Allowance

Should Your Child Get One?

Why bring up allowance in a Reduce Expenses category?

Because if your home is anything like mine, you will SAVE money by giving your kids an allowance, and will be teaching them the value of money at the same time.

How often are you in the check out line at the grocery store when your kids bug you into sticking something else in the cart?



The whole “but we’ve been so good!” routine played out to perfection.

Do you shell out money for them to put into vending machines? Or to spend at Chuck E Cheese? Or for a gift for a friend’s party?

Those little things add up each month.

Don’t believe me? Try this. As part of your recording for your monthly budget this month, give your kids their own category.

Write down exactly how much it is that you are spending on them each and every day.

Carry a notebook with you and write down every purchase, be it new pencils for school or an ice cream from the ice cream truck.

See?

You spend A LOT on extra things for the kids.

Now, I’m not saying make them buy their own dinner when you go out, or their own underwear, but there are expenses they can be paying with their own money.

And the older they get, the more they should cover.

Giving children their own allowance does the following:

--It teaches them the value of money.
--It insures that they will be productive members of society when they are older.
--It helps them to completely avoid the debt trap
--It teaches them the concept of paying themselves first
--It provides an opportunity for them to be cheerful givers
--Money is saved by not buying extra toys and candy on non-holidays



How much allowance should they get?

Every family is different. Some can afford $1 allowance a week per child, while others pay their kids so much money each week that I personally don’t understand the lesson value. For instance, I’ve known 8 year olds who get $100 a week. Doesn’t make sense to me.

In our home, we give our children, each week, $1 for each year they have been alive. So our 7 year old gets $7 a week, while our 5 year old gets $5 a week. When our 5 year old became 6, she got a raise to $6 a week. This works good in our home. Everyone is completely aware of how it is structured and when they get increases.

Now, admittedly, $7 a week seems like a fortune to a 2nd grader, but they don’t spend it all.

Why?

Because they know the 10 Percent Rule.

They must give back 10% and give to themselves 10%. In our home, every time our children get money, be it from allowance, gifts from grandma, or even a dollar bill found along the side of the road, they must put 10% into their giving jar, 20% (we really want to hit home savings) into their savings jar, and the remaining 70% is theirs to do as they would like.

We bought Moonjars to store their money in.

They have three compartments: giving, saving, spending.

Each week, our kids divide their allowance money into each part.

They use the spending for money they are saving up for a bigger toy, giving for their tithing or donations, and saving for the money they will NOT spend on anything other than college, investments or retirement.

When the savings jar gets a few dollars, we take it to the bank.

When the giving jar gets a few dollars, the kids decide what they want to do with it. Usually, they either give it to our church or they buy chickens at Heifer International.

It is important to note, that the 10/20 rule in our home is a minimum. Our kids frequently put more in their giving and “Millionaire Fund” than just 10 Percent.

We also have a contest to see who has put the most allowance money into their savings for the year. The child who has the most gets a bonus $20.

The reason we force them to put aside this money is so that it will become second nature to them. That way, when they are 20 years old, and all their friends are using credit or spending every dollar they earn, our kids know that 30 Percent (or 20) is not spending money, it is automatically placed into their giving and saving.

For more information, check out Bankrate's article on key money lessons for kids.

We do not tie our allowance payments to chores. To me, kids do chores not to get paid, but because they are members of our family. We each have to do things, reward free, to contribute to our household. Chores are just that: contributions.

Money on the other hand, is being entrusted to my children to teach them a lesson. They know that Mommy is not a Savings and Loan. If we are in the store and they want something, I will not lend them a dime. They either have the money or they don’t get it.

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Early on in our allowance days, our children were given their money and felt it was burning a hole in their pocket. We went to the office supply store, and my kids both had to buy a pack of gum. My husband and I told them that they could buy the gum, but they would not be getting any more money until next week. We also suggested that they split the price of the gum so that they could each have half, but still have more money leftover.

They were adamant about the gum, so they each bought a pack, and between the two of them, still had $4 left over.

