Kids, Money, & The Allowance
Another school year has begun and I have been given the annual gentle reminder that my kids are getting older. My youngest has not only moved up a grade, but up to a new floor because she’s a big kid now, “no longer a baby” I’m told. She makes a good point, though, she is getting bigger. She gets herself ready for school, reminds her brother and sister to grab their lunches and me my keys, and tells me regularly that she can do it herself, “it” being most anything I try to help her with. This is my cue that she’s ready for a little more responsibility and independence. Time for an allowance.
There are many factors to consider when deciding on the amount of allowance. Some of those factors to consider are their age, what they are expected to use the allowance for, and sometimes the cost of living in your area. An easy method, though, is $1 for every year of life per week, age 6…$6 per week. Now it’s time to see how many toys a $6/week allowance really buys you.
There are three common piggy type banks, or buckets, that exist. I have chosen to stick with those for my children, one for saving, one for sharing, and one for spending. Some also add an income tax or family tax bucket, I chose to let them live in denial for a little while longer. Our general rule is 20% to savings, 10% to sharing, and 70% to spending. With a $6 allowance there might also be a little rounding going on, but as they get older it becomes easier. Some people suggest using glass jars for these piggy banks so kids can see the money grow as they save and shrink as they spend. We went with glass jars for the spending and sharing banks so we can get to the money easily when needed and use typical hard to open piggy banks for saving.
Time to Save
Saving can be hard, especially when you just started getting an allowance and there are so many toys out there to buy! Rather than forcing children to save, some people suggest sweetening the deal with a “company” match. Offer to match your child’s savings up to a certain dollar amount. Explain how that decision not only increases their allowance from the original decided on amount, but their savings will now grow twice as fast. It’s hard to say no to more of mom and dad’s money.
Remember to Share
Once they have decided on how much they would like to share, let them do a little exploring. Help your child find an organization related to something they are passionate about. Sharing with a cause that is meaningful to them will make it easier to share and more likely that it will continue for a lifetime. Helping others over time, will teach them to be grateful for what they have and hopefully more careful about how they spend.
Spending (ie. “All those toys and I will finally be together”)
When it comes time to spend, talk to your children about evaluating the value of items they have on their wish list. Ask them a few questions. How long will it hold your interest? Is it something you need or something you want? Do you have enough money or do you need to save for this purchase? Realize that at first, these discussions may go in one ear and out the other. We’ve all been there, dollars just burning a whole right through your pocket. You want to spend it, you don’t care on what, you just want to spend the money. You may feel the need to keep your children from doing this, but it is one of those lessons they need to live to learn. Let them be little and make that mistake so they can learn from it and spend more wisely next time.
Teaching children at a young age to be responsible for their finances will give them the foundation to continue the same behavior throughout their life. And when the time comes, they will be more prepared for the next step… checking, savings, and credit cards. Time goes by fast, it will be here before you know it.