Allowance for young children

[bongo2]

I frequently read that you should start your kids on an allowance at a very early age. Some say 3-4 years old or “as soon as possible,” and they also tend to advocate getting out of the way and letting kids do what ever stupid things they want with their money.

We tried this with our 4 & 5 year olds a couple years ago, and we had a lot of trouble with it. We wanted to give them $1.50 a week, and we found that this was both too much and too little. It’s too little to buy any sort of substantial toy (like a lego set my son wants that’s around $50) without saving forever (in kid time), but it is enough for them to buy an enormous amount of crap at garage sales. As soon as they got the money they wanted to spend it as quickly as possible on whatever came along, and if they didn’t spend it immediately they lost all interest in the money and didn’t care if they lost it. So we dropped the allowance.

Now that they’re a little older I’m wondering if we should try it again, or if we should wait even longer, or if we should have been doing it all along and just had a bad approach.

Does anyone here have experience with giving kids an allowance at an early age?

Any other or better ways to teach young kids about money?

 

[Nords]

Does anyone here have experience with giving kids an allowance at an early age?

Yep, as soon as it stopped being a food source. We had the same behavior at first but we kept with it.

Having a "special place" like a locking drawer or a safe or the "Bank of Kid" (which pays interest) helped keep her from losing it. Of course she still managed to lose enough to eventually learn her lesson on her own.

We've always told her that the allowance is for being a member of the family and to help her learn how to take care of money (to manage money, to invest money, whatever vocabulary they can handle). She gets her allowance whether she's a good chore-doing kid or a surly rebellious teenager. If she wants more money then, after her chores are done, she can tackle jobs for money. One of the first jobs she could handle was washing the car tires for, IIRC, 50 cents each. Today she's almost 14 and she's relieved me of the entire car-washing task for $10 (inside vacuum included). Window washing, re-screening, spackling & painting, ditch digging, yardwork, spreadsheets, drafting Navy Reserve correspondence, and even oil changes are fair game. When she turns 14 she's probably going to get a part-time job at the Kumon franchise (she's been taking Kumon for five years there) and we'll see if regular labor quenches her thirst for off-the-books jobs.

Next month she picks the T. Rowe Price mutual fund for her first IRA deposit.

Any other or better ways to teach young kids about money?

"If You Made a Million" (a great read-along, our kid still has her copy) and "The First National Bank of Dad". I especially like Owens' perception that kids think their parents are psychotic when it comes to money... and from a kid's perspective, he's right.

 

[yakers]

What worked fairly well for my younger son (now 17 and a senior in HS) was, from about age 6 he received $6 a week allowance, Two was to spend on anything he wanted (immediate gratification); two were to save (he could only spend thin money for things on a list we negotiated ahead of time, still his choice of items, but delayed gratification) and two were for charity. He would have three envelopes because it has to be simple. And usually a couple times a year I would take him down to a bulk food store and he would buy food which we would take to the local homeless center. The choice of charity is up to him, so he could respond to 9/11 or Katrina.
As he got older we increased the amounts to each envelope.

 

[wabmester]

Any other or better ways to teach young kids about money?

What do you want to teach them?

We started with ours about age 2 with a piggy bank and cash register just so she could learn to count coins and figure out the different demoninations.

At age 3, we started setting short-term goals (like purchasing a $5 item), planning on how to achieve the goal, and figuring out ways to *earn* the money. She's chosen to do chores for money and wants to sell stuff at a garage sale, so she seems to get the ideas of both wage slavery and selling items she no longer wants.

That's where we are now (she's 3 1/2). No plans for an allowance, as that seems to only teach them the concept of *entitlement* (at least, that's what it taught me as a kid).

We still need to teach her about entrepreneurship, creating recurring income streams, the power of compounding, etc. But I'm not sure how an allowance would help.

 

[bongo2]

Thanks for your responses. I read "First National Bank of Dad" and it seemed like a good approach for when they are older (say 8+), but it just didn't seem appropriate or effective for ages 3-7.

