We’ve gone back and forth a bit as far as how we want to handle money for our kids. Allowance? Payment for chores? Combination of the two? In the end of the day, we figured that any system we use will probably work out just fine because it will teach our kids the basics about money, saving, spending, living within your means, etc.
I found this post at Frugal Mama and I really liked it. Maybe because it’s written by her ten-year-old daughter and I loved that. But I decided to copy pretty much everything about it and see how it works out here.
Our son is four (the little guy is one so he’s got a while to go before money means anything to him) and he’s starting to understand how money works. I spent about an hour with him tonight, explaining the new allowance system, making the savings containers, counting and sorting his money and answering all his questions.
We started with three empty coconut flour tins, and then our son picked out some scrapbook paper from my craft area. We cut the paper to fit and then glued and taped it to the cans. Then we made “spend”, “save” and “share” tags and attached those to the fronts of the cans.
Then we counted up the money our son already had (I think my in-laws gave most of it to him when they emptied out their pockets last time they visited). He had $3.56. The next step was to divide that into the correct amounts for each tin. We liked the 10/40/50 allocation that Frugal Mama uses, so we went with that.
I drew a picture of a dollar and then divided the picture into ten sections. I explained that 10% is one of those sections, 40% is four of them, and 50% is five of them. Then I showed him how we could divide up his $3.56 the same way. Once we had the amounts, he counted out the money (he counted the pennies and then we worked together to count the larger denominations) and put it into each tin.
On August 1, he’ll get four dollars, and we’ll work together to come up with the amounts for each tin.
The money in the spend tin is for him to spend as he wants, but our one-in-one-out rule for toys still applies, since we definitely don’t want the house to be overrun with toys.
The money in the share tin will accumulate until the end of the year and at that point we’ll help him find a good use for it and we’ll match his donation. When he’s very young, a local place like a shelter or a food bank might be best, since he could physically hand over the money. As he gets older, we’ll introduce him to the many organizations that we can donate to with the click of a mouse.
The money in the save tin will go into a savings account at our local credit union, and we’ll match that too. I’m not sure yet how we’ll earmark that money – we might just let it sit there for a few years until he can be more involved in the decision. Our credit union pays 4.99%, so he can start to learn about interest that way, which is a nice bonus.
For now, we’re not going to tie chores to money. He’s expected to do chores on a daily basis, just for being part of the family (cleaning up his own messes, clearing the table, loading and unloading the dishwasher, etc.) As he gets older and his chores get more difficult and time consuming, we will probably institute an additional or alternate payment system where he gets paid for working. But for now, a $4/month allowance seems perfect. And since virtually all of our shopping is at Goodwill, his spend jar will accumulate enough to buy something new just about every month if he wants to.
If you have children, how do you handle money with them?
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