Saturday
Nov222008
Money money money money...
Saturday, November 22, 2008
For today's reader question, I'm going to partially pass the buck by linking to some great resources and then add my own 2 cents to it (pun intended). Michelle asks:
My readers have the greatest questions! Thanks for asking this Michelle. You are right that we haven't tackled this yet, but it is something that I've thought about and I certainly have some thoughts on it.
I do plan to give our children an allowance as a tool for teaching responsible money management. I want to teach them about the trade-offs between buying something small now versus saving your money for a few weeks or months to get something that you really want. I want to teach them to give to charity. I want to teach them to put money away for the future. From that perspective, I really like the allowance system developed by the parents at raising4boys.com. They give their children a certain amount based on their age (in their case, $0.50 per week per year of age) and that money gets divided into spending money (60%), long term savings (30%) and charity (10%). I think the amount given can vary depending on the family, but I love the idea of having a formula like that to divide it up. I think it is important to teach our kids about saving and it is also important to teach them to give to those that are less fortunate than they are, just part of trying to overcome the empathy deficit in our society.
The question of age is a good one. I think you have to judge your own child's readiness and interest in things related to money. I think we'll probably start a bit later for my son (maybe at 5 years), but probably a bit earlier for my daughter, since she will see her brother getting money. The parents at Raising 4 Boys also answered the question of the right age to start an allowance and concluded that 3 years old was right for their 4th child.
When my children are older, I also plan to implement something that my dad did. When we were out of high school and starting college and university, my parents generously supported us in our education, but also expected us to have summer jobs to earn some of the money ourselves. In order to figure out how much money I would need, my dad required me to submit a budget. I had to indicate how much money I would need each month for things like food, rent (when I went away to school), clothing, entertainment, etc. and then we reviewed it together and he scoffed at some of the numbers being too high, warned me in some cases that I might not be budgeting enough, and so on. It was a great way to prepare for heading out into the real world.
I do expect our kids to contribute to the household and as they get older we will have to figure out the best way to manage that. At the moment, they love to help with some things (unloading the dishwasher, vacuuming, matching socks, setting the table) and don't like other things so much (cleaning up their toys when they aren't done playing). Fair enough. Everyone has chores they like doing and ones that they don't like doing. I can envision a process in the future where we sit down as a family and agree who is going to do which chores, giving each person a chance to choose some favourite chores, but possibly also having to take on some not so favourite chores.
If our children continue living with us as adults, my expectation is that they will contribute financially to the household as well. We will work out a system for them to pay a certain amount of rent based on what it costs us to have them in the house and/or what they are earning.
I don't think it is a good idea to tie an allowance to a child's behaviour or to their household duties. You often hear parents threatening to take away their allowance if they don't make their bed, don't clean up their toys, aren't nice to their sister, etc. I think this sends a bad message. They start to expect money for doing those things and will start to refuse to do anything if not paid for it. I want my children to learn the value of cooperation, of contributing to the household, of getting good grades, and helping others without expecting to be paid for it. I see way too many young people entering the workforce these days that are always questioning what they will get for any extra effort that they give and I really don't like that attitude. This article by Aletha Solter talks more about why an allowance shouldn't be tied to specific household duties.
I'm an entrepreneur. I always have been an entrepreneur. I was a successful babysitter as a teenager (and I'm still amazed that I often managed to take care of 3 or 4 kids at a time with ease whereas my 2 kids completely exhaust me now!). I also started a business teaching private swimming lessons in peoples homes. I also worked in my father's business, sometimes as an employee and sometimes working on special projects to earn a bit of extra cash.
I would like to give my kids the opportunity to earn some extra money by being entrepreneurial, both inside and outside the home. Some families have a list of extra chores that their kids can choose to do to earn extra money and I think that is an option. But more valuable than that, I think, would be to get them to propose ideas for things they could do to help and get paid for in return. Essentially, I would want a mini business case or proposal for what they are suggesting. I will also encourage them to start their own money making endeavours outside of the home, whether that is something as simple as babysitting or as complex as figuring out the next big trend in IT and capitalizing on it.
I want my children to understand the value of a dollar, but I also want them to understand that money isn't everything. I want them to value friendships, taking time to relax, and enjoying the simple pleasures in life. How will I do that? I'm not sure yet...that is maybe a question for another day. Or for my readers. What do you think? How will you teach your kids that money isn't everything?
Do you have a question for PhD in Parenting? Check here for instructions on submitting a question: Questions?
Today I revisited a question that's come to mind a few times, in slightly different forms, but with the same concept. I also read, and loved, Alfie Kohn's Unconditional Parenting; it gave me so much to think about. So many things that my parents did that I thought were good (um, monetary rewards for grades?!), I now see in a different light...
