Teaching kids to manage money goes down in my book as a parenting priority. How and why we cover this topic (or if we even do) varies from family to family, based on our past experiences, current financial situation, comfort level, parenting style, etc.
At our house, we give an allowance to teach about money management and to limit our children’s impulsive spending. We ended up combining our childhood experiences for a plan. My parents were kind of random about allowance until we became teenagers. I started babysitting at about ten years old, which is how I earned spending money. When we were 13, my mother decided to give us money on a monthly basis. She gave us a set amount every month that went into a checking account. It was supposed to cover lunch, clothes, and spending. (Please note: It absolutely did not for me.) I always had jobs of some sort, so I was always able to add to my coffers. My husband’s parents gave him an allowance, but it was super small. It covered pretty much nothing, realistically. He worked to supplement his spending. We both grew up in a big city with great public transportation, so we never had a need to drive and pay for gas. We did, however, have to pay for the bus. Thankfully, it was pretty reasonable way back in the dark ages.
Our allowance plan came about because when our kids were about five and eight, we got tired of them asking for stuff every time we went anywhere. (Gotta love the Hot Wheels and My Little Pet Shop characters in the checkout lane!) To combat this constant nagging, we decided to give them an “allowance.” It was—and still is—based on their age: a dollar per year. For a while we made them put money aside for charity as well as put some money in savings. The charity thing actually ended up falling by the wayside because we kept forgetting to actually determine a charity and distribute the money. Plus, we highly value volunteering our time anyway, so that ended up being more important to us. So we just talk to the kids about why and where we do our charitable giving instead. We still require them to saving every month, though, because teaching kids to save for something they want and the benefits of accrual can’t be beat.
Allowance at this point is tied to wants only and not needs. We require our kids to be physically active and play a musical instrument, so we pay for those expenses. Also, we buy their clothes (luckily they are not super into them) and pay for school lunches. Our 16-year-old just started driving, and though she drives herself to school now instead of taking the bus, her driving also frees up a ton of time for Mom and Dad, so for now we are paying for gas and insurance. We did not buy her a car. Mom got a new car, and our daughter is driving Mom’s old one.
When our cherubs were small, we tried giving them cash. I guess because they never see us use cash, they did not understand that it was valuable, and we would find it on the floor. I was too lazy to teach a lesson about that at that point, but I know some parents would. Also, we lived overseas a lot, and sometimes our kids wanted to spend money in local currency and sometimes in U.S. currency, which complicated things. We decided to use modern methods of money tracking. In our quest to track their money, we had a genius idea to keep a spreadsheet. It worked for a while but was eventually a bust because it was before the days of easy access to information in the Cloud. However, with things like Google Spreadsheets I could see it working now. Eventually, we realized our bank offered prepaid debit cards for kids. That is what we have been doing for about eight years. For us, it works great.
At our house, everyone is expected to do chores as part of the family. If you don’t do chores, you don’t do things like play video games or go to a friend’s house. We have some set tasks on a daily basis (e.g., feeding the dogs, doing the dishes) and others on a relatively regular basis (e.g., picking up dog waste, mowing the lawn), and sometimes we all have to work on a project together (e.g., planting the garden, cleaning out the garage). Allowance has nothing to do with completing chores. Our kids would have to do chores even if they did not get an allowance because they are part of the household.
In my Facebook discussion where I threw this topic out to “my people” so I could hear what other families do or how it was when they were kids, my friends shared all kinds of setups.
Several people reported doing pretty much what we are doing. Some people include lunch money and a clothing allowance in the amount they give their kids.
One of my friends does not give an allowance, but the kids can easily earn money by doing chores like chopping wood and other laborious tasks out on the two acres where the family lives.
Another family does not tie allowance to chores or ask their kids to do any specific chores at all, but the parents model helping around the house and their amazing kids actually follow suit. I want some of their magic.
Several other families I know do tie chores to allowance. Either each chore has a value or it is an all-or-none scenario.
A couple of people said they monitor their kids spending and discuss their purchases with them, while others said anything was fair game as long as it was legal.
More than a few in my circle of friends grew up in families that probably could not afford money for extras, so while parents paid for food and clothes, any discretionary funds came from jobs as soon as the kids were old enough to get them.
Which is best?
According to the experts, giving kids money—however you give it—so they can learn about budgeting and money sense is better than just buying your kids everything they want without any opportunity to learn. According to some financial pros, using actual cash works better, which is something I know we will not do because it does not really work for us. Jobs earning money are also useful for learning that work brings rewards. One thing I am going to change is talking more to my kids about saving for the long haul, not just saving for something they want. Apparently kids who learn the importance of delayed gratification and planning for the future do better as adults. However, as with anything, each family has to do what works best for them.