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Allowance time!

New Year, New Me…well at least more focused me!!  The New Year is a great time to get going on a regular allowance practice.

Allowance is all about giving the child a chance to succeed with money. The regular practice of giving allowance and encouraging thoughtful money usage goes a long way in growing money healthy and savvy kids!

At my house when we could not quite remember to get it done each week, we turned the story around and put it on the three kids.  They had to come to my husband or myself for the allowance. Sunday was the day and there was a grace period until Tuesday.   My kids are older now and although each has a unique relationship to money, they understand the accountability of making choices with the money.

Below is a great story from a fellow Financial Literacy advocate:


The Next Rockefellers- Adam Carroll’s look at Allowance

We’ve adopted a page out of John Rockefeller’s playbook as well, though not to the extent John did. Every week he would give his kids a quarter and they had to track giving, spending saving and investing in a double entry bookkeeping journal. If they couldn’t account for every penny spent during the week, they would not get their allowance the following week. This obviously was to teach them accountability with their money.  In our house, on distribution Saturdays, I’m keen to know how much they have in their wallets, and where the money went from last week to this week. In a sense, I’m wanting them to pick up on the fact that they should be tracking what they spent, where they spent it, and what they spent it on.


When it comes to determining what they’re spending their money on, any amount in the spend category is theirs to determine. We’ve reserved the right to tell them no you can’t buy that candy because you’ve had so much sugar already today, but if they want toys, clothes, shoes or miscellaneous junk, it’s their money to spend, we just encourage them to think through what the cost vs benefit might be to them. All in all, they’ve become more conscious of what they’re spending money on, especially since mom and dad aren’t footing the bill for frivolous things.


We have yet to formally announce this change, but as the kids get older and begin asking about camps, athletic events, friend’s birthday parties and presents, and other larger purchases, we’ve decided that they’ll cover a percentage of the cost. Athletic participation is 10% of whatever it costs, so the $200 baseball season is $20 out of my 7 year olds budget.  A year of swim team that costs $400 requires $40 from my daughter.  Birthday presents are usually split half and half. If you want to give your friend a $20 basketball for his birthday, pony up $10 or find a coupon at Dick’s Sporting Goods to make it less. All of these becoming learning lessons.


Here’s the key to the allowance system working..


It has to be consistent. A start and stop allowance program is doomed because the kids won’t take it seriously and it’s effectiveness is determined by the sheer volume of lessons that can be taught over time.

It has to be transparent. We’ve gone so far as to create contracts with our kids so that they understand exactly what’s expected of them and their money. You signed a lease or a mortgage, right? They expect to get paid. You know that. Makes things pretty cut and dried. You don’t pay, you don’t stay. It’s simple.

It’s founded on mutual understanding and mutual agreement. My wife and I have been discussing the parameters of allowance for some time. If we don’t agree fundamentally on how it’s set up, it just won’t work.

The amount of money is not the most important thing… it’s the fact that the kids get real money experience and the decision making is shifted to them.

One of the major questions that is asked is… should it be tied to chores. Again, a very personal decision. In our household, the allowance system is “loosely” tied to a list of chores and jobs that the kids have to help the house run smoothly. It includes:


making sure the dog is fed, has water, is let out, and poop is scooped.

making sure laundry is put away, and when asked that you help fold it as well.

practicing piano (with no griping).

finishing homework each night.

helping pick up the house, yard and rooms every day

emptying the trash

emptying the dishwasher

and, we’re implementing a Kids Dinner night where one night a week, the three of them cook dinner (with supervision of course).

The point of tying money to chores is alleged by some so called gurus in the space to impact work ethic, as in — do work, make money. The more I work, the more money I make. Our children have a good work ethic already, so we reserve the right to withhold allowance if they’re not fulfilling their assigned duties, but it’s not like you didn’t practice yesterday so that just cost you a dollar.


One of the unique ideas we did with our kids was making an issue of them having an emergency savings fund. They each had to have a certain amount in an emergency fund by the time they were 5. At 5 it was $300, at 7 it was $400, and by 9 they had to have at least $500 in an emergency savings account. Anything over and above that amount I encourage them to invest. Now you may be asking why would any 5 year old need an emergency fund, and my answer is they wouldn’t. But if they have an emergency fund at 5, they’ll have one at 10, at 15, at 20, 30, 40 and 50. It’s a scary number of people in America who literally have no savings whatsoever. This is a behavior thing, pure and simple.

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