Kids Allowance - Learn Me Please

Hello All,

My oldest child is 6 1/2 now, and I have been thinking about starting to teach her about the finite availability of money, so naturally, after both my wife and I admitted we had no berkeleying clue how best to do it, I thought I would turn to the GRM hivemind!

So, we think that giving her an allowance would be the best start, and then letting her use her allowance to buy the "luxuries" a 6 year old girl craves. What I have no clue of is how much of an allowance to give her, as well as what strings to attach (if any) to receiving it and spending it? Do we make her do extra chores, or set behaviour/manners expectations, etc.? Is cash still king, or should we set up a "virtual" account for her that she can credit/debit money out of?

Any and all thoughts are appreciated. Thanks.

The biggest risk with cash is it promotes all of the off-the-books spending. Believe it or not, every school has a black market: be it candy, Pokemon cards (well, not anymore), LEGO figurines (seriously... my nephew has a lot to learn...), etc. Unless you're willing to teach your daughter to be the entrepreneur and exploit those other kids (and how better than to have her discreetly sell bubble gum between class), I'd recommend something more along the lines of a rechargeable VISA gift card. That way, they can use it in stores, they can use it to buy digital delights (iTunes/Android purchases), and you can track it if needed. Plus, it'll get her in the habit of carrying a wallet with an ID and contact information.

We went with the dollar-per-year a week allowance. So a six year old would get 6 bucks each week. But also have then start using their money for gifts for others, so they learn to save up if they want to buy something nice.

Chores are expected so I didn't want to start paying the kid to clear the table.

Honestly, we didn't care for the "virtual" account. Kids need concrete things and individual dollar bills are very real. A number on a page is much less so.

I'm in the camp of "work extra chores for income" group of people. It's been working well as my oldest 3 have learned to save for large purchases vs wasting on garbage all the time.

I'm glad you brought this up because I've been meaning to set up an allowance for both my kids. All necessities and most luxuries are funded by us already, but I want them to appreciate the cost of goods.
My son (10) is a video game junkie and is willing to spend every minute and every penny he has on games and digital downloads. He also has a bad habit of breaking electronic devices (old iPhones, chargers, gaming headsets), so making him buy replacements is important.

My daughter (12) is a lot more reasonable on purchases but it's always good to make them appreciate how expenses add up and what financial priorities are.

This came up in a quick interwebs search. Should be a good start- allowance calculator

Im in the same boat, my daughter is 7 now, we give her some cash every now and then for chores/doing laundry etc. She gets to keep it, but has to ask to spend it. She bought some american girl doll clothes last time, online and gave me cash. Is NOT allowed to spend without asking or take to school.

In reply to Kylini:

The black market is SO true. She comes home with all sorts of random crap she "traded" or was given at school. And Pokemon cards are still a thing.

My kids are 8 and we dont do allowance so maybe im slacking. We tend to just take them out to get a toy or something. They did manage to save enough birthday and christmas money to buy 3 ps3 games and rc cars. Wifes too much of a pushover to add stipulations too anything. There expected too keep there room clean without bribery.

We started our kids off at $2.50 a week. However 10% of that goes to a charity of their choosing (usually once a year) and 10% to savings.
To 'earn' this they have to do their chores and behave. They can get their pay docked for failing to do things they are asked to or throwing a tantrum or talking back. Usually they're warned that certain behaviour costs $1 if they engage in it. Past about 10-11 allowance goes up as chores go up. They still have the 10%'s.
They ask for extra work in the yard to earn more. Deucekid#2 was running a black market brownie ring at school for a while to earn extra cash. The big kids now have a bank account with a debit card attached to it so they don't have to carry cash.
They've all made mistakes and impulsively bought things they wish they didn't. Those were good lessons. A lot of times now they will look at what they want and check to see how long it is until birthday/Christmas and wait to put it on their list. They've had fun donating money and they can see how their savings have grown with the power of compound interest (the bank of dad has been paying 6%) and at least a couple of them are interested in moving that savings into stocks in the future.
It seems to be working out so far.

Lots of great ideas here:

http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/

As a kid, we did not get allowance. We kept the money we got for birthdays/etc, and used as we wanted. We did get extra money for each page we read from a book or magazine, and I really like MMM's idea of paying per mile walked or ridden as well.

I would caution about tying allowance to chores, as I have heard that it can instantly stop your kids from doing anything unless they are being paid to do it. (like any other parenting, becareful of the 'contract' you write). I think giving money for 'extra' housework is fine, as long as that is clearly the communication. i.e. I might pay you for 2 days helping me re-landscape the backyard, but hell no am I paying you to clean your own dang room. That is your responsibility as a member of the family, not a job I pay you for.

SWMBO had the rule "If it's not your birthday or Christmas don't ask for it, because you're not getting it." that all the kids could recite from a young age. We didn't do allowances, but we did pay(and deduct) for grades.

