“Everything we tried never seemed to work…As they got older, we tried to really tie it to more chores. But then what would happen was they would do some of the chores, and they wouldn’t do other chores…Every week it was a struggle. A battle.” This frustration is what Sondi Sepanuk shares in the first episode of The Art of Allowance podcast .
Her struggle is real. And one shared by many. My post “Why Your Kids Do Need an Allowance and Why Most Allowance Programs Don’t Work” addresses the core problem at the heart of allowance failures.
I thought offering a few simple tips for setting up an allowance that you can implement immediately would be useful.
Use THREE jars (or envelopes or conch shells). Conch shells? I do think that using three jars is the best approach, but whatever you do—yes, conch shells would work—give your child “buckets” so that she gets used to making money choices. Like I explain at the end of this excerpt from my first book for parents, The Art of Allowance , just don’t do nothing:
Okay, your jars are set up. You and your daughter have labeled them Share, Save and Spend Smart. Now what?
We all worry that she may run amok, spending money like a Kardashian. Don’t let your worries turn into what I call “Spendthrift Syndrome,” where you dole out a pittance because you don’t trust her with money. Remember that the consequence of an empty jar may be a more powerful lesson than anything you say to her. The dilemma here is that in order to establish trust, you have to trust her with a meaningful allowance. Recognize Spendthrift Syndrome before it’s too late, or you may hear something like this: “Yeah, Dad, thanks for my 75-cent allowance. I’ll be able to get that Razor scooter I want in a few decades. Awesome.”
This statement is not that far from reality. I know parents of means who were giving their seven-year-old 75 cents. He’ll need seven months to save for the next volume of Captain Underpants! Remember, the purpose of an allowance is to teach your child to be responsible with his money. Be careful not to under-empower him.
The Art of Allowance means you have leeway to construct your own system—to distribute an amount that works for your family. It also means that you need to empower him fully with meaningful amounts. Otherwise, your program will be in jeopardy of failing before it starts.
Virtually every youth money expert agrees that a good starting point for an allowance is one dollar per the child’s age per week. So, a five-year-old would receive five bucks per week. Pretty simple—nine bucks per week for your nine-year-old.
Of course, if your financial situation doesn’t allow you to use this guideline, then adjusting your allowance rate is sensible. Just don’t err on the side of doing nothing.
Start the conversation sooner rather than later.
Be EXPLICIT about your purpose. The reason I advocate for clear jars over conch shells is because they emphasize the transparency that we want to bring to our discussions with our kids. We also want to explain to them that they are receiving an allowance to learn to become responsible with money and to discover the three core money-smart skills of distinguishing between needs and wants, making smart money choices and saving for goals:
Some individuals argue that an allowance not tied to chores is akin to an entitlement.* That belief assumes accountability only comes from working for money. Of course, just giving him some money and calling it an allowance is an entitlement. Granting him a purposeful allowance with a plan as described here is not a handout.
Set a SMART goal as soon as possible. Saving for goals is one of the core money-smart skills you should teach your child as early as possible. Here’s how I explain getting started in The Art of Allowance :
Goals are powerful life lessons for your child. The ability to save for a goal is not only a core money-smart skill but also an essential life skill for your child to learn.
From a practical standpoint, keep your goal-setting simple. A five-year-old’s attention span is short. A child’s ability to visualize exists, but it’s limited. Find a simple goal, like a scooter, that might take four to eight weeks of saving. Delaying gratification is okay, but not by so much that your child’s eyes glaze over. Speaking of that scooter goal, our older daughter still rides around on the Razor scooter she bought when she was six.
Goals should be SMART: Specific, Measurable, Achievable, Relevant and Time-based.** Help her decide on something she wants that is reasonably priced (specific and relevant). Identify how much your little saver intends to contribute each week (time-based) and how many weeks saving for the goal will take her (measurable and achievable).
And a BONUS tip… Start early! Here’s one reason why:
You may be familiar with the term “emergent literacy,” the concept that children are in the process of learning to read and write by absorbing knowledge when they are in early childhood, babies even.*** This notion is the reason many of us read to our children before they can walk.
It’s helpful to consider teaching money smarts and wariness of stuff to young kids as “early childhood financial literacy,” a term coined by David Godsted and Martha McCormick.**** Young children assimilate the ever-present messages about consumption and can readily absorb communications that counter the American creed to “consume more.” By not introducing the concepts and language of money—sharing, saving and spending smart—to our children at a young age, we do as much of a disservice to them as if we did not expose them early to books and writing.
Good luck on your money-smart journey.
*Kadlec, Dan. “Why Giving Your Kids an Allowance May Not Teach Them Anything.” TIME , February 15, 2012, http://business.time.com/2012/02/15/why-giving-your-kids-an-allowance-might- not-be-teaching-them-anything/.
**Lawlor, K. Blaine and Martin J. Hornyak. “Smart Goals: How the Application of Smart Goals Can Contribute to Achievement of Student Learning Outcomes.” Developments in Business Simulation and Experiential Learning 39 (2012): 259-67.
***McCormick, Martha H. and David Godsted. “Learning Your Monetary ABCs: The Link between Emergent Literacy and Early Childhood Financial Literacy.” Networks Financial Institute at Indiana University, NFI Report , 2006: 3.
****McCormick, Martha H. and David Godsted. “Learning Your Monetary ABCs: The Link between Emergent Literacy and Early Childhood Financial Literacy.” Networks Financial Institute at Indiana University, NFI Report , 2006: 8.