How Lisa Teaches Her Kids About Money
We give our kids allowance because it enables them to learn money management. By practicing with their own money, children can try out concepts – saving for a rainy day, prioritizing goals, and delaying gratification – that might otherwise seem abstract or irrelevant. Allowances give kids room to make mistakes in a low-risk environment. They are able to learn early on the pitfalls of impulse buying and the value of saving.
In our family we do NOT link allowance with chores. We talk a lot to our children about family responsibilities and family benefits. We tie that in to family unity by saying, “Being part of the Hoelzer family comes with benefits and responsibilities. One of your benefits is receiving allowance each week. One of your responsibilities is doing family chores.” We use this concept in other ways, also. If we are going on a vacation, that’s a family benefit. If there are extra chores to do some weekend, that’s a family responsibility. We all work together for the good of the family, and we all enjoy certain benefits. If another family gets something our family doesn’t, we point out that every family has benefits and responsibilities, and that’s not one of ours.
We start giving allowance when our children enter kindergarten, because a child’s understanding of the concept and value of money does not fully emerge until 6 years old or older. Before then you will find him or her leaving the money around, not taking care of or caring much about it (beyond an initial excitement).
We pay $1/grade/week. For kindergarten and first grade they get $1/week, in second grade $2/week, and so on. This amount has worked well for our children, and it’s an easy way to remember when they get a “raise” in allowance.
We decided to give out allowance on a weekly basis. The important thing is getting in a consistent pattern so you remember to do it. It takes some effort to have the correct change around each week; you need many one dollar bills!
We don’t force our children to save any of their money. Their allowance is not that much to start with, and I don’t think any amount they could save would make much difference in long term pursuits (college, etc.). Some of our girls have chosen to save up for some big-ticket items, which has taught them about delaying gratification and the benefits of saving. But if they choose to spend it all right away, I’m okay with that.
We do, however, strongly encourage them to donate money. In our church (the Church of Jesus Christ of Latter-day Saints, or the Mormons), we are taught to donate 10% of our money as tithing. Ten percent can be tricky, though, when you’re paying $2 a week! I didn’t like the idea of giving allowance in coins, so I came up with a better way. I keep track of the weeks and have my girls pay their whole allowance as tithing every tenth week. It’s the same concept, one-tenth of your increase, but more convenient! Sometimes the girls have resisted and said they don’t want to, or it’s their money, but I just say, “This is what Hoelzers do!” and give them the pen to fill out the tithing slip. I remind them that the other 9 weeks they got to keep their whole allowance, and that this one week their money can go to help others. Somewhere in middle school my girls started making more money from babysitting, keeping track of their own income, and paying tithing on it on their own.
One fun thing about children having their own money is watching them use it to buy for others. For Christmas and birthdays we encourage our children to buy presents for others family members. It has been really cute to see their generosity and excitement over finding a present to give to mom or dad or sister. At Christmas we take them shopping to buy for others. We supplement the younger ones’ allowance so they can buy for everyone and sometimes a friend or two. But the older ones (10 years old and up) budget and decide what to get each person and pay for it all themselves. They are very thoughtful in gift giving, especially for my husband and me. Around November if they are talking about things they want to buy with their allowance I remind them that the holidays are coming and they should be saving. They have really come to enjoy this opportunity to give.
In general, we let children spend their money on what they want, even if we don’t think it’s a good use of money or worthwhile. I’ve had times where my child has bought something of low quality that I knew would break, but I didn’t say anything. When we got home and it broke, I didn’t say, “I knew that would happen;” I was sympathetic and kind and told the child I was sorry that happened. The child learned the lesson from the consequences far more powerfully than my predicting the consequences.
However, I do think there can be some general oversight, such as, “You can spend your allowance however you like, as long as it doesn’t cause a problem.” Buying something you’re opposed to, like fireworks or a pellet gun, would fall under that clause.
Between the ages of 6 and 12 their allowance is pretty much just fun money. I pay for their movies or activities, and they don’t really go places that cost money with friends. They could use their allowance for toys or trinkets, food or candy, or save up for something bigger. Around middle school, children’s expenses increase. This is the time they want to do stuff with friends and want more clothes and accessories (at least girls do!). At that point we started having them pay for some of their own fun activities, but not all. We didn’t have an exact plan, but if I knew they had some money (if they were “cashy,” as I call it), then I would tell them to pay.
When my girls were in eighth grade I started having them pay for their dance clothes and shoes. There is a large price difference in leotards, and if I am buying, they really like the more expensive ones! Having them pay for their own leotards taught them a lot about the value of a dollar and how to look for sales and discount websites.
When my oldest two daughters were in middle school we decided to sell much of their accumulated American Girl dolls and clothes. The sale was a success, and they both earned hundreds of dollars. One child asked if she could open a savings account (and the money is still in that account to this day). The other got on amazon.com (with which she was already intimately familiar) and spent almost all of it! Both approaches were acceptable to me, and both girls learned lessons from the experience.
The Hoelzer Family Bank doesn’t give advances. I want my children to learn to delay their gratification and not spend their money before they have it. A related problem is when they want to buy something at the store, but their money is at home. I mostly allow this. I will buy the item and have them pay me back when they get home. It’s one more thing to remember, but it’s a little more immediate.
Giving children money is an instructive tool that helps them learn and develop necessary skills for adulthood. It is essential that a child learns to work during childhood, and that’s where the family responsibilities come in. Children need to have chores and responsibilities around the house. They need to experience what being a family member, a team member, is all about. It’s important to teach them that all family members have responsibilities to the group. And that’s nonnegotiable. Though they may gripe about doing the dishes, the need to contribute in a meaningful way is fundamental. Tying that work to allowance doesn’t give the child a better work ethic. Sometimes it can even cause the opposite – the child can consider whether the chore is worth the money, and possibly decide it’s not. In that case, he doesn’t learn to work and he doesn’t have any money to spend.
I don’t think there is any child who will grow up thinking that money comes for free forever. This is just not a legitimate concern. If you instill a good work ethic in your child he will continue to work hard at whatever his current task is: family chores, school work, college work, or his professional job. Children are smart enough to realize the difference between a weekly allowance from mom and dad and money they will need to earn as an adult.
Connecting money and chores can give both an added layer of emotional power. Parents start to emphasize that you have to get the bad stuff over with (the chores) to get to the good stuff. I prefer to teach both as positive concepts. We get to work together and produce a clean house, and we also get weekly allowance.
Sometimes parents want to tie chores to allowance because they feel it gives them more leverage. They have something to hold over the child’s head to motivate him to work. But, again, it may not be motivation enough, and then you are stuck with undone chores. The better way to get children to complete their chores is harder and takes more time: talk to them about the importance of all family members pitching in, compliment them when they complete their chores, stay with them to ensure they are done, be firm but kind in insisting the work is done.
We do have a list of “money chores” that the kids can choose to complete if they want to earn extra money. These would be the more difficult, extra chores such as cleaning windows or vacuuming the car; something that is not part of the child’s usual responsibilities. They are completely optional, simply there if the child wants to earn money. We haven’t been great about keeping this list up, but if a child is saving for something special and wants ways to earn extra money, then we will create a new list.