Feeling torn between the happiness I would feel by making this impulse purchase for my son, and knowing that in the long run I wasn’t doing him any favors, I became grumpy.
“No, I’ve said no, and that’s it!”
“You are so mean.”
“Seriously? You’re going to call me mean just because I’m not buying you something?”
Emotional blackmail. Nice. Now I was resentful. These kids have so much, they are so ungrateful for all that they have, yadayadaya...
And so went our conversations about spending in the past. So how do we handle these situations so kids can learn the value of money and so that we can stop feeling like an ATM machine? Chores!
Well actually, no. While I’m a strong advocate of the value of daily chores, research has shown that allowance isn’t the best way to motivate kids to do them. In fact it can actually decrease kids’ motivation to help around the house.
(Here’s a caveat: While kids should be expected to participate in basic household chores, this doesn’t preclude paying them for larger tasks, especially the occasional type that you might otherwise pay outsiders to perform, such as yard work or washing the car. The difference is that the child is self-motivated to do the task and earn money, rather than being paid for something they are expected to do anyway. For more information about how to tap into kids’ motivation to do chores see “The Science of Motivation and How We Can Apply it to Raising Kids” )
So if we’re not giving our kids money for basic chores, what is the purpose of allowance? Allowance is a great way to help kids learn money management skills, how to budget, and how to defer immediate gratification. It’s a powerful tool in that it is the first exposure that a child has to the choice that financial means can bring.
What’s the best way to structure allowance? While the amount given should vary by age, as well as what expenses they are expected to be responsible for, many experts agree that it is useful for kids to receive a weekly allowance that is divided into 3 buckets: spending, saving, and charity.
Spending is left to kids to use without judgment by the parent. The idea is for kids to experience the natural consequence of their spending choice: either savoring their purchase or having buyers remorse.
Savings is for bigger, more thoughtful purchases. Parents may require kids to save until they have a certain amount in their savings account, delay their purchase for a certain length of time, or even make a presentation about the benefit of the purchase they’d like to make.
Charity is saved throughout the year and then donated to a cause that the child has chosen. My animal loving son has given to the Human Society for many years now, while another has decided that giving to programs that provide services to homeless children is more meaningful to him. Whatever it is, we try to find a way to volunteer for, or at least tour the program giving the kids an experience associate with their donation, and an understanding of the impact it has for the recipients of those programs.
There are a number of great apps out there that will track kids allowance including ZooFam.com which has a lot of cool features including a debit feature (allowing for monthly expenses like cell phone bills), a digital register so kids can see where they are spending their money, a goal tracker which helps kids see how long it will take to reach their savings goal, and the ability to set up interest on one or more accounts providing an even greater incentive to save. Kids Bank doesn’t have quite as many features, but it’s free and still allows users to set up to 3 accounts per child with an interest feature for the savings account.
Since we implemented this system a number of years ago, we’ve still had the experience of watching one son spend all his hard saved money on a toy that will be forever remembered by the spender as a huge waste, but this experience causes pause before any purchase he now makes.
Whatever their experience at this young age with money, my hope is that our kids will learn not only how to manage their money wisely, but that the best things in life aren’t things.