I read all the time that we should just give them $1 or $2, and then back off and let them use it for TP if they like. I don't know if I'm able to do that, but it also just feels wrong. I don't let them eat whatever they like or wear t-shirts when it's below zero, and if I did I don't think that they would learn on their own as the "experts" seem to think. When my kids eat so much that they get sick on Halloween night, they wake up asking for more candy, not reflective of the lessons they have learned.

I guess what we need to do is get the allowance going, but try and guide them (without rancor) to what we feel are appropriate ways to use it. I also like Wab's ideas for focusing on the ways that you get money - work, commerce, and investing - and I need to figure out a way to introduce that to my kids.

 

[Nords]

I read all the time that we should just give them $1 or $2, and then back off and let them use it for TP if they like. I don't know if I'm able to do that, but it also just feels wrong.

When our kindergartner got her hands on anything over $5 we tried to create our personal mental images of lighting cigars with $20 bills or some other extravagant purchase that we'd made in our 20s. That $5 could be considered tuition at the school of experience.

It became a valuable lesson later on when she torched a few $20s on Yu-Gi-Oh! cards. Today when we get into a debate about the wisdom of a purchase, it usually ends after we compare the proposed purchase to the value of a Yu-Gi-Oh! card. We're not laying down the law-- we're just reminding her of how she felt after other experiences.

As for the Hallowe'en candy scenario, I think that young kids learn better from personal experience. (That's why we have to keep them away from explosives, alcohol, & firearms.) We'd keep our kid from going too far with something like candy, but if she complained of the slightest hint of stomach upset then we'd remind her of the consequences of her choice.

Last night our almost-14-year-old was getting her dessert. I commented "Lemme make sure I understand this: you're having a chocolate-chip fudge brownie, topping it with icing, and adding chocolate chips on top? How many calories are in that dessert? How many pushups do you have to be able to do for the black belt test?"

So she put away the chocolate chips. I guess with teenagers that's as good as it gets.

 

[Mach1]

Last night our almost-14-year-old was getting her dessert. I commented "Lemme make sure I understand this: you're having a chocolate-chip fudge brownie, topping it with icing, and adding chocolate chips on top? How many calories are in that dessert? How many pushups do you have to be able to do for the black belt test?"

So she put away the chocolate chips. I guess with teenagers that's as good as it gets.

I do the same to our 13-year-old Daughter, she usually cuts back on something. Anyway, she gets $20 bux a week for keeping the kitchen clean.

Mach1

 

[farmerEd]

We tried the allowance thing when my oldest was 7 and the younger brother was 5...started out at 50 cents a week, and they had to do chores for it, i.e. clean up their rooms to the best of their abilities...they were good about saving it too...they were upto about $2.50 each...then the well meaning grand-ma drops a $50 on my 5 year old son for his birthday and a few days later I go up into their rooms and theirs my 5 year old sitting on his bed with his outstretched arms behind his head and legs crossed watching his 7 year-old sister clean his room for him - for $1.00! ...

Anyway, that kind of money being thrown at small kids kind blew the whole purpose of the allowance thing...up until that point they thought 50cents was a lot of money...

Now we confiscate all the gift money they get and only let them spend a small portion of it...the rest goes in ther bank accounts...

 

[youbet]

He would have three envelopes because it has to be simple.

A guy named Ray something-or-the-other has written a book on that method. But, he calls the envelopes "buckets."

 

[OAG]

Long, long time ago we started the kids towards EARNING thier own money. No allowances for doing household chores -- they lived there too. Cleaned thier rooms, emptied garbage, cut the grass, those kinds of things -- kept it age specfic (had 4 of them to work with). Money from Birthdays, EARNINGS from doing work for the neighbors went to GRANDMOTHER who set up specfic bank accounts for each of them at HER bank (with them joint on the accounts). Kids did get to keep some earnings for things they really wanted AND needed. Worked out fine for us. When kids graduated from HS Grandmother gave them the passbooks to the savings account -- Oldest son bought his first USED car (260Z) with the money he and Grandmother had saved up over time; pretty long time. Today all four of them handle money MUCH better than almost anyone in the family did at the same time in life.