Feeding the hungry piggy bank…

photo credit: ken +
When I was a child, my brother and I received a weekly allowance of $2.00 each. Usually in quarters, since our dad’s was co-owner of a video game vending business. I was the one who usually ran out to spend my eight quarters right away, while my brother saved his up. As you can guess, I was quite peeved when after several months he had enough money to make a big purchase, and I did not. 

Teaching kids about the value of a dollar, and how to best manage their money is not an easy task. There are temptations everywhere – from television and print ads to their breakfast cereal box and just about any store they step into. And to be honest, we adults are not always the best role models in this regard either.

My husband and I had been meaning to start giving our older girls an allowance for quite some time. Our oldest is in second grade and our second daughter is in kindergarten – plenty old enough to be able to have some pocket money to spend.

Or to save…

We started during this past summer. Our previous attempts at doling out an allowance had been complicated by the fact that we rarely have the requisite amount of cash on hand. I finally remedied this by basically giving each girl a ‘line of credit’ so to speak. In other words, we keep track of how much allowance they each have and any purchases are simply paid by us with the same amount coming out of their ‘account’.

There are a few separate factors to consider when instituting an allowance system.  First, what (if anything) do they have to do to earn their allowance? Second, are they required to save any portion of their allowance or can they spend it all if they so choose? Third, how much do they get? And last, is their allowance tied to any kind of discipline system?  These are questions that every family has to decide for itself, based on experience, value system, financial background and what they know about their own kids.

Here’s what we chose to do with our girls.

1. Do they earn their allowance, or just automatically receive it?
   What we chose to do is to automatically start them off with a set amount every week. But – we also added in a ‘responsibility factor’ as well. The girls have specific things that they’re required to do, just a ‘family responsibility’. These are simple, age-appropriate things like putting dirty clothes in their hampers, dealing with their dishes after meals, etc. But what I did is to choose one ‘job’ in particular, tailored to each daughter’s age and circumstances and tie that into their allowance. If that job gets done every day, without reminding, then everything stays status quo. But if they fail in that one responsibility, they automatically lose 50 cents from that week’s allowance. And if they fail again, they lose another 50 cents. Whatever they have left by Saturday, is theirs to spend or save.
2. Are they required to save any portion or can they spend it all if they choose?
   We went back and forth on this one, and finally decided that ultimately, it’s the girls’ responsibility to manage their money wisely – and there’s no better way to learn than by experience. So, it’s completely up to them as to whether they save all or any portion of their allowance or spend it all every week. Now that being said, I make a concerted effort to make them think their purchases through and understand what the state of their finances is at any particular time. We track how much they have, so they can see at a moment’s glance what their status is.
3. How much is their weekly allowance?
   We ended up deciding on $3.00 per week per child. It’s enough that they can actually buy something small if they want to – but not so much that it’s breaking our own pocketbooks to pay out (times 3 eventually). Of course, it sometimes ends up being less depending on whether or not they’ve lost any during the week (see #1).
4. Is allowance tied to discipline at all?
   For our own family, we chose not to relate the girls’ allowance to how well (or poorly) they behave. That may change in the future, but for now it’s completely separate.

Again, these are the decisions we made for our own children and the lessons we’re trying to teach them about managing their money. What I’ve observed in the weeks since we started with this allowance system is in some cases about what I’d expected and in other cases, very surprising to me. So far, neither of them has  successfully ‘saved’ a week’s worth of allowance for more than a few days after receiving it. However, both of them almost always want to at first. Giving them their own pocket money has helped with the begging in the checkout lanes quite a bit. It’s a relief to simply ask them if they have enough money to purchase whatever-it-is that they ‘must have’, and since the answer is usually no, there’s really no point in begging anymore. The decision is out of my hands – but instead in their own. After all, if they save up their allowance, then they could buy whatever-it-is at some point. And I think that lesson’s definitely starting to sink in.

One thing that I do love about how we’re handling this whole allowance issue, is that everything is completely flexible.  If we choose to do things differently in the future, we can. If we want to increase their allowance amount, increase (or decrease) how much they ‘lose’ for not completing their responsibilities (and even how many and what kind of responsibilities are tied to their allowances), or add any other tweaks to the system – it’s easy to do, as long as the basic concept remains consistent.

I’m hoping as our girls grow older and start managing larger amounts of their own money, that the lessons we’re attempting to teach them now are ones that they will remember and that they will make smart choices with their finances – better ones than their father and I did.

Do you give your kids an allowance? What kinds of rules do you have in place for how it’s earned and spent (or saved)? Please share your stories in the comments – I’d love to hear what’s worked (or not worked) for you… 

This post was written as part of the Parent Bloggers Network‘s blog blast on ‘Money Doesn’t Grow on Trees’, in conjunction with Capital One. Check out their new online interactive Moneywi$e eLearning tool to help families learn about money management skills, including talking to kids about money!