Anyone who knows me personally would probably tell you that I have had strong opinions about having kids in the past. Honestly, since getting married I have softened my views a bit (aka grown up), but my wife and I still aren't having them any time soon.
HOWEVER, I have always wondered what I would do in terms of an allowance when we do have them. My dad gave my sister and I one quarter per chore completed…which I thought was highway robbery at the time!! Fortunately, my guest Maggie from NorthernExpenditure.com has some GREAT advice that she uses for her kids. Enjoy, and make sure you share your opinion below! – M$M
I'm a millennial with kids. I've got three of them. I'm passionate about personal finance and making smart decisions about money. And I'm even more passionate about raising my kids to not be dumb! So how do you handle money with little kids? Give them an allowance? Buy them all the stuff? Make them earn their own school supplies? We've stuck to three principles that have worked well for us:
Don't Pay Kids for Being Alive
I've always had a problem with allowance. My kids don't deserve money just for being there. What message does that send them? They grow up thinking they are literally entitled to weekly cash because they exist. This is the biggest mistake you can make. If kids don't learn what it takes to earn a dollar, they won't appreciate the value of it when they go to spend it. A dollar you pick up off the street is so much easier blown on candy than a dollar you worked to earn.
Give Your Kids Responsibilities
My kids each have a series of age-appropriate tasks they are in charge of weekly. They clean their bathroom. They fold and put their clothes away. They clean their rooms. They vacuum. They dust. Etc. I do not pay them for these responsibilities. We talk a lot in our house about how we are a team as a family and we share our home. We each have things we do to be a helpful part of the team.
These are expectations.
They have expectations from us as their parents. They expect that they don't have to pay for housing, utilities, food, clothing, etc. They expect us to make their meals (though our oldest is starting to help out with this one more). They expect us to help keep the house clean as well.
We all have our roles as part of the family and part of the team. If we don't do our part, it impacts everyone. This is a tough and important lesson for kids to learn. It requires them to think outside of themselves and realize the impact of their help (or lack thereof!) in the broader concept of our house and family.
Hire Your Kids
My kids are expected to fulfill their weekly responsibilities without pay. On Saturday, if they have done so, I will hire them for extra jobs. The pay varies based on age, the job, and what their financial goals are. My daughter is saving up for a waterproof camera before our next vacation (think of the fun in the pool!). The key is that I treat each Saturday as a job interview. If they did not complete their responsibilities during the week, or if they threw a fit about doing so, or if they simply had to be reminded too many times, they don't get the job.
We talk about what would happen if their dad started whining about assignments at work. Or, if I didn't do my job when it was assigned. We make these conversations elaborately dramatic and hilarious to ease the tension of not hiring them. But, the conversations work. The kids know the expectations. And they know if they don't get hired, it's because of their own actions.
My daughter has meticulously calculated how much money she needs to earn each week to get that camera before vacation. She knows if she loses a Saturday of extra jobs, she may not get the camera in time.
As I struggled with the best way to handle kids and money, I hated the age limits everyone set. “Start paying your kids at 7.” “No, 4!” My kids are very different from each other. A blanket age simply wouldn't work. One kid was ready for money way earlier than another! When I started treating it like a job, it worked perfectly.
When they can't fulfill their basic age-appropriate assignments without whining, crying, or throwing a fit, then they're not mature enough to handle earning the money. As a parent, I love this method because it puts the onus on them. I don't have to decide arbitrarily when they are ready. They do it.
And, of course, they will now grow up to be successful millionaires. I'm awaiting my “thank you” letter from each of them…