Kids and Money Part 1
I have wanted to research and write about allowance for months, but it has felt too huge. I think this avoidance mirrors what likely happens for a lot of us when it comes to money in our adult lives: we don’t want to think about it until we have to think about it, and that’s usually when it’s stressing us out. The result? Allowance is just one more parenting area where I have great aspirations, but the execution has lagged far behind. After doing the research, I concluded it’s time to change that. Now.
No doubt money and wealth and finances bring up enough baggage to fill the underbelly of an airplane. Money is emotional. Financial stress and disagreements top the list of reasons for marital conflict. Whether we grew up without money, with just enough money, or with wealth, money represents values and worth in complicated ways that often need a therapist for dissection.
In preparing to write this, I read Ron Lieber’s The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart with Money (such a good title – who wouldn’t want these kids?). The beginning presents WHY we need to actually talk to our kids about money rather than dismiss or gloss over their questions. To do this effectively, we need to be thoughtful about our own relationship with money.
In our household, I have to keep a check on my ultra-frugal nature. I would penny pinch unnecessarily if my husband weren’t balancing me out with his consumer bent.
This frugality may be one reason we have not taken allowance seriously with our children. Based on the average of American children getting $800 a year in allowance, that would cost us $45 A WEEK for 3 children, almost $200 a month. That is an expense worthy of a line item in our monthly budget.
Despite this temptation to keep avoiding truly dealing with money and my children, I decided to face it front and center. As I read The Opposite of Spoiled, I also combed the internet for guidance and consensus. My conclusion: we need to take this allowance thing more seriously, starting now, AND it’s not too late even if your kids are teenagers.
CONFESSIONS OF A CHEAPSKATE
We have given our two oldest a whopping $2 a week for maybe a couple years? I haven’t really been keeping track. But I know we are total cheapskates compared to what I’ve read about averages, and we have slid into the laziest way to do it: mentally tracking the last time they spent money and then adding up how many weeks it’s been since.
This haphazard approach to allowance and money is probably doing little to nothing to TEACH my children what I want them to learn about money. In fact, some research has shown that kids with allowance think LESS about money than kids without allowance. (Major caveat: the body of research is limited and outdated . . . reportedly, only 20 studies since 1930 and 8 since the 90s).
So what’s the most important ingredient to connecting getting an allowance with smarter money sense? Talking about it instead of just handing out the dollar bills every week. Not just talking through spending choices, but even family finances. It’s like the recommendations for screen time with young children: it is more enriching if you are interacting with your children about it.
AGE AND ALLOWANCE
When should you start? I could not find a hard age when allowance should start, but this sentence in Lieber’s book caught my attention: “Kids who have gotten wise to the power of pestering parents to buy things are ready.” Well, no question our 4-year-old is ready! Lieber included other readiness indicators: a child who can count, and asks questions about money and how much things cost. I would guess most kids between ages 4 and 6 would fit.
How much? Advice varied, but most fell in the range of .50-$1 weekly, per year of age, up to age 10 or so. Some experts recommend allowing your child to negotiate a raise, while others suggest increasing the allowance every birthday.
What about teenagers? Teenagers are special in many ways, including their “wants” usually becoming a lot more expensive. This is hopefully where those earlier years of managing money pay off so it’s not a foreign concept when you as the parent balk at their pricey requests. My mother’s phrase “save your money!” still rings in my ears from my own adolescence.
But if you’re just hopping on the financial parenting train with your teenager now, it’s not too late. It does mean making the time to sit down with the family budget, discussing wants v. needs, and brainstorming ways to gain income, and specify for which expenses. As a parent yet to know the reality of parenting teens, I imagine this is a great age to encourage/expect them to figure out other sources of income, like a job (see Kids and Money Part 2 next week for more on this).
I garnered from the many lines of thinking several common points of guidance:
Concretely and visibly split money from allowance into categories: spend, give, and save. (Jars, envelopes, etc.) Set rules so that a portion is always set aside in “giving” and “saving.”
Distinguish between “wants” and “needs.”
Develop a list of banned items that they cannot spend their money on (eg, candy, an iPhone, violent video games).
Set a weekly day to give the allowance so there is routine and predictability.
Use a debit card for teens. I don’t have the pleasure of parenting teens yet, but I like this concept (NOT a credit card!) so they get used to spending what they have and making tough choices between brand name clothes and the newest tech gadget.
DEBATE: ALLOWANCE FOR CHORES OR NOT?
I’m happy to report since I researched the science of childhood chores, my own family has upped our chores game and all three kids are not only doing weekly and nightly household tasks, but even extra ones when we see an opportunity.
I have been amazed at how cooperative the kids are for chores (except the endless “clean your room” battle); it’s like they actually WANT to do dishes and vacuum. Apparently, there is some evidence that kids crave this industriousness, but our propensity to do things quickly and well means we squash this tendency over time. (Note: My kids still have zero independent ability to pick up after themselves; apparently, industriousness does not include putting dirty socks in the hamper.)
It’s a no-brainer that kids should have household responsibilities, but the big question is should you pay them for these tasks? I hear passionate opinions on either side of the debate. As with most real-life parenting dilemmas, we don’t have sound evidence that one approach is superior to the other, so we have to rely on our observations and instincts.
Argument 1: “I’m not just handing over money to my children for doing nothing. They need to earn it.”
Argument 2: “Chores should be part of being in the family and contributing because we are a team, not because we get paid.” (Fair point: the parents sure don’t get paid for doing chores!)
Both are valid and have good justification. As with just about every parenting decision, however, it at least partially depends on the kids and the context. I could see at least one of my headstrong children deciding they would rather miss their allowance than do their chores, or even more likely -- come up with a creative workaround to earn money another way in a win-win scenario for them, and a lose-lose for me. And again, this is where the parent-child interaction around the money matters for true benefit.
Bottom line: You know your children and what works best for them, even if some trial and error is involved.
BE THE (POCKET) CHANGE
As of this month, we are now giving the 4-year-old an allowance of $2 a week, and have increased our daughters’ rates to $3.50 and $4.50 a week. For the 7 and 9-year-old, they each have three envelopes to designate spend, save, and donate. We also went to the bank and got actual cash to dole out every Saturday.
At first they thought they had struck gold to have their weekly rates go up, but I sobered them right up with the lecture on us buying less for them and them making more decisions about how to spend their money, including setting aside donation money every week.
Our kids have a lot more to learn. We have a lot more to do to build their financial literacy and responsibility. But as sloppy as our financial parenting has been, I have seen my kids pick up a toy in the store, look at the price, and put it back. I have heard them analyze a potential purchase with how much they will actually play with it over time.
Maybe they inherited my frugal nature (doubtful) or maybe we have actually taught them a thing or two despite our haphazard ways. I like to see the wallet half-full.
Should You Give Your Kids an Allowance? Psychology Today
The Way American Parents Think About Chores Is Bizarre, The Atlantic
Allowance Advice for Well-Meaning Parents, US News Money
FamZoo, App (A family finance app that can allow more complicated tracking than most of us can do mentally)