When it comes to family money matters, the kids should arguably be a part of purposeful discussions that help them to foster the right kind of attitude and relationship with money. In addition to talking openly about money, parents may wish to support this process by offering their kids an allowance. All parents want to raise modest, patient, and grounded kids who can develop into financially savvy and wise savers and spenders, but how should we approach the issue of offering our kids money?
One of the most contentious issues around the giving of pocket money to children is not only the amount that is given on a weekly or monthly basis, but whether or not this transaction should be one that’s earned. Should our kids work for their allowances? Cleaning the car, taking out the trash, cleaning their room, and washing the dishes are just some of the most common sets of chores traditionally asked of children in an effort for them to be taught financial responsibility and the value of money.
No one wants to raise a child with a sense of self-entitlement, and having your kids earn their pocket money may seemingly be the best way in which to support the cultivation of a good work ethic and a meaningful understanding of money matters. However some parents would argue, as I do, that chores are foremost an integral part of family life, and household tasks should not be seen as a transactional tool whereby kids can trade in responsibilities for compensation. Household chores should be considered core elements of a child’s contribution to the home and family.
The Zupko family have adopted this philosophy and garnered their inspiration from the manifesto laid out in author and financial columnist Ron Leiber’s The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. This practical guide book for families is intended to provide a detailed blueprint for parents tackling family money matters related to: the Tooth Fairy, allowances, chores, charity, saving, birthdays, holidays, cell phones, and other issues that are directly related to finance. Parents are encouraged to teach and demonstrate healthy money management by having their kids take their allowance and allocate it evenly between save, spend, and share. “We let them decorate a bucket with a label for themselves so they really felt like a part of the process,” said Julia Zupko, mother of 11-year-old, Natalia and 9-year-old Josephine.
The Zupko Family
Helping our kids to differentiate between tasks we must all learn to contribute towards in a family, and the healthy management of money and expenditure, means that our kids will receive a more well-rounded philosophy and approach when it comes to domestic labor and how to spend and budget, “We are now starting to use a spreadsheet instead of physical buckets here in China because physical money is less relevant, where, in addition to using it as a credit/debit/balance system, we are also considering adding in a monthly APR so their money grows just like a real savings account and further, keeping track of the amount they would have had, had they not spent it,” says Zupko. She went on to say that there are no rules attached what her daughters can spend their allowances on, however perspective and advice is offered to support wise decisions.
The Lim family have a slightly different approach, which seems to embrace a more flexible process of offering ad hoc allowances to their 6-year-old boy, Zac, “We give pocket money irregularly, on demand and in reward”, said father of Zac, Michael Lim, “There is no set limit, if he likes the look of coins more than notes, we give him that.” When asked about how Zac’s allowance is earned I found it interesting that the Lim family’s allowance philosophy is not so much based on chores as such, but rather the triumphs and accomplishments of their little boy, “Zac receives an allowance by achieving goals and milestones, i.e. learning new vocabulary, listening to what we say, and picking up after himself when playing.”
For Lim, an allowance is a reward, so in that regard it is earned and therefore is a gesture that aims to attach meaning to the monetary gift. “We are promoting positive behaviors by rewarding them with food and toys, plus money in his piggy bank”, he said.
Although these two families are using a slightly different approach to the issue of raising kids with an allowance, the end game couldn’t have more synergy. These families are also dealing with family money matters with kids of different ages and therefore the nature of their methods will reflect the emotional, mental, and physical characteristics of their children. The Zupkos are teaching their kids fiscal responsibility, where, as is appropriate for Zac’s age, the Lims’ focus is on reinforcing the practice of positive behaviors related to fostering a good work and learning ethic.
The philosophy concerning allowances for kids may also adapt and change with time, and be built upon the unique attributes and makeup of each family. Both the Zupkos and the Lims are trying to support and encourage their kids to harness a greater sense of responsibility and a healthy attitude towards money, its worth, finiteness, and of course all the wonderful results of wealth-building.
What are often not discussed among parents and families however are the systematic elements of high and low-income households, which are directly connected to inequalities and segregation in education and housing. Some families have no choice but to raise children who will ultimately have to financially fend for themselves, and go without until they can. What lessons can be taught to these kids about money? How can parents of higher-income households balance the giving of an allowance with ensuring that their approach does not nature an attitude of entitlement?
The charity element that the Zupkos have implemented ensures that their kids are thinking about others and their needs; this could perhaps be a tool that can be used to combat the raising of prima donnas and an attitude that fails to acknowledge the importance of giving and empathy for those who do not have the same privileges. In regard to families who can’t offer physical money, lessons, praise, emotional support, and the giving of your time and energy can also be used to teach kids responsibility, accountability, and respect.
Every family is different, and we all have to do what works for our household when it comes to money matters. Below are a few reasons why giving kids an allowance can have a positive effect. However there are a plethora of other ways to teach kids about money – chocolate pennies, piggy banks and matching toy coins, trade-offs with selected items, and activity-based transactions can also be used to talk money and cultivate the right behaviors and attitudes towards giving, receiving, and the value of time and finance.
5 reasons to give kids an allowance
Teaches them how to budget
Make sure your kids are required to put a designated amount of their allowance into savings, and when spending money runs out, they will learn about healthy spending and preparing for unexpected expenses.
Helps give them a good work ethic
If you require your kids to work for their allowance, select the kind of tasks that work for you as a family and are not too connected to everyday contributions that all kids should be doing without compensation. If your kids are slightly older, you may ask that they run an errand for you, demonstrate generosity by helping out a neighbor with a chore of some sort, or learn a simple dish or snack they can prepare for the family on request.
Teaches them fiscal responsibility
Budgeting is arguably one of the most important skills we all should learn as early on as possible. It helps kids to be more responsible with their spending as they get older, and prepares them for the wider world of money management. What’s APR? How can one budget for shopping, travel, and disposable income spending? And how can one plan/save for short-term and long-term financial goals?
Helps them to understand what it takes to run a home
I had no idea how much money went into keeping my parents’ household running, and so when asking for extra pocket money never considered what expenditure was attached to keeping family life functioning. Kids need to learn how much money you spend on basic things, like food, utilities and even desirables, like toys and candy. Giving an allowance shows how far money will go, and by sharing some of the costs for things like food you can demonstrate how many allowances it would take to feed the family, so that finance is not an intangible concept.
Shows them their effort in the family is appreciated
Again, if you require your kids to earn their allowances, using the method above, you are also showing your kids how much you appreciate their contribution. Kids, particularly when in their teens, can feel like their help around the house goes unnoticed and without thanks. It’s all about balance. Yes, we should all contribute to household tasks but nonetheless, praise, thanks, and/or an allowance goes a long way in acknowledging and reinforcing the positive behaviors you would like to see more of.
Do your kids get an allowance? What’s your philosophy? Comment below!
Photos: courtesy of Julia Zupko, Michael Lim, Pixabay