We set up a virtual economy for our girls (eight and eleven) to invest in so they’d develop an appreciation for the high price of immediate gratification. We’ve got inflation, taxes, and variable rates of return modeled. Return is modeled by summing the roll of two dice…can’t do worse than two percent or better than twelve percent and the average will be seven percent so it’s a reasonably good analog for equities. To compensate for their short attention spans, we roll once a week and the competitive nature of siblings does all the heavy lifting from there…blow your dough on immediate gratification stuff and you’ll see suffer the horror of watching your sister pull away from you on the weekly dice roll.

the 5 year old gets a quarter for taking out the compost. the value of a dollar must be learned, or else they keep going back to the mom and dad bank for the rest of their lives. i never got one and learned early on the family as a whole was more important than a couple of my own dollars.

I don't recall what amount we have given our three boys, but what did is setup an actual bank account and have the money transferred directly into the account (solve the problem of us forgetting to pay their allowance).

Then, we setup Famzoo accounts. Famzoo allows us to set virtual accounts on top of the main account. We then told the boys that they had to split their allowance into 3 buckets. One for spending (pocket) money, on for long term savings (big items), and one for charity. We then asked them how much they wanted to put into each and made sure they knew that they had to put something into each pot. We were pleasantly surprised that all three wanted to put away more than 10% for charity right off the bat, which is the minimum we wanted.

The benefit of using Famzoo is that there are iPhone and Android apps for it. It allows them to monitor how their savings are doing. Then, when they want to give something to charity, we deduct the amount from the real account. Same thing with the spending and long term money.

The goal was to teach them that charity and savings are important, and should always happen before your spending money. It has worked out really well.

We have all 4 girls doing this system with really pretty good success. There is a weekly pool of money equal to the sum of their ages. (9+9+7+3=$28) That money has never all been claimed. Chores that benefit the household get marked on a chart in 25 cent increments.(folding laundry=4 marks, putting away laundry 2 marks, setting the table 1 mark, helping make dinner variable) Things that are done for their benefit do not, ie making their bed and clearing the table. There is a 25 cent bonus each time a chore is done with the person doing it having recognized the need and not being asked.

Each week at payday, the children sum up their charts and declare what they think they are due. This is to instill the concept of work equals pay. The payment is made in bills and quarters and must be able to be divided into three portions, equal or otherwise. So $2 couldn't be 2 singles. They divide the money into three piles designating one as spend, one as save, and one as give. Something must go in each pile.

Spend money can be spent as they see fit, parental discretion is advised. Save money must have the item to be purchased declared a week before the actual purchase. Give money can go to charities or presents.

Dave Ramsey has a kit called FPU Jr that covers all this.

When the oldest was 5 last year, we started with 5 every other week. We made her mark her payday on the calendar and she has to remind us to do it (we'll occasionally ask her "what's today's date"to remind her.

So far we've been doing it for a year and a half and I think she's understanding it. She's super excited about a free bike we found, and she used her money to buy some paint and accessories, and she's worked hard to sand, prime and paint the thing. I'm impressed with the 6 year old..

I figure we'll start with the interest idea when she's 10 or so.

We're also of the camp that this allowance has nothing th do with chores, you're expected to help when asked because you're part of the family, with appropriate punishments/natural consequences for not being a good family member.

Thank you for all of the great ideas and tips! I'll read through the linked articles and my wife and I now have a great starting point from which to start.

Thanks again, I appreciate the help!

When I was 6, I got $2 a week for doing various chores. My parents thought it would prevent me from spending my money on stupid stuff, and teach me how to save up. The latter part stuck very well. The former part? We don't talk about that.

I never got an allowance. When there was something I wanted, my parents would either give me money for it, tell me "no", or else give me a job to do and they'd get me the thing.

When I was 13, I got a job as a caddy. Dad told me I was allowed to spend 10% of what I made--to a 13 year old, spending $100 in one fell swoop was a really big deal. I kept up with that "saving 90%" thing until I hit college, when it all went away. That was the best lesson I ever had though--save it, because you'll need it later. Today I wish I could save 90%, but I'm plugging along between 20% and 50% depending on how you look at various things.

Allowance to me is a paycheck. You may not be paying the man, but you aren't getting cash for free. Case in point. Swmbo 2.0s daughter is on the 20$ a week plan. She has chores. Swmbo is a pushover so daughter usually gets paid regardless of chore done. This does not work this way with mine. He has things he needs to do to earn $$$. Feed the cats, get a quarter. Etc. If he has something larger to earn, a very clear set of rules is set. You need to do x for however long to earn y. If ue attempts to spend his $$$ on something else other than his goal, we remind him of what he's after. In both cases, neither child sees cash. Mommy does the bank of gibson, and swmbo dumps daughters cash on a prepaid visa from walmart.