Which brings me to my question. My three-year-old son was helping me pick up the house today, and the thought of an appropriate age to begin allowances popped into my head. Then I thought, no, no allowance: that's essentially bribing my son to help, when theoretically, I'd like him to help just because he's contributing to his family and that makes him feel good. But at a certain age, I think children are also going to start wanting their own money (which I wish wasn't true, but I think in our consumer based society, it's going to be hard to escape), and until they can get a real job, what do you do? I certainly don't want my children to learn to expect money from me whenever they want it; money has to be earned and I think there's a lot of valuable lessons we as parents can teach about saving, when to spend, etc.
I know we are several years away from worrying about any of this, but I like to think to the future :) And it's a question I've thought of a couple times now. I believe your children are also quite a few years from tackling this subject, but I would love to hear what you think about the topic.
My readers have the greatest questions! Thanks for asking this Michelle. You are right that we haven't tackled this yet, but it is something that I've thought about and I certainly have some thoughts on it.
Teaching Responsible Money Management
I do plan to give our children an allowance as a tool for teaching responsible money management. I want to teach them about the trade-offs between buying something small now versus saving your money for a few weeks or months to get something that you really want. I want to teach them to give to charity. I want to teach them to put money away for the future. From that perspective, I really like the allowance system developed by the parents at raising4boys.com. They give their children a certain amount based on their age (in their case, $0.50 per week per year of age) and that money gets divided into spending money (60%), long term savings (30%) and charity (10%). I think the amount given can vary depending on the family, but I love the idea of having a formula like that to divide it up. I think it is important to teach our kids about saving and it is also important to teach them to give to those that are less fortunate than they are, just part of trying to overcome the empathy deficit in our society.
The question of age is a good one. I think you have to judge your own child's readiness and interest in things related to money. I think we'll probably start a bit later for my son (maybe at 5 years), but probably a bit earlier for my daughter, since she will see her brother getting money. The parents at Raising 4 Boys also answered the question of the right age to start an allowance and concluded that 3 years old was right for their 4th child.
When my children are older, I also plan to implement something that my dad did. When we were out of high school and starting college and university, my parents generously supported us in our education, but also expected us to have summer jobs to earn some of the money ourselves. In order to figure out how much money I would need, my dad required me to submit a budget. I had to indicate how much money I would need each month for things like food, rent (when I went away to school), clothing, entertainment, etc. and then we reviewed it together and he scoffed at some of the numbers being too high, warned me in some cases that I might not be budgeting enough, and so on. It was a great way to prepare for heading out into the real world.
Contributing to the Household
I do expect our kids to contribute to the household and as they get older we will have to figure out the best way to manage that. At the moment, they love to help with some things (unloading the dishwasher, vacuuming, matching socks, setting the table) and don't like other things so much (cleaning up their toys when they aren't done playing). Fair enough. Everyone has chores they like doing and ones that they don't like doing. I can envision a process in the future where we sit down as a family and agree who is going to do which chores, giving each person a chance to choose some favourite chores, but possibly also having to take on some not so favourite chores.
If our children continue living with us as adults, my expectation is that they will contribute financially to the household as well. We will work out a system for them to pay a certain amount of rent based on what it costs us to have them in the house and/or what they are earning.
Not Tying Money to Behaviour
I don't think it is a good idea to tie an allowance to a child's behaviour or to their household duties. You often hear parents threatening to take away their allowance if they don't make their bed, don't clean up their toys, aren't nice to their sister, etc. I think this sends a bad message. They start to expect money for doing those things and will start to refuse to do anything if not paid for it. I want my children to learn the value of cooperation, of contributing to the household, of getting good grades, and helping others without expecting to be paid for it. I see way too many young people entering the workforce these days that are always questioning what they will get for any extra effort that they give and I really don't like that attitude. This article by Aletha Solter talks more about why an allowance shouldn't be tied to specific household duties.
Teaching About Earning Money and Entrepreneurial Spirit
I'm an entrepreneur. I always have been an entrepreneur. I was a successful babysitter as a teenager (and I'm still amazed that I often managed to take care of 3 or 4 kids at a time with ease whereas my 2 kids completely exhaust me now!). I also started a business teaching private swimming lessons in peoples homes. I also worked in my father's business, sometimes as an employee and sometimes working on special projects to earn a bit of extra cash.
I would like to give my kids the opportunity to earn some extra money by being entrepreneurial, both inside and outside the home. Some families have a list of extra chores that their kids can choose to do to earn extra money and I think that is an option. But more valuable than that, I think, would be to get them to propose ideas for things they could do to help and get paid for in return. Essentially, I would want a mini business case or proposal for what they are suggesting. I will also encourage them to start their own money making endeavours outside of the home, whether that is something as simple as babysitting or as complex as figuring out the next big trend in IT and capitalizing on it.
