My recently 15-year-old son got his first summer job, so he wanted a bank account. As the banker was teaching us about his account and such, she mentioned “overdraft fee.” After she said this a few times, I looked at him and said, “Do you know what ‘overdraft’ means?” He didn’t. I said, “It’s like when someone is in-the-hole for allowance. But they make you pay for going in-the-hole.” This made sense to him.
There were more discussions about how I would check and monitor his bank account. I said, “I don’t think I’ll have to? It’s his money?” Much like the reason I rarely check my kids’ grades on PowerSchool: They’re not my grades. My banker complimented our parenting decision to give an allowance and teach the value, ownership, and consequences of money prior to getting to the banking account point.
There are pros and cons to giving allowance. If you google “should I give allowance,” you’ll find many different answers. Dave Ramsey suggests a commission system. As someone who can barely fill out an allowance sheet every week, this sounds like a lot of work. Also, I don’t know Dave Ramsey’s children. But for any mom who has ever gone back and forth with a “tricky fellow” of a kid (aka: ADHD, intense, defiant, strong-willed, naughty, argumentative, oppositional, non-listening kid), we know that any chore we throw at them on a commission system will be met with a campaign of why they should have more money per chore. Along with a chorus of “nos” towards the chores we ask of them when they don’t want the money because grandma just took them on a shopping spree, or they’re in a “no” kind of mood.
When my first child reached about age three, I realized she wanted “stuff.” As someone whose love language is not gift giving, I didn’t just want to give her stuff. I didn’t want to buy a toy any time, let alone every time, we went anywhere. I wanted to take her to stores and to the zoo and to a fair, but I didn’t want to buy stuff when we went places. I didn’t want my kids constantly asking for things.
I think it’s important to empower kids and give them control where they’re able to have it, so I was always looking for places to give them autonomy; having them control some money was an easy place to hand over some control. I also needed a logical consequence to kids being chronically irresponsible with items or chronically breaking stuff. Being trained as an educator in Love and Logic and the Nurtured Heart Approach had taught me that natural consequences were the best thing I could give my children to allow them to learn from their mistakes. All kids lose mittens or a hat a time or two a winter. I told my kids that I’d buy the first replacement of the winter, but they’d buy the second. I’m sure they lost their mittens, but they were always wise to check the lost and found on the bus or at school or retrace their steps and find it when they did.
My tricky fellow is impulsive, and that includes breaking stuff. When he was five, his favorite thing to do was launch things into the air as high as possible. Of course, this did not include thinking about where the thing might land when it came down. Making him pay some money to repair things he broke made him see that he didn’t then have money to chase down the ice cream truck as it came on our street.
I had received allowance as a kid, and so the idea made sense to me. I thought I had heard something on the Oprah show about allowance being a good idea. I asked my financial advisor for her recommendations, I asked a mom-friend, I googled, I read. After my studies and training, I was drawn to the idea of giving an allowance without linking payment directly to a chore.
My kids get a weekly allowance, no matter if they did 500 chores or they were gone at camp for a week. A chore is done because I need some help, and everyone in the family needs to be helpful; a chore is not done for payment. I give allowance in place of buying them stuff. If parents who don’t give allowance (and are in a similar income bracket as us) compared what they spend each year on “stuff” for their kids, they likely have a very similar number to what we pay in allowance each year. And similarly, moms who buy kids a toy or electronic here and there, when they feel like it, or say no when they feel like it, versus giving an allowance still have kids who do chores at home.
We started allowances at age three. That was pretty early, but it worked for us.
The kids got half their age per week for payment. One week per month is put into a saving account. So a three-year-old makes about $4.50 per month. A 16-year-old makes about $24/month. (Each January, we parents just take 12 months x 1/2 their age and add that to their 529 plans.)
Parental compliance is probably the most difficult thing with allowance. I set the bar very low on this one. Each kid has a column. I picked Wednesdays as a “pay day.” About every three or four Wednesdays, I remember to add things up. I write down when I take out savings to ensure that is not missed (and so the kids can see it as an “automatic” thing.) When the kids want to buy something, I give them cash or I buy it on my bank card. When we get home, they/we get out the allowance sheet and subtract and total it out (depending on age.) They write down what any additions or subtractions were for, mostly so I don’t forget and say “Hey, did you ever pay me for that video game I paid for at Target the other day?”
