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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kat89 says
We never gave our children an allowance, mainly because our parents continuously drummed it into our heads that no one in life just gives you money for existing, which is what they considered an allowance to be. This isn’t said to be judgmental, it’s just the way their mindset was, having grown up during the depression and WWII. Plus, neither of our families could afford to give allowances to us anyway, money was very tight. My hubby grew up in a large family and my family just didn’t have any extra at all. We lived very frugally, reusing, recycling, buying used clothing, etc. before it was trendy to do so. Our own kids each had chores to do around the house, but they could earn money for doing extra chores that weren’t on their lists, helping me in the garden with planting, weeding, prepping the soil in the spring, mulching, weed whacking, helping me paint something or refinish a piece of furniture or clean out the garage and attic or washing and vacuuming the cars. Money that was given to them as gifts went into their saving accounts and any money they earned could be spent. I wish we had established the 3 way division of money though. It’s a great concept. I could never judge anyone for giving their children an allowance or not. Parents need to do whatever they feel is the best way to teach their children about money based on their values and financial status, and we all have our own systems for doing it.
Frugal Babe says
For a long time, I was against the idea of an allowance, mainly because I never got one either. My parents paid us for chores so we had to earn our money rather than just get it as an allowance. But after a lot of consideration, I decided I liked the idea of chores being something that you just have to do because you’re part of the family, rather than something you do to earn money. As our son gets older and his chores get more complex, we’ll reevaluate this. The other thing that finally sold me on the idea of an allowance was a monthly allowance rather than a weekly allowance. I knew a lot of people used the child’s age to determine allowance amount (ie, a four-year-old gets four dollars) but they give out that four dollars every week. That seemed like way too much to me, and it turned me off to the concept. When I saw Frugal Mama’s idea of giving an allowance once a month, I thought it would be perfect. $4 a month seems very reasonably to me (especially since we buy everything second hand anyway, so our money goes a lot further than it would if we bought things new). We’ll see how it goes as time goes by. I’m definitely feeling good about the three separate tins for allocating the money, and a set percentage going into each one rather than arbitrary amounts.
Economies of kale says
I definitely agree that children need some money of their
own to learn how to handle it and how to deal with having a limited amount and
not being able to buy everything they want. When my siblings and I were
teenagers, our parents gave us a monthly allowance to pay for everything
(clothes, movies, lunch, books etc). This meant that they didn’t have to worry
about buying us anything and we were responsible for how much of our money we
would spend or save. My sister and I dealt with this in different ways, I
shopped for most of my clothes in thrift stores and saved a large percentage,
whereas my sister would save up to buy a few designer clothes. But we both understood the value of money.
On the other hand, I know some people around my age (late
20s) who are still being completely supported by their parents, who pay their
rent, bills, mobile phone, spending money etc. These people have no idea how to
budget or handle their own money, as their parents have always paid for
everything. They also have no savings because they have never had to save.
The Omnivore and I don’t have children yet, but I imagine we
will deal with pocket money or allowance in pretty much the same way you do. I
especially like the idea of enforced savings of a certain percentage, as this
how I save my money now. I would like to instil this value into my children
from a young age (although with our genes they should be pretty good savers
anyway!).
Economies of kale says
Sorry about the strange formatting, I don’t seem to be able to change it :(
Frugal Babe says
Those thoughts were all things I considered. I definitely want our boys to have long-term savings accumulated by the time they head out into the world on their own – as well as a solid habit of growing those savings with a good portion of every dollar they earn. I think it’s sad when I see people in their late 20s (or beyond) whose parents are funding their lifestyle. We often have clients who are in their late 20s and early 30s and their parents are arranging for their health insurance – everything from choosing a plan to paying for the premiums. I know that’s probably better than going uninsured, but what sort of life skills are the “kids” developing? I’d much rather start teaching our boys how to be independent and have basic skills (like doing laundry, cooking, budgeting, etc.) under their belt long before they need to live on their own. For now, our son’s “spend” portion of his allowance can be for just things he wants, rather than things he needs. But as he gets older and has more money, we’ll probably include clothing in the stuff he buys with his own money.
Dave says
Great article. So many children have no appreciation for money and so few teenagers have part time after school jobs these days. I got my first job as a super market cashier when I was 15. You learn a lot about money when you have to work for it.
On my website I posted and article that you might want to try Frugal Babe. You are teaching you kids to save, what about teaching them to earn?
http://piggybankbuilder.com/?p=58
Please let me know what you think.
Julian says
A great idea, and I loved reading the post by the 10 year old! Whilst I don’t have kids myself I think the ‘Moonjar’/money splitting idea is an excellent way to instil budgeting and financial disciplines into kids from an early age. I think having a ‘share’ pot is also a wonderful idea – let us know how your kids get on with it all!
Mama T says
4.99%? May I ask what credit union are you with?
Frugal Babe says
We’re with a small local credit union that only has a few branches around here. The regular interest rate on our main checking account is 3% on up to $15,000. We have to use our debit card at least 10 times per month and have a direct deposit or withdrawl set up in order to get the dividends, but that’s pretty easy. The 4.99% is for an “accelerated savings” program that they have. I think it’s mostly aimed at kids and young adults. You can’t have more than $1000 in it, but that should be perfect for our kiddos for quite a while.
Frugal Vegan Mom says
Was going to ask exact same thing as Mama T! I’m with a local credit union and have had a great experience with them, but the savings rate is 0.1% !!
Grubbsrns says
My daughters are 25 and 22 and both are excellent with money. We did the jars (especially with the older one) and I was very pleased with the system. We gave allowances as a tool to learn about money. Chores were done because we all belonged to a family and things have to be done in family life. I did offer opportunities to do extra chores to earn extra money. One issue that came up was when they received money as a gift from the grandparents. I think I let them spend a greater percentage of that money because if they had gotten an actual present it wouldn’t have been an issue. We watched some learning, aka, wasted/poor choices, in the middle school years, but I am so impressed with their money skills now: they live well below their means, have savings, would NEVER run a balance on a credit card and clearly understand that money means “work”. As far as clothing: I bought all the basics: jeans, undies, coats, boots and some basic shirts and they used their money for the trendy stuff. And of course they got clothing for birthday/Christmas.