Allowance. How much, for what, when? This topic regularly comes up with parents. There are a variety of approaches to allowances, and every family will have to decide what fits with their values, parenting style, and child’s (or children’s) personalities.
When our daughter was going into first grade, we gave this issue a lot of thought. I read a couple of articles and books, including the fantastic Kids, Money, & Values by Patricia Schiff Estess, which I recommend finding at your local library. Here is where my husband and I finally shook out:
- We decided that, in our household, an allowance
would be purely a money management training tool. It is not a carrot or a stick. We do not require that our child (currently
only our daughter gets an allowance, though our son’s time is coming, in about
a year) do household chores to earn her allowance. Nor do we withhold allowance as a
punishment. Why? Ultimately, our view is that no one pays us
to do the little chores that keep the house running. Cleaning up after yourself, gathering trash,
doing laundry, unloading and reloading the dishwasher, etc. – these are all
just the price of admission for living in our home. No one is going to get paid to do these
things. Not us. Not the kids.
And if we give ourselves permission to remove the allowance as
punishment then we’re depriving our child of the opportunity to do what we have
established as the primary purpose of giving her an allowance: learning to manage money. She can’t manage what she doesn’t have.
- That does not mean that the allowance does not
come with strings. Our daughter is now
expected to make the vast majority of her discretionary purchases. She knows that if we are on vacation and she
just has to have that adorable stuffed cat to add to her collection of a
million and one stuffed animals then her Daddy and I will ask, “Did you bring
your money?” We may buy her brother the
stuffed cat HE wants, but he’s still living on Mama & Daddy’s discretionary
dime. If our daughter wants something
non-necessary, she has to budget for it.
No money = no purchase. Why? We want her to distinguish between what she
needs and what she wants. Food, basic
clothing, shelter, basic school supplies – those are things we provide because
she needs them. The one-hundredth
stuffed cat? That’s something she wants.
- That also doesn’t mean that we would never pay
our kids to do chores. Why? Well, we pay someone to mow the lawn and wash
the car, for example. If one of our kids
shows an interest in something that we already pay another person to do – well,
we’d strongly consider just paying our child to do it. We didn’t have kids to gain free labor, so it
seems fair to pay them to do something we’d be paying someone else to do.
- Barring a truly exceptional circumstance, which has
occurred only once, we don’t advance allowance.
Why? There’s really no money
management goal behind this one. It’s
simply because we don’t want to have to remember from week to week that we’ve
already forked over the allowance she thinks is due.
- That said, we will occasionally loan money if
she hasn’t brought her purse. Why? Well, her Daddy and I have credit cards. We do this all the time. Understanding credit is part of managing
money. She pays us back as soon as we
walk into the house. No long-term memory
required. And we don’t change interest…
- We do have her allocate her money among three
permanent categories and one temporary category, but we do not dictate HOW she
allocates her money. Why? Again, this is a money management tool. We think the best way to learn is by trial
and error. She won’t learn if we don’t
give her some freedom to make mistakes with her allocations when it really
doesn’t matter (or to feel really good when she thinks things have worked out
perfectly). The three permanent
categories are spending, savings, and donation.
Typically, she puts her weekly allowance in a special jar, where she may
also stick any change she finds or any money she gets as a gift from a friend
or relative, then every few weeks she pulls out the money and divvies it up
among her wallet and a couple of specially labeled Mason jars. The temporary category was her idea: Christmas savings. Turns out the kid has a generous spirit and
LOVES buying her gifts to give family at Christmas. She’s pretty good at it, too.
- HOWEVER, remember the title of that book? We also want to impart some VALUES with our
money management training, so we match savings and donation but not
spending. Why? Matching indicates the relative importance we
put on saving for the future and supporting charitable causes. She decides how much to save (but boy does
she love to double it, and she is VERY proud of her bank balance) and how much
to donate as well as to which charity. We
make the match.
- Finally, we have no set schedule for increasing the allowance amount. Our daughter was going into first grade when we started this training experiment, and she is now going into fourth grade. She still gets $5 a week. She hasn’t asked for a raise, and, for the time being, the amount seems to meet her limited discretionary needs. If she asks for a raise and is willing to explain why she thinks she needs it or if her Daddy and I just decide independently that her circumstances warrant it absent a request from her, we’ll do an increase. (And I am expecting a request in a year, when her brother starts getting an allowance. Why? Because she’s older and will think she deserves more.)
This system has worked for us. Our daughter understands that money isn’t unlimited, that it is rewarding to see your bank balance grow and to know you have savings, that supporting a worthy charity makes you feel good about spending your money, and that spending on yourself often pales in comparison to buying something that puts a smile on the face of someone you love. And as she gets older and starts actually earning her own money, we’ll add additional money management training tools like a checking account and credit card.
I’d love to read comments from others about the system you use, why, and how it works for you.