“Teaching kids how to handle money is about more than dollars and cents. It’s about character and responsibility.” – from the book Smart Money Smart Kids
Growing up my brother and I used to look forward to our weekly allowance payout (which was equal to half our age). So when our kids were ages 6 & 4 we implemented a similar system. It worked great when it came to shopping trips – no more begging for us to buy them toys and treats, but it often just seemed like a payout, or a monetary handout that they came to expect so we started looking for something different.
We’ve always been a fan of Dave Ramsey, and when we learned that they offered a Financial Peace Jr. edition for kids, it definitely peaked our interest. We ordered the set and dove into the workbooks. The basic premise behind the system is that a commission is paid for chores completed. Each kiddo came up with a list of chores that they were interested in completing (things like setting the table, unloading the dishwasher, picking up the mail, folding laundry, emptying the trash cans, dusting, wiping windows, etc.) and together we assigned a dollar value to it. In our house, chores are either worth $0.50 or $1.00.
Next we reviewed his envelope system – 1 each for Save, Spend and Give. Each kid came up with a wish list of what they wanted to spend their money on, and did comparison pricing for the best deal. From there, they got right to work on chores. The first few weeks they were banging out chores right and left, and the payouts were quite high! But over time as their excitement weaned, they’ve slowed and now their weekly payout averages what I would have paid them, had continued the allowance system. Nowadays if there is something they want, they know they can always complete more chores to earn the money to pay for it.
After sticking with this system for a few years now, here are some recommendations:
- Purchase 1 chore chart and set of envelopes, per child
- Create a “master envelope” for yourself and keep it stocked with lots of bills and coins for payout time. Try to have the proper cash on hand and avoid I Owe You’s at all costs – we’re setting the example, right?
- Set and stick to a regular payout time. We try to do it on Friday or Saturday evening, so they can have their Give envelopes ready to bring to church and practice tithing.
- Don’t forget about sales tax. One family I know collects taxes during payout time. While this may sound a bit much, they take those “taxes” and put them towards an added family bonus (like an extra-special event used during vacation time).
- Go one step further and set up a Savings Account for each child. We actually offered our kiddos an incentive and doubled any long term deposits. Even though it’ll be years before they can actually drive, they’re already saving for a car!
One thing I wasn’t prepared for was when the kids started to spend their money, especially if it wasn’t a purchase I agreed with. For example, my daughter was dead set on buying a Frozen-themed Olaf snow cone maker. I’m pretty sure she saw one of those YouTube videos where a kids was demonstrating using it and figured she just had to have it. We talked for a long time about the purchase, and she couldn’t be swayed. So sure enough, it arrived and they made one set of snow cones before it broke. It was one of those moments where I had to bite my lip and hold back everything in me from saying, “I told you so”. And you know what, we’ve had lots of those moments, but that’s how they grow and learn from their mistakes, right?