From the time my kids were pretty small the hubs and I were discussing what we would do for allowance. Would we give the kids money for nothing? Would we make them earn it by doing chores? Would they earn more if they did extra chores? Would we take it away if they were misbehaving? How much do we give them? How early do we start? What can we teach by giving an allowance?
I have to tell you I have googled A LOT about this subject. I've read experts opinions, I've read other parents opinions, I've read blogs about how families have adapted some mixture of all the suggestions from the first two together. There are so many ideas, so many different takes on the subject, I was left reeling trying to consider all of the possibilities.
Initially we floated the idea of allowance to the kids when Lil was about 6 years old, making Logan only about 4 at the time. I didn't feel like I could leave him out so we implemented for both of the kids. I think I recall giving them like $1.50/week and they had to save at least $0.50 of that. The problem was they didn't really get it, didn't really care about receiving it and I was really bad about having the cash on hand to present to them every Friday. I think it may have lasted about 3 weeks at the most. They forgot to ask, I forgot to provide and so it went by the wayside.
Now that they are older we decided that it was time to implement allowance again. Several things prompted the beginning of this new allowance system.
- Their wants are getting increasingly more expensive. With technology becoming more innovative and cool they want the latest gizmo and gadget. While we could probably get them some, if not all of it, if we really wanted to, we feel like they don't have any understanding of how valuable the item is. Someone hands you an iPod and it's like, "Great! Woohoo!" There is no concept of the fact that the little piece of technological parts you're holding in your hand cost that someone a pretty penny.
- They value money. They are both at an age now where getting cash & gift cards is one of their favorite things. They like to know that they can buy something, with their own money, when we go to the store.
- We want to teach them what it's like to be responsible with money. Not only are far too many of us up to our eyeballs in credit card debt these days, there aren't many of us that are on board with the "save up until you can afford it" mentality. Our society is so full of "needs" that are really just wants - and damnit we need these things RIGHT NOW! The idea of waiting to get something you want is nearly lost on my generation and, if it's possible, is only getting worse for my children's generation.
As I researched what was working for other families and what the experts recommended I thought about the constraints we would face with regards to allowance. Here's what I knew some of our limitations would be: 1) I would not have cash for them every week on Friday. I never carry cash and I know I wouldn't stop on Friday after work to get it for them; 2) They will probably forget to bring their money with them to the store OR they might not know that we were going to stop at the store and thus not bring their money; 3) They had to have easy access to whatever system we implemented. Otherwise they'd just ditch the whole idea, money or not; 4) It had to be something that was visible. They will need to be able to see what's happened with their allowance.
In taking all of this into account I developed our own system. It's definitely a hybrid of all of those other cool ideas I've seen on other people's blogs, but it is customized for the way that we live.
First, we discussed how much money per week to give the kids. Many of the things I read suggested an amount equal to their age either per week or per month. For us, $10 and $8 per month seemed a little low considering the cost of consumer items these days but we were also unwilling to shell out that amount per week. In addition, because we have two children who are constantly arguing about what is fair, we knew it had to be the same amount for each of them. We settled on $5 each per week.
Second, the earn for chores or just be given the money question. While we like the idea of earning your money (that's how we get our money, right?), we didn't want them to think that they should get paid for helping out around the house. We don't get extra money for doing laundry, or picking up dog poop, why should they? We felt like it was more important for them to realize that they had an obligation to lend a hand because they are a part of our family and they live here, rather than pay them for chores.
Third, do we take money away if they are misbehaving? While this is tempting we felt like the main reason why we were giving them an allowance is to teach them the value of money and to learn how to be responsible with it. It is not part of a reward/punishment system and so we have chosen not to use it in that way.
Fourth, I read that many people made their kids split their money into different banks: spending, saving, and donation. We decided we also thought it was important for the kids to see what it was like to save their money and so we came up with a hybrid spending/saving plan. Of their $5 per week they are required to put at least 30% of that amount into a Spendable Savings Account (SSA). It is a savings account, but it is money that they will be able to spend. The caveat is that they will only be able to spend this money on a big purchase that they save up to buy. This stemmed from a goal Lilly had to buy herself an iPod. She had saved up $140 (the one she wanted was $200) and over the course of a few weeks piddled her money away on junk with nothing to show for it. The money in the SSA can only be withdrawn at $50 or higher. Also, for every four weeks they have $50 in their SSA they earn $2.50 interest. And that is compounded so if they have $100 for four weeks they earn $5.00 and so on.
Now that we had answered the important questions we had to figure out how to implement. Knowing that their allowance would not be my top priority I set up automatic transfers from our checking account to their savings accounts at the bank. This way their money would always be available and designated for them. I decided that the best way for them to keep track of their earnings, savings and spending was on a form that looks like a check register. I created these folders to hold their registers for both their regular spending account and their spendable savings account.
I created the registers to look and work exactly like the check registers of the days of yore. I say that because I haven't kept a check register in ages - I just use a debit card - but I do know how to use a check register if I have to and it's as good a tool as any to teach the kids how to manage their money.
I wanted to make sure they knew the regulations of the Bank of Mom & Dad up front so each of them have a copy of them in the back of their folders. These are the regulations:
· Paydays
are weekly on Friday.
· You
must save at least 30% of your allowance for a long term goal.
· You
must keep all purchases up to date in your register.
· You
are allowed to spend your allowance at any time, on anything you wish to
purchase. However, the items you buy can and will be regulated by the parents.
For example, you can choose to buy candy but the parents have the right to deny
access to any item that you buy, at any time, for any reason.
· You
ARE allowed to deposit more than 30% of your allowance into your spendable
savings account.
· There
is a minimum $50 withdrawal amount from your spendable savings account. In
other words, you cannot withdraw an amount less than $50. Any amount over $50
is ok.
· Money
in your spendable savings account will earn an additional $2.50 per month for
every $50 in your account
I initially included a regulation that required that they add their money into their registers each week but upon further reflection decided not to. While I wanted them to think that getting their "paycheck" was important, I remembered that I get my paycheck whether I remember to pick it up or not. I complied with the regulations set in order to get my paycheck and the company I work for cannot then say since I didn't pick up my check ON payday that I don't get to have it. Since the goal is to prepare them for how money works in the real world I left that regulation out.
I also thought about letting them get themselves into a situation where their account could potentially go negative and setting regulations as to what fees would be charged - just like the actual bank. But I decided to hold off on that for now until they start to get a better grasp as to how this all works.
The kids have a pretty good memory of how much money they have in their accounts at any given time and I usually watch them when they add their paychecks in so I have an idea as well. This way they don't have to bring their wallets with them everywhere (where they get lost or stolen) and if we make an impromptu stop at the store they have their money available to them. We simply pay for their items separately and they take the reciept home and log it into their register. This way they pay the sales tax, they get whatever discount might be going on, etc. We haven't run into a time where they've gotten into the negative yet. If and when we do I will have to revisit my ideas about adding regulations on that subject.
We started this at the beginning of November and it has been going quite well. It is interesting to watch the differences between the two kids in the way they save and spend money. They are definitely both very different.
Logan began putting a little more than the required $1.65 into his spendable savings account ($2.00), but he is quick to spend his money. He is also the one who always remembers to add his Friday paycheck into his register.
Lilly hasn't spent much of her allowance at all. I think she may have bought TicTacs one day. But she designates a much larger amount to savings. She really wants to start earning the interest and building that savings account up because she wants an iPad REALLY bad.
Do your kids get an allowance? What system do you have in place?
If anyone is interested in getting the templates for my register, folder cover, a copy of my regulations or otherwise please let me know and I will post links to them as free printables.
