Thursday, January 9, 2014

Kids' Allowance

Just before Christmas, a friend asked me in a comment here how we manage allowances for our kids - ie. the weekly giving of money.

I thought I'd share what we do, though there's certainly no magic to it.  In fact, I'm sure many others have far better ideas about allowance than I do.

Currently only Matthew receives an allowance: $6/week.  He's nine years old and has been receiving an allowance since he turned eight.

The only criteria we had for instituting allowance for him was learning about money:  coins; bills.  Until he could understand some of the basics and gain at least some appreciation for the value of money, we figured that any money we had for him could better be put to use in an Education fund for him.

The reason we waited until Matthew understood basic money concepts before offering him an allowance is because at that point we felt we could also teach him other things about money that are important to us:  Tithing; saving; spending wisely.

First, when it comes to tithing, we want Matthew to see that we give away a minimum of 10% of our gross income.  We hope that he models it, though we're not demanding it of him.  Although he has no idea about how much income we have coming in our door, the concept is easy to explain:  If Geoff and I bring $50,000 into our house as annual income, we give a minimum of $5,000 away; if we earn $75,000, we give a minimum of $7,500 away; if we earn $100,000 we give a minimum of $10,000 away.  You get the idea; we base our giving on pre-tax income and so the calculation is pretty simple.  We hope that by teaching him why we do this and (more importantly) by modelling this for him, he might come to the same point.  Giving a tenth of our income occasionally feels hard to do, because there are always (a gazillion) things we could otherwise choose to put our money towards, but it is something we believe in and a discipline that we want our kids to see us doing.

Second, we want Matthew to learn to save his money and to spend it wisely.  We opened up a bank account for him and his allowance is put directly into his bank account every week.  Our hope was that by seeing it accumulate over time, he would learn that he is then able to plan for and make larger purchases that he has contemplated and researched over time.  Tied into this concept, we have required of him that he never make spontaneous purchases; when he sees something that he likes and wants to buy (immediately!), we ask him to go home and think about it for a day or two and, if it's still important after that time to make the purchase, we will go back to the store for him to buy it.  That's been a very helpful thing, in that it's taught Matthew over and over that the things he might want in the moment aren't necessarily the things that he really cares about; in fact, he rarely ends up going back to make a purchase, choosing instead to continue to save his money until there's something he really, really wants.

One issue that always seems to come up in discussion with other parents is whether or not to tie the giving of a week's allowance into the completion of chores.  We have chosen not to connect allowance with chores or behaviour...ever.  Nor do we pay 'extra' for the completion of larger chores.  We assume, in our household, that we all make a contribution to our home by completing chores.  We don't have a chores chart, and my thinking behind this is that I would rather work towards teaching the kids to see what needs doing and then to just do it.  The kids are regularly involved in chores:  Kitchen clean up (dishes, floors, table); laundry (putting it in, transferring it, folding it, putting it away); clean-up of bathroom counters and sinks; general household tidying; and, recently for the boys, vacuuming.

Not connecting an allowance with chores/behaviour ties in with our approach generally to parenting.  As you know about us already, we're trying very hard to become parents who provide an environment that enables natural development to occur in our kids.  We don't do a lot of rewards or consequences and so, following that, I'm not comfortable with tying my kids' behaviours (ie. whether or not they did their chores) to a reward (ie. allowance) or consequence (ie. no allowance).  It's too much like santa clause theory to me!  So even on weeks when behaviour has sucked, attitudes have gone down the toilet, and not a single chore was done willingly, Matthew gets his allowance.  I think that when Matthew (along with Seth) starts up his own little business (the mobile lemonade stand being discussed for spring!), he will have ample opportunity to learn naturally about being rewarded for working - this is a far more real-life experience than doing household chores for a few dollars.

Seth and Lizzie do not yet receive an allowance, though Seth is working on his understanding of money as we speak, and I can easily imagine that 2014 will be the year he begins receiving an allowance!  Currently, the younger kids rely on little bits of money that they receive here and there; money for birthdays; generous Toys R Us gift cards from very generous uncles/aunts at Christmas time (thanks again C&L); etc etc.  When we occasionally do a massive bedroom clean out, the kids do earn $0.01 per item tossed out or given away, and that's clearly something I do based on a reward system; but quite frankly I'm more than happy to pay a child $2.00 to throw out 200 scraps of craft paper and torn elastic bands and the like in order to help tip the scales of their motivation in decluttering their shelves and the spots under the bed...I consider this an investment, and they are always very happy to be invested in!  To be honest, though, the younger kids don't think a lot about money - they like it, but they get that Geoff and I take care of all of their needs at this point, as well as a reasonable number of their wants.