When the kids were little, they needed to have cash to really see and understand. So I’d go to the bank every now and then, and take out $100-$200 in smaller bills so that I could physically pay them the allowance every week or so. Much like a checking account, I’d simply write a balance of zero on the allowance sheet and write PAID CASH. They kept their money somewhere safe in their room. When the kids were little and we’d go somewhere on a trip, I’d have four different envelopes of money. This allowed the kids to see how much they had and we could count out how much the things they wanted to buy cost. If they didn’t have their money with them and wanted to buy something on a random day, they’d pay me in cash when we got home. Now when we go on a trip, I just make a note in my phone of how much each kid has in allowance at the time of the trip and I subtract as we go and they glance at it, much like they would a banking app.
As I said, I don’t pay for chores. Allowance isn’t tied in any way to chores, and this also eliminates threats of “if you don’t do ‘fill-in-the-blank,’ I’m not going to pay you your allowance.” The kids will ALWAYS get an allowance, no matter what. And they are expected to ALWAYS do a chore when I ask, no matter whose turn it is or who has done more chores today or how dumb the chore is.
They may have to use their allowance to pay for something they break (see -$50 for a new Kindle, after my son left mine on the floor for the 50th time and someone stepped on it), but the allowance won’t get taken away. Allowance goes up with age, and so do the family responsibilities. Older kids might have to watch siblings or drive them to/from places or make supper. But again, allowance and responsibilities are not tied to each other. You can also see that once a kid gets a job (my daughter), they don’t really touch their allowance money and they become my ATM when I need cash. We’re currently discussing where that money should be put, versus sitting in the “allowance bank” where she earns 0% interest.
We also don’t buy birthday presents or Christmas presents; allowance is sort of in place of the gifts. Santa brings each kid over age ten a gift around the $100 mark; we tried to keep it much lower when they were little. Our birthday gift was always their birthday party; when they stopped having parties (12ish), we did buy them a small gift. When they started to realize that we weren’t buying them gifts and asked why, we said we would either do allowance or gifts, but not both. So either they’d need wait for Christmas or their birthday for us to buy them a Switch, or they’d need to save their allowance money for a Switch. The kids all liked having the control that allowance afforded them, and so we continue.
A con that makes allowance difficult is “Well what will mom/dad buy and what does allowance buy?” From the start, we’ve said that we parents will buy needs, they will use their allowance money for wants. For example, I didn’t want to buy snacks at Disney World; it’s plenty expensive without snacks. So I brought snacks that we might need. The kids could use their allowance money to buy a $12 ice cream cone they want, or they could eat the snacks I brought. (FYI: two kids had such buyer’s remorse after buying a snack that the other two were happy to learn from their mistakes.)
Example 2: A kid needs winter boots; they don’t need Uggs. My daughter, who was then 12, really wanted Uggs. The boots I was willing to buy were $80, the Uggs she wanted were $120. So she paid for $40 and I paid $80 and she got the Uggs. We buy clothes they need; they buy the extras. We don’t buy gas for their car that we split the cost of; they take our minivan if they have to drive a sibling somewhere or run an errand for us. Many times, my husband and I will decide that an experience is something we want them to do, and we may send them to camp or on a trip. This “who buys what” has really only been a problem when it comes to the older teenage daughter and clothes; everything else the kids have wanted has been self-explanatory that they need to use their allowance.
Another con is the massive regret I have over deciding to pay them to mow the lawn. That should’ve just been a chore like any other chore, and not attached to allowance. I didn’t follow my own advice on that one.
As parents, we have never needed to charge interest or an overdraft fee. The kids really don’t like having a negative balance, and it doesn’t often happen. Much like they don’t like getting bad grades, they are intrinsically motivated to stay out of the red.
There are many ways to teach kids about money. For our family, allowance has worked well.