When it comes to teaching our kids about money, we all want to make sure we do it right. For decades, parents have been shelling out allowances to their kids, but is it really helping them be savvy with their finances in the long run?
When I was a kid, I got fifty cents a week. I dutifully shoved my two quarters into my little metal globe piggy bank and dreamed about what I’d buy when I filled that thing up. Then one day, I met a boy down the street who boasted that he got a whopping five bucks a week. Five bucks a week in the '80s was an astronomical amount of cash for a kid, and suddenly, I was convinced I’d been gypped.
Now a mother myself, I’ve gone round and round when it comes to kids and allowance. At first, it seemed like a grand idea. Until my kids began demanding it first thing every Friday morning. Then we tried the pay per chore system, but that got a bit tricky, too. One kid felt a buck for cleaning three toilets was a joke. Another thought $10 for mopping the floor was fair. A friend pointed out that our kids should help around the house just because they were part of the family, and I tended to agree. The situation was getting a bit sticky.
Lewis Mandell, a professor of finance at the University of Washington, has studied more than 50 years’ worth of allowance research. He says this: “Kids who receive a regular, unconditional allowance tend to think far less about money in general. Those children appear more likely to grow up and be slackers since they aren’t associating work with money. Kids who have to ask for the money have higher financial literacy than those who get allowances.”
But Mandell doesn’t rule out allowances all together. “Allowance can be used very constructively, but it requires time, effort and a degree of honesty on the part of the parent,” he says. He adds that parents should discuss family finances with the kids if they do dish out an allowance.
Other experts suggest paying kids to do things they enjoy, like planning a family trip or cooking a meal, instead of giving an allowance. This helps kids associate work with fun, something they can hopefully realize later in life when they choose a career.
As for what age to begin giving an allowance, experts say that depends on the family dynamics, but age 4 seems to be a starting point. Some say $1 per age of the child per week or month is a good idea.
So as for my house? We’ve done away with the allowances, and we’ve given up on the pay per chore method, too. But if my kids want something special, they know they’ve got to earn it somehow. My teenage son recently wanted cash for a sledding trip, and I asked him what he’d like to do to earn it. He made his own list and set about doing things around the house for the next week, and we forked out an agreed upon amount of cash the day he left for the trip. For some families, this may be too ambiguous, but for us, it works right now.
Moms, what do you think is the most effective way to teach kids about money? Do you implement an allowance? If so, when did you start dishing it out and how much did you start with? Do you pay per chore, or do you have a different method that works in your home? We want to hear from you!