Many children don’t have a grasp of money in general let alone how to manage it. In college and even now, I know quite a few people who never learned to manage their money. In fact, both my brother and brother-in law racked up large amounts of credit card debt as young adults.
I don’t want that to happen to my kids. I want them to be responsible with money, so I decided to start teaching them about it while they are young. To do this, we started giving them a weekly allowance. I no longer buy toys or DVDs for the kids. They know that they will get these things for Christmas or birthdays but any other time, they need to spend their own money. This has drastically reduced the amount of “Will you buy me this?” and “I want” statements when we are at the store.
Now I did a lot of research before giving Jase an allowance. We began when he was five. Lexie of course started sooner (at the age of three), but I don’t think even now at four she is getting the same benefits that Jase receives as she just doesn’t understand the concept as well as he does.
The first thing we had to determine was how much to give him. I know several families that give out a quarter a week but honestly, what can your child buy with that? It will take them a long time to save up enough to buy anything. On a few websites, I saw suggestions of $1 per year per week. So since Jase was 5, we would be giving him $5 a week or $20 a month. This sounded like too much for a five-year-old. (I remember receiving $5 a week as a teenager.) In the end, we decided on 50 cents per week per year – so he receives $3 (we rounded up rather than do the change) a week. When he turns 8, we will up it to $4 a week. Lexie has been receiving $2 and won’t see a raise until she turns 6.
Now we do not tie his allowance to doing chores and experts support this decision. Doing chores such as making their bed or setting the table should be part of their job as being a member of the family. You don’t want to barter with your child to take out the trash. If you are paying them to do normal household responsibilities, then if they don’t care about the money, they won’t do the chore. However, we do allow him to do some extra work around the house if he wants to earn some additional cash.
His allowance has already taught him quite a bit. He has learned to read the prices of the things he wants. He has had to work on math by counting his money and ensuring he has enough to cover his purchase. It has taught him to delay gratification. If he wants a bigger toy, he has to save for it. He has learned that if he buys the small set of Legos now, he will have to wait longer to buy the bigger set. His biggest accomplishment was saving up for a $100 Star Wars AT-AT toy. (pictured above)
As he gets older, we will discuss the differences between a want (toys) and a need (food). And we will discuss making sure your needs are taken care of before your wants as well as living within your means. I will gladly talk to him about what we earn and how we decide to spend our money. However, for now, we don’t dictate what he does with his money. We don’t require him to save or donate a certain amount to charity. He spends it as he sees fit. The other lessons will come soon enough.