Very occasionally the younger kids see Matthew buying something with his allowance and, on a couple of occasions, they have expressed being upset by the apparent unfairness of his receiving money while they don't.  I let them grieve this (because it really is a futility experience for them) and, on a different day when the grief has passed, I encourage them to also learn about money so that they, too, might someday receive an allowance.  As I've said before, I'm not a parent who believes that children must always be treated the same; there are things that each of my children has/does that the other kids would also like to have/do.  I want them to learn to be happy for their siblings, even if grieving something for themselves, and I want them to learn that life isn't always going to feel fair and that they will survive nonetheless.

It's interesting to me that, over time, the kids are clearly learning that things balance out over time and that we will take care of their needs and also some of their wants..and as they learn this, they can also express and feel both the sorrow of the futility of their own experience and the joy for their sibling that they are receiving something special.  Just as Matthew's receiving of an allowance is a great learning experience for him at the moment, not receiving an allowance 'just because' is a great learning experience for Seth and Lizzie...and a great motivator for them to want/beg to learn about money matters!

Anyway, those are a few of my thoughts on kids and allowances.  They will shift over time, but it's working for the moment.

What about you...any thoughts to contribute to the discussion?  We've had this conversation a little bit already, some time ago, but it's always good to continue the discussion!


  1. I read a book by Gail Vaz Oxlade: 'Money-Smart Kids' - and it was the springboard for us to give our kids an allowance. Total commonsense, and alot of the same principles, Ruth. One difference is that we give our kids the money directly instead of putting it into the bank. I have 4 jars labelled Tithing/Giving, Saving (college fund), Planned Spending, & Mad Money. They then split their weekly allowance into the jars themselves. The only stipulation is that 10% goes into the tithing/giving, & at least 10% goes into the saving. The rest is split up however they want. They can move it between Planned Spending & Mad Money as they wish. They also do the recycling in our house, and share the profits as source of additional income.

    Obviously, the College Fund savings is not going to be their only source of college tuition, but it will be important for them to contribute and be aware that higher education costs money. Planned Spending is saving for what they would really like. Mad Money is for those impulse things. Want to have a treat such as a chocolate bar, movie, that kind of thing? Dip into your mad money. Our son loves to golf, and so we expect that some of his green fees will come out of his allowance.

    We don't tie allowance to chores either. The whole point of it is to learn to handle money. We have set the amount according to age & responsibility level. We also expect them to carry their weight around the house with 'family jobs' such as cleaning bathrooms, vacuuming, setting the table, clearing dishes, loading/unloading the dishwasher, doing their own laundry, keeping their rooms tidy, & helping with yardwork. They are 11 & 12, and have been doing this since they were 7 & 8. Nobody has turned up dead yet. ;) They actually love it, and it's quite hilarious to hear the clink of coins in the jars on 'payday'. We have lots of discussions around spending choices, and what we would do if it was our choice. We always encourage them to wait and think it over....not to do anything in a hurry.

    I wondered if it really was having any impact at all...we live in such an entitled society. Until one night, I was sitting watching a little TV with our son, and asked him if he'd like a coke (a treat in our house). He turned to me & asked (very seriously) 'How much is it?' and I realized he got it. Yeah, taking it a little far, but he has learned the lesson that we have so dearly wanted him to learn. It'll serve him well.

  2. That's great,'ve got a great plan going, from the sound of it! Thanks for sharing what you do - it's given me a few things to think about.

    One thing I have struggled with is the whole mandatory division of allowance into giving/saving/spending. For a while we contemplated doing something similar to what you're doing (though your term 'mad money' is not something we thought of - great term!). But then we thought (and we might change this yet) that if our goal was to help them figure out for themselves what to do with their money, that we'd better be sure that we were providing a great example for them and talking to them about what and why we do what we do and let them see what we do. That's led to some interesting discussions and the result has been that (so far) Matthew very generously dips into his savings to give money away to things that move him (likely to a tune of a little more than 10% at the moment) and it's been of his own choice.

    It's hard to know how to teach kids these life responsibilities and there are so many good routes to go. Although I'm happy so far with what we're doing, I can see it changing as time passes.

    Thanks again for the thoughts, C!