“Money make the world go round, the world go round, the world go round…”
Just like you can’t learn to swim without water, the kids can’t learn how to avoid getting into debt and manage their finances efficiently in a future, without having any money to manage. So an allowance is a must in our house. Here is a little Q&A how it can be made educational.
Q: Why would you give your kids money?
Because they are kids, and this is the best way to learn! This is not a reward for a good behavior or chores.
Q: What can you learn?
History, math, and, of course, managing finances. The last one is indispensable: learning how to manage your earnings successfully without getting into debt is indispensable.
Q: How early do you start?
As soon as the kids wouldn’t swallow it. Sometime around 3 years old.
Q: How much do you give?
In our house: a dollar per week. More – would be too much for our wallet. Less – is not enough to learn how to use it. And not enough to buy something other than junk food. With a dollar a week they can quickly put enough together to buy little fun somethings or save for a bigger item.
Q: How often do you do it?
At most – once a week. Otherwise – whenever they ask. Our rate is $1 per week. We can never get around to do it every week, so every 3-4 weeks is more likely. I also have a limit how much do I give per one time: if they haven’t done our allowance activities for two months (happens), I am not going to shell out ten bucks. I don’t need motivation to do it rarely. I’d rather have it regularly. So, no matter how much time has passed since their last “paycheck” – at most they can get $3.
Q: What do your kids do?
Bring and lay out everything that we’ll need, count themselves the amount of money they should get this week. We start off with History. Go on to Math. Finish with Money Management. I’ll talk about Math and History next time in more detail, going over the overall process first.
Q: What about money management?
Once we are done with math, the kids can divide their “earnings” into categories:
- Money to spend
- Money for the gifts
To make it easier, at this point, it has to be at least 5 cents per every dollar that they get. So, for $3, it is 15 cents. Gifts came in as a separate category quite recently. My kids love picking something in a store for their cousins and friends, and I like the idea of them sharing their own money for it, saving up for it. I usually match whatever they saved: if they saved a $1, I’ll add another one. If they saved $3.50 – they can pick a gift for $7. Gifts for mom, dad, grandparents have to be homemade (makes no sense to buy them), but cousins are perfect guinea pigs for practicing thinking about someone else, financial aspect of gift giving, the joy of presenting something that you bought with your own money.
Some more math trickles down their road as the kids divide, count how much each category gets and count what it actually is. Older ones record how much every category gets, how much they already have in there.
Then, finally, they get to hide it: savings go straight to their electronic piggy banks (oh, they love hearing those funny noises!), pocket money – into the separate compartments of their wallets; charity – for us it is a simple Ziploc bag that will be cheerfully rolled down into the donation jars in zoos and museums. Saving up for a tiger is usually fun and zoos always have fun machines to deposit those donations.
Q: How do you spend it?
That’s the best part! Not only for the kids, for us too: now, whenever “I want this!” exclamation resonates through the store, you can immediately agree: “Absolutely! It costs $12 and you can buy it with your own money.” Now they get to save up to it, sometimes borrow, sometimes just decide they don’t need it after all!
Destruction takes a different perspective as well: when they were being so wild that ripped the trampoline net, it was my kids’ responsibility to pay for a replacement. It was their friend, who actually ripped the net, but we explained my boys, that this is their house, and everyone in it is responsible to keep it safe and comfortable. Both of them chipped in for a new net. Gladly: instead of being yelled at or grounded, they had an opportunity to correct their mistake, and enjoy the trampoline. Honestly, they felt proud to resolve this problem in such a competent manner.
We usually take our wallets to museums and zoos. Art stores. Sometimes they really want something specific and we order it online (while their share of coins gets returned to the original “coin bank” bag). We have very few constraints: no junk food, no violent toys. Otherwise… our kids were buying themselves paints, fire trucks, museum trips, shark teeth, even saved up for a their own real leaf blower! Well, we actually chipped in for it too, to avoid thinking of the right terms to share it…