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Money Honey

For sure money talks.  What age is the right time to start learning?  How should allowances work, if at all?  Thanks for your email Sadie Rose:
How do we do it??  What is the best way to teach our little ones how to spend, save, earn, value?  Sometimes we can't just rely on example (wink, wink).  But really, I am dying to hear how other uMs and uFams teach their children the best way to handle this thing called money.

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I agree with the practice of using allowance as a teaching tool in itself. A small amount of money to be given out on a scheduled basis, for them to spend or save as seen fit. Once they're out, they're out.

I don't see allowance as a reward for chores, which are teaching tools in themselves, and which the child has a responsibility to do for other reasons. And I wouldn't withhold it as a punishment for acting poorly, not doing the chores, etc. Since it's a teaching tool, not a privledge, that doesn't make sense to me.

A friend of mine gives her almost-six son one dollar a week with this condition: one quarter to save, one quarter to charity, fifty cents his choice to save or spend.

It's not a reward and it is not taken away as punishment.

We started our daughter with an allowance about a year ago, I think around when she turned 7. When she finally went into a store and didn't spend all the money she had on something, but decided to spend a little and save the rest, we realized she was ready for a proper allowance. She's almost 8 now and gets $3 a week. We do associate it with chores a little, because we feel like there is some earning that needs to happen. If she goes the whole week forgetting to feed the cat or help around the house (she sets the table, helps take out the trash, unpacks her own lunch bag, etc.) then she gets half. If she does everything on her chart, she gets an extra dollar. I have a magnetic chart on the fridge with her chores listed, and for each one she gets a smiley face magnetic sticker to put on the chart.

Our son is 5 and while he has a small list of chores, he does not get an allowance yet. He's still at the stage where if he has money at a store, he will spend all day there trying to buy something just for the sake of buying something. We've had to practically ban him from Target serveral times because he makes such a scene when he doesn't get something. I think we will just wait for a sign of some maturity with him like we did with our daughter.

We have a separate charity change box and the kids will put loose change in there, so it's not really tied to an allowance.

Here's a question: what do you think about having kids pay for birthday presents for friends and family out of their own money?

If kids are going to have to buy gifts from their own money, they will need to get more money. Maybe a special fund put aside for just that purpose. Especially these days when kids are invited from their class lists and go to at least one party each weekend. And I also think that the standard is pretty high as far as gifts go, which I am probably not going to follow when my daughter starts going to bdday parties, just because we can't afford to buy trendy gifts. Creativity should still count for something.

I do think we have to set an example for our kids by our own actions, and I can tell you that is going to be a challenge, as we have probably been living outside our means. But I think it's good that I will have to set an example, because maybe that will encourage me to budget a little better myself.

Example is a good start, but with money, I think overt teaching has to be done. "The Only Investment Guide You'll Ever Need" by Andrew Tobias has some very excellent ideas for teaching kids about saving and investing. When my kids are old enough for allowance, I definetly want to start with a hands on lesson about the power of compound interest so they'll be extra motivated to save. You've gotta check out the book, 'cause I can't really give a consice recap of the details very well. It's a fun book to read, I promise.

We haven't yet started an allowance for our daugters (aged 6 and almost-3), even though we have started more regular chores. I appreciate the above thoughts, as well as those on a Parent Hacks discussion: http://www.parenthacks.com/2006/02/teaching_money_.html

So, my husband and I were talking about this last night and he says "I want to see what the urbanmamas have to say about this!" Any current thoughts? In my mind, it's a learning tool. Kids need to know that I see it as their responsibility to do chores because they live in the house and we all do jobs to take care of the house. As for money, it's my job to allow them to be kids and therefore not have to hold paying jobs at this point but that if they're going to learn about money they have to get it from somewhere. We both grew up in homes where if you needed money, mom and dad either gave it to you or they didn't and there wasn't the lesson to be learned about budgeting and making choices. We want to avoid that. But my husband is leery about making an allowance available even if they're not doing their jobs. He wants to make that connection between money and work.

I'd love to hear more thoughts on this.

My kids have gotten allowance for years at this point. The money is not tied to chores in any way. Everyone who lives in the house, contributes to its care. Even my hubby, the big breadwinner, can be seen doing dishes most nights. Over the years the kids have learned to save for more costly items. They also carry their money to events and faires so that they have above and beyond whatever spending money I might have shelled out to them that day.

At the time of this writing my kids are 14 and 12. The elder babysits when she wants extra money. The younger one runs a garden watering and pet-check business in the summer. I'm proud of both of them.

I like the idea of tying an allowance to a "job", whether that job be taking out the garbage, doing homework without complaint and on time or whatever. To me, that's part of the lesson children need to learn about money. If you don't show up to work, you don't get paid. The next step of the lesson is how to be responsible with the money you have & earn.

What an interesting discussion! My concern about paying for things like taking out the garbage and doing homework is that some of that is simply expected without any kind of extrinsic reward. The reward is knowing that the roaches won't invade the kitchen and that you're ready for school the next day when your homework is due.

I am very concerned about tying too many things to money. But I also see the dilemma that if kids are going to learn about money, they need to get their hands on it somehow.

Philomom, I love what your kids are doing and I think that is a great illustration of it working out really well. But what did you do when your kids were younger and couldn't work in these ways? I hesitate to give my child a "job" at home because I want to know that he'll pitch in around the house simply because he lives here and is part of this family.

I give my daughter $1 per her age #. so she is 8, she gets $8/ wk. I do not tie her allowance to chores whatsoever as I feel daily tasks around the house are basic functioning. I do however give her more $ for extra tasks so she can earn extra if she really wants something special. Like $3 for weeding, $3 for cleaning chicken coop, etc, etc.
She also saves all change for charities.

I'm a big fan of a 3 fold system like moonjar. 4 and 6 year old boys. They are currently at 50% for saving for a car (their idea), 40% for spend and 10% for charity.

Our 6 year old is a little money (saving) obsessed and I'm pretty convinced we will all be borrowing from him in the future. He is very protective and smart about his money. Knows he wants to save it for an Oaks Park visit