My kids started receiving an allowance this past summer. It was time to give our 5 year old some meaningful opportunities with money.
At first, understanding how we should allocate funds was a dilemma. I knew I did not want money to be a reward for chores. Not at this stage of the game.
Household chores help kids to develop a work ethic. An allowance helps kids develop money management skills. These are two critical yet separate lessons that should not be muddied by one another. Money and chores should not be interdependent at this stage.
And frankly, I do not like the idea of paying my kids to do the very tasks that I do not get paid to do (taking out the garbage, making beds, folding laundry, dishes, etc).
Our kids get money each week simply because they are a part of the family. They also need to help around the house simply because they are a part of the family.
Giving our kids money has helped achieve many goals:
- Establish priorities for how to spend money.
- Introduce the abstract idea of a necessity versus a desire (or need vs. want).
- Introduce our practice to save 10%, give 10%, and spend 80%.
- Discuss the less tangible concepts of giving and saving.
- Consider how we will give the money (donations, hand-outs to homeless people, gifts for less fortunate kids, etc).
- Check out the seven points from Teaching Kids About Money.
Money management is learned through trial and error. Simply handing out money is not enough. Money without restrictions leaves kids with a sense that there is cash to burn. This notion of disposable income is hard to outgrow. Kids need to be taught about money. Without this, the odds are that they will be living paycheck to paycheck (i.e., in your house) long into their adult lives.
* Since some will be curious – our 5 year old receives $2 and our 2 year old receives $1. We give them money at our weekly family meetings.
Posts in this series:
- Top Rated Gift for Every Child
- Teaching Kids About Money
- The Do-Gooder’s Guide to Raising Generous Kids
Useful links:
- What Kids Need to Know About Money – MSN Money
- 8 Behaviors of the Financially Intelligent Parent
- The Financially Intelligent Parent (book link at Amazon)
