Allowance - yea or nay?
We have a balanced approach to this subject in our house. Some tasks are expected as a mere privilege of life in our house. You want to live here? Then every day, you will make your bed, pick up after yourself, put your dirty clothes in the hamper, and set and clear the table. If you don’t, you’re on the street. We don’t play.
But other chores earn an allowance. It’s not because I think my kids should get paid to help around the house, because I don’t. In fact, I struggled with the whole idea of allowance. No one pays me to clean up, make meals, or grocery shop for them. We all live here, we all have a responsibility to pitch in as appropriate. But then I thought about the financial side of it. I am pretty good with money now; I am a good saver and a smart shopper. I could definitely be better at long range financial planning, but it is on my to-do list. I shop responsibly and minimally, always look for the best deal, and ask myself “do I really need this?” before purchasing something. But I was not always good with money.
When I was in my late teens and early twenties, I was horrible with money. I rarely balanced my checkbook; in fact, I pretty much only did that when I had overdrafted. I couldn’t get a credit card, so I would borrow a friend’s when we were out shopping, and then when the bill came, I sometimes didn’t have the money to pay it (I’m sorry, Karen!). I always cashed my paychecks and kept much of it with me, which meant I was always spending it. I spent a lot of time at malls, in convenience stores, and in restaurants. I had nothing in savings. When I finally did get a credit card (a JCPenney card with a $400 limit) it was always maxed out. I was on a path to financial ruin.
My friend’s mother, who you would always see reading Kiplinger’s and Money magazines, gave me a copy of Get a Financial Life: Personal Finance In Your Twenties and Thirties by Beth Kobliner. Here’s the part where you think I am going to say I read it cover to cover. I didn’t. I flipped through it, read some of the more interesting passages, and put it on the shelf. But it watched me and taunted me. I knew I was a financial moron, and the book knew it, too. Though I didn’t study the book like I should have, it did give me an awareness that I was doing it wrong.
It took until I went to college (when I was 26) for me to really realize how to save money, how to plan ahead, and how to be financially responsible. I had a minimal income, so I got pretty good at finding ways to save. One of the best compliments I ever received came in the form of my grandmother telling her sister that I could stretch a dollar further than just about anyone she knew. I remember feeling at that moment that I was finally beginning to get it right.
Recently, I got to thinking about how I didn’t want my kids to repeat my financial mistakes. The only way to really make sure that didn’t happen was to teach them about money early. I figured a three-pronged approach was the best way to get this accomplished: modeling good financial habits, having them learn about managing money through books, stories, and lessons, and then of course managing money themselves.
They get birthday money from family members sometimes, but other than that, their only method of earning right now is allowance. To assign a separate monetary amount to each chore seemed tedious, and we didn’t want them to get into the bad habit of picking and choosing what chores they would do based on what they would get for it. It was going to be: either you do your chores and earn, or you don’t. So we decided that certain chores would earn $3 a week IF (and only if) they were all completed with a minimum of reminding and zero complaining. We bought a cool chore chart at Target to motivate them and serve as a visual reminder, and we were off!
How has it been going? Well, I would say so-so. The girls are very motivated to earn and they typically do not mind chore-time, especially if everyone completes their tasks at the same time (for this, I take a page from my own mother’s book and turn up some fun music as we all go around the house armed with cleaning supplies). The remembering to do the chores is harder though. Part of this might be where the chore chart is placed, on the back door, which is the only place that was magnetic enough for the chore chart to stick. So we will be finding a way to move it to a more central location in the house, hoping that will remind them to complete chores without constant nagging reminding.
They have a few bucks saved up, but once they get a bit more, we will begin learning about how bank accounts work, spending vs. saving vs. donating, and maybe even some junior investing. My older daughter heard a story (that both impressed me and filled me with envy, alternatively) on NPR about a 24 year old who bought his first house in cash from investing his allowance, and later his earnings from shoveling snow and mowing lawns, starting at an early age. This got her really excited -- of course she has no interest in buying a house with it... she wants to use her dividends to travel the world! Sounds like a solid plan to me! I wish I had been more of a planner when I was younger and maybe I could have done the same. Both my girls want to experience the entire world, and let’s be honest, you need money to do that, so it would be great if they could make that happen for themselves. But they are never going to do it by maxing out a JCPenney credit card and spending all their money on restaurant meals. Hopefully by getting them started early, my kids will be smart with their money as adults!