t really come up yet. Don’t get me wrong, we’ve had some money talks with our eldest, but she hasn’t yet had money coming in regularly for her to manage.
She has had a few visits from the tooth fairy (who she now knows to be Mom thanks to a little know-it-all at preschool haha), but we’ve just now started talking about giving her an allowance, and teaching her how to have a healthy relationship with money.
It’s a tough subject. I don’t want to give my kids too much money and turn them into spoiled brats, but I don’t want to give them too little and have them think I’m a tight-fisted Scrooge McDad.
Why Give Your Child Allowance?
I’ve actually struggled a bit with this. I think the reason that we haven’t started until now is that I don’t feel right giving our children money in exchange for existing. Shouldn’t they have to earn it like adults do?
On the other hand, our kids are getting really good at helping out around the house. They keep their rooms clean (sometimes), they load the dishwasher, help wash the cars and clean up as required. They actually do quite a lot around the house, and I think it’s reasonable that they get a share of the income.
That said, I don’t want our allowance system for our kids to be completely task-based. It makes sense to me that the money we give to our children should be based on household cooperation and respect.
Different Ways Of Approaching Allowances For Kids
I’ve been looking into different ways to approach allowances for kids, and there are some different systems out there. I’ve listed a few below, but I’m sure there are many others.
In a fixed allowance setup, your children get money every week. There’s no expectation that comes along with it. Every week when the parent’s money comes in, the children get a share. The positive here is that your kids will have some money to manage no matter what.
In a task-based system, your kids earn allowance as a reward for doing chores or demonstrating good behavior. Though I like the idea, I’m concerned that if we gave our children allowance based on task-completion they might grow up thinking that money should always be tied to task-completion.
Obviously, that’s not really how the world works. I have a job and I’m paid for it, but there are many other ‘chores’ that I do in a day and am not compensated for.
This is what we’ve done up until now. When we have some extra money, we give it to our daughter. There’s no structure and it doesn’t set much in terms of expectations. It puts some money in the piggy-bank but doesn’t teach her that money comes with responsibilities.
How We’ve Decided To Deal With Allowance
After reading some other articles on child allowance, we’ve decided to give our two oldest kids a dollar-per-week for each year of age. This means that for our six year old will receive 6 dollars per week, and our three year old will receive three dollars per week.
I think we’ll stick to giving our one year old Arrowroots for now.
We’re going to teach them put their money into three jars – saving, giving and spending. I’m hoping that this will help them to learn that when money comes in, it needs to be thought through and allocated, rather than just spent.
It’s important to us that our children learn that money comes with responsibilities. That said, I will require some level of household cooperation and helping out with chores in order for them to maintain, rather than ‘earn’ their allowance.
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Preparing Our Kids For The Future
There are a lot of things I didn’t know when I was a teenager, or a 20-year-old for that matter. Fresh out of high-school, I had no idea how compound interest could work against me. I also didn’t know it could work for me, or how to balance a checkbook for that matter.
The reality is, the younger you are, the more your investing dollars are worth in the long run, so I want to give my kids a better start than I had. My hope is that by helping them develop good financial habits as children, that those habits will carry through into adulthood and propel them to financial success.
I want to give my kids the best chance at success in life that I possibly can, and all that’s going to cost us at the moment is $10/week. That’s a pretty good deal in my opinion.
Question for you:
How have you taught your kids about money?