Money Isn't Everything
I want my children to understand the value of a dollar, but I also want them to understand that money isn't everything. I want them to value friendships, taking time to relax, and enjoying the simple pleasures in life. How will I do that? I'm not sure yet...that is maybe a question for another day. Or for my readers. What do you think? How will you teach your kids that money isn't everything?
Do you have a question for PhD in Parenting? Check here for instructions on submitting a question: Questions?
Reader Comments (16)
I just edited to add some info on the appropriate age for introducing an allowance (under the Teaching Responsible Money Management section) because I realized I forgot to address that aspect of the question.
Another great post! I would say I agree with everything you've said here. Here's how we do it with our kids.
My husband likes the ideas at http://www.fiparent.com/
We decided that when our kids started asking us about money, then we would begin giving them an allowance. So when my son asked how much things cost and was paying attention to how we spent our money, we wanted to begin. Unfortunately, we weren't able to because of being unemployed, but we started as soon as we could.
Since B and I have an "allowance" we give one to our son as well. We set the basic rules like he has to put $1 into savings each time he gets his allowance and he can not spend his money on junk foods. He also has to pay for things that he damages or breaks. For example, he lost a library book and he had to pay for it with his money. The last rule is that if we aren't buying for the entire family, and he wants something, he will have to purchase it. Like if we go to a pizza place with arcade games, we might give each child a dollar for games, but above that has to come from his money. If he doesn't remember to bring it with him, then he can't play more games.
Working around the house has nothing to do with money at all and has never been linked to it, so he sees no connection. We also do not tie money to behavior. So far it's been easy to keep up with. I pay him when I pay the bills every two weeks and he hasn't spent but one dollar of his money on anything since. I'm not sure why exactly because he asks for things all the time, but whenever I bring up his money, he changes his mind.
As part of his education about money, I invite him to watch me pay the bills and ask questions. He hasn't been that interested so far. I do sometimes wonder if he's really ready for his allowance. By the way, he is nearly 8 now, but he didn't start asking about money until this year. My two girls are still too young.
[...] teaching our kids about the value of helping other people, about the value of nature, and about the value of a dollar, can all help somewhat to curb the corporate influence. However, sometimes I feel a bit helpless to [...]
good post
I like most of what you're saying here. I won't have kids for a few years at least, so I can't directly relate, but I do have a question. I see in my generation and a bit younger (I'm late 20s) a certain sense of entitlement among many of my peers when it comes to money. This leads to consequenses such as out of control debt and poor work ethic. I feel that much of this sentiment originated perhaps because they received money (allowance) from their parents whether they helped around the house or not. While I definitely see your point about not wanting to tie household chores to allowance, how would you suggest balancing that with teaching children that money is not a given, that it needs to be worked for and respected?
Thanks! (Great blog, btw!)
[...] teaching our kids about the value of helping other people, about the value of nature, and about the value of a dollar, can all help somewhat to curb the corporate influence. However, sometimes I feel a bit helpless to [...]
[...] by encouraging kids to save for the things that they want. I wrote about allowances in my post Money, Money, Money and I also love Amber Strocel’s post on Starting an Allowance and Raising 4 Boys Allowance [...]
Great post, as usual :) My oldest is only 3 but she definitely has ideas around money already. Items she wants are endless; if she wants more of something, we can just go to the store and buy it. I think part of this is due to her grandparents spoiling her a little bit. That's what grandparents are for I suppose but considering my MIL has served as a primary caregiver while my husband and I went to work it hasn't sent the right messages perhaps about money.
I think I will consider the allowance thing once she is around 5years old. It might start sooner for her sister since as you mentioned, she will see her sister getting money and will expect the same treatment. I remember getting an allowance for completing my set chores but I'm not sure exactly how we will work it out. This will be a discussion between my husband and I in the future.
Personally, I think getting an allowance and being able to spend it how I wished helped me as an adult. I hate being in debt to anyone, I never wanted to borrow money from my parents as I was going to school. I hardly use my credit cards and when I do, I pay off the balance right away. So whatever my parents did, I guess it worked :)
Great food for thought, thanks! My oldest son recently turned 5 and has become money-obsessed. In an informal poll of our readers, 5 years old seemed to be the magic age for allowance but the amount varies wildly (as one might expect). Without doing any research, I was thinking $.75 and a quarter would go into each of SPEND, SAVE, GIVE categories and my husband suggested $1.50 with the same breakdown. The percentages you propose do seem a little more realistic.
Hmmmm. Back to the think tank to figure out our own answer now.
I have given my kids allowances for sometime now and its worked well. They're chores associated with their allowance are to respect to their personal space in the house. Household chores are something they nee to help with as they live in the house and are expected to help- I'm not paying for those. Our rule is 1/2 the allowance goes into the bank and the other half is there's to do what they want with. When the save to buy something their sense of accomplishment is huge, they take batter care of it & normally it would have been something that I would have bought anyway. As a side note I also pay for school grades & there's a curve involved so both kids scales are designed to their abilities.
Great post, and it will make me reconsider our system. We give our kids an allowance of $3 per week (they are 7 and 9), but whatever they spend, they have to put the same amount into savings. So if they buy a toy for $10 (after saving up for a while), they have to put $10 into savings. There are certain chores they are expected to do, but if they really want something we discuss projects with them that they could do to earn extra cash. I like the idea of setting something aside for giving, so will add that to the mix!
My oldest son is almost 8 and we are still settling into our own allowance system. Thus far he doesn't really need a weekly stipend...and to be honest, I forget to hand over a weekly allowance. I think in the new year we will arrange a weekly amount for him and my 5 y/o son. I'm divided over whether or not to include the 3 y/o son. He isn't really old enough to need money, but his awareness of money and having the ability to buy things is greater than my oldest son's was at that age, because of his position as youngest child with two older brothers.
We do not link chores to any reward system, financial or otherwise. Everybody who lives in our family shares the work, sometimes voluntarily, sometimes when asked, because we all live in this home. So far the boys are very helpful and appreciate the natural benefits of housework: belongings that are easy to find, few broken toys, a clear space to play, a favorite shirt that is clean when you want it, etc. I don't want to disrupt this by introducing a reward system! My feeling about an allowance is that it is a logical way to share the family wealth. All of us have responsibilities, and all of us share in the family wealth (which is officially earned by my husband, but all of us "work" one one way or another). Friends have challenged me, saying "what if they don't work? The consequence for not working is not getting paid!" Is that true? Don't most of us slack off sometimes without significant consequences? I didn't do laundry yesterday, and consequently, I had to wear dirty jeans today. Nobody cut off my access to my bank account. Similarly, I won't cut off an allowance because toys weren't picked up when I wanted them to be.
I like the idea of spending money/savings/charity but thus far I have been uncomfortable with *requiring* a specific distribution. We do talk about saving and the tradeoff between spending now and saving for later, and we all have opportunities to share our wealth (in the form of our time, talent, or treasure) with others.
I think that 3 is too young, only because my own kids simply didn't *get it* at three. My three year old happily sorts coins and puts them in and out of a piggy bank and knows what money IS, but it has no value to her in relation to the world. And until my twins started first grade this year & much of their math so far has been tied into reading a clock and counting coins, they didn't, either.
My oldest is almost 9 and did receive an allowance for a very brief time, but unfortuantely, we were too broke to sustain it and really needed that $2 a week for other things. Sad. But he is more interested in buying stuff now & I feel often like my "yes" and "no" are kind of arbitrary and I would love for them all to have a better idea of the value of money and how important it is to save and what we DID start telling them from a young age is that there is no college savings account being kept for them - they need to bust ass when it comes to their education.
Anyway, thanks for this post and the links. I did decide that I'm going to start an allowance for my oldest come the new year. I have to decide whether or not to include the twins. And they are all generally helpful around the house - my son is a great room straightener, they'll all happily set or clean off the dining table, and they'd love to be more hands-on with meal prep. I think that the problem is actually that some other jobs, like laundry or taking out garbage, really aren't kid-appropriate in our situation logistically.
My son asked me last night why I wasn't punishing his sister for hurting him and I said, honestly, I just don't think that the kind of punishment you are expecting me to dole out to her works - and lo, I've never punished you in that way, either. So the idea that I would pay them for additional tasks on top of working together to maintain a household is something that I've been struggling with. I'm looking forward to reading more & giving this lots of thought.
[...] some thinking and research, we decided to implement a spend-save-give system (as inspired by PhD in Parenting) to teach our greedy kid some charity and saving habits. We messed around with the formula a little [...]
We give our 6.5 year old a weekly allowance. She has 3 jars, give, save, and spend, and each week has to allocate her allowance into those jars. But we allow her to decide how much, and it typically works out to the formula above. Once a month she deposits her savings into the bank (it might only be $2) but she is responsible for getting it to the bank. She also gets to decide which charity she wants to give her money too. This month she is thinking about the SIERRA club. We plan to match her donation to her charity. It's worked well, the spend, save, give part. And it is not tied to chores. However, we have a "backtalk" jar, and whenever she talks back to us she is expected to put a quarter in the jar. I am just not sure this is working since she spends most of her spend money on talking back and is not really saving it for something she wants, and it's not much of a deterrent to talking back, so I think we need to reevaluate.
This year we chose the charity for our kids (because so many things go into making the decision about which ones to support), but chose one where they can choose which "gifts" to purchase with their funds - i.e. baby goat vs. mango tree vs. school supplies.