When it comes to kids getting allowances, I’m a huge fan. There are many pros to kids starting to earn their own money. But like every parenting move, I’m also left wondering if what I’m doing is right. Is what they are doing to earn their allowance too much? Too little? Am I paying them too much or not enough? Here is how we handle our kids allowance.
(Quick note this is a continuation from the last article Dad, what is money? )
How Do They Earn Their Allowance?
Their are two schools of thought when it comes to kids earning their allowance. Some people think that they should do chores to get them. The other is that they should do over and above what they do for chores.
I favour the over and above. My reasoning is that you are part of a family and everyone needs to help out. Things like making the bed, tidying up after yourself are all things that they should do by habit, and not get paid for.
My logic is I want them to think about more what they can do to earn the money rather than expect a handout for what they should be doing.
I look at it like I’m prepping them to hustle later on in life.
How Much Should Kids Get For Allowance?
The best rule of thumb I have heard is to give them their age in dollars every week. So a 5 year old gets $5 a week, 10 year old gets $10 and so on… If that feels too rich you can cut it back to $0.50 for each year.
Here’s My Problem With That Rule
I have two kids of separate ages. If they are both doing the same chores they should get paid the same amount? Right? I mean I don’t want to look like I’m an ageist. 😉
To solve this pay equity issue we have started with $5 a week for both of them. We will probably keep it at this for several years until the kids need more money. Right now they are more than happy with $5.
If they want to earn more I can give them separate unique chores to do (e.g. pulling weeds for an hour) and decide then how much they should get paid for it.
Where Does The Money Go?
If you have read how I managed my first allowance, I’m a huge fan of having separate accounts for different things. In my opinion this is the most important part about getting an allowance. The managing your own money is a huge part of getting an allowance.
For my kids they must split their allowance into 2 accounts Saving and Spending. They have to save a minimum of 50% of their allowance. This is to save for something much bigger so that they learn how to save and delay gratification for larger purchases.
My hope/plan is to one day change this into investing accounts for them. But they aren’t at that stage yet.
How I Handled Our Kids’ Allowances
As soon as our kids received their first allowance it was time for them to get started on a saving goal. We sat down with each of them and asked them what they were going to save for. All too quickly they came up with iPods and iPads.
Perfect we have a goal.
Next we needed to figure out how much this goal was going to cost. Looking at the iPods. There are several sizes so we picked $300 as a goal for them to save towards.
Make The Savings Goal Visual to Keep a Constant Reminder
We have two separate piggy banks for each of our kids. One is the savings account, one is the spending account. When the spending one is empty they know that they must wait or look for new ways to earn money.
The saving account has a designated item on it so that they know what they are saving for (currently iPods). Under no circumstances are they allowed to access their saving account to spend on something small. This system is designed to make them learn to save and work towards a financial goal.
The next thing I did was a simple chart where they could check off the amounts as they worked their way through it. We placed the charts in their rooms and showed them to check off when they hit a new amount. This was our way of money gamification.
What we are really doing is getting our kids used to money.
Pros of Giving Kids an Allowance
From the way I see it there are several pros to giving kids an allowance:
Learning about money, Learning to manage money. Learning to save. Learning the value of items. The list goes on and on… One of the side benefits I stumbled onto is the trips to the store. Now when my kids ask me to buy them something. I remind them of
Cons of Giving Kids an Allowance
They have money and they can chose to do with it what they want (within reason of course). Which means when they want Shopkins I have no recourse except to explain how to maximize their buying. (There are 2 backs for $5 and then 20 packs for $20, so I try and steer them to save for the bigger one.)
The one drawback I think of is that I’m getting my kids “into money” way earlier than I ever did. Next week I’ll share some tips about how our kids allowances has been working out.
How do your kids get allowances? Better yet, did you get an allowance? How was it handled? Do you think it could have been done better? Let me know in the comments below.