The next day, we decided to take the kids to the beach. We had recently moved to the area, and had no sand toys, so we took the kids to a drug store so that they could purchase some toys with their remaining $4.

They found the perfect set! A big basket of sand toys, with buckets, shovels, those cookie cutter things for the sand! It was great!

And best of all…..only $3.99!

PLUS TAX

Now we had already explained sales tax to the kids. And when their purchase came to $4.35 with tax, they were devastated. Out came the tears. Out came the begging. The pleading. The “please mom, we’ll be good!” and the “its only 35 cents!”

But my husband and I had decided long before entering the store that we would not budge, not even for a few cents.

An older cashier witnessed this exchange and became visibly upset. She offered -rather forcefully- to pay the 35 cents herself. She told me that she had lived through the Great Depression and what I was doing to my children was “cruel and wrong”.

When she said, “when I was growing up, we didn’t have much.” I told her that if I gave into my children now, that when they grew up, they would never have much either. I said to her, “My children are growing up in the land of plenty. If they get everything they want now, they will become debt ridden consumers.”

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You see, we were trying to teach our children about instant gratification. We do not want them to think what the majority of children growing up in America today seem to think: if I don’t have the money now, no big deal. I’ll just charge it. Its only a couple bucks.

If we had given them the sales tax money, the lesson would have been taught, but it would have been the wrong one.

Our schools do not teach our children anything about debt, or money. In fact, they teach just the opposite.

Did you know that credit card companies “help” with the costs of money education at school? These generous companies provide learning materials to teachers, free of charge! They hand out valuable information to teachers to help explain just how much debt a person in America should have. When I was in high school, we were taught that we could have up to 30% of our income go to consumer debt (credit cards, car loans, etc) . But anything more than that we should try to reduce.

Can you imagine! 30% of your income towards debt?? What’s left? Nothing. And this is what we are teaching our children.

Want a good laugh? Watch TV with your kids. The next time you see a credit card ad, ask them what product is being sold, and what the ad is telling you. My favorite is the credit card ad where people are buying flowers. The whole shop is dancing around, flowers are blooming, everything runs in perfect harmony….until one woman decides to write a check. The whole flower shop shuts down, blooms die, people practically crash into each other. So I asked my 7 yr old what the commercial was about. His response: “You have to have a credit card or bad things are going to happen. When you use a credit card, everyone is happy.”

Logical conclusion. The advertisers are doing their job, creating brand loyalty from small children who will automatically reach for their product when they are old enough.

This is actually a fun game to do with all commercials, not just credit cards. My kids think eating Cheetos® snacks will turn your tongue green, or that toys come alive when you play with them. We just don’t realize what this school aged group of kids can and cannot comprehend. Seriously. They literally believe everything they see and hear.

Now, I go through commercials with them and explain what they mean, and why things are advertised. But it doesn’t always work. We don’t buy cable TV, so the kids occasionally watch infomercials instead of cartoon channels. Not a week goes buy that my son isn’t trying to get me to buy the latest offering on an infomercial, from siding for the house (remember, we live in an RV ) to floor cleaner, he is completely swayed by marketing. But we are working on it.

So what do my children have to pay out of their allowance? In addition to their mandatory minimums on giving and saving, they have certain items that we do not buy for them. We will not buy candy or toys unless it is their birthday or Christmas. We won’t give them a quarter for a gumball machine or a video game. We do not buy snacks at gas stations, or ice cream from the ice cream truck. We do not give them extra money to buy gifts for others.

As they grow older, their allowance will increase, as will their responsibilities. They will be given a salary, based on Mary Hunt’s book Debt-Proof Your Kids. We will abandon the $1 allowance per year you are alive rule, and give them a substantial increase, allowing them the opportunity to pay for their own toiletries, school lunches, field trips, clothing, and activities.

This will not happen overnight, but instead will be a process they learn over time, preparing them to be productive adults.

Bottom line: an allowance saves you money, and prepares your kids.

Why wouldn’t you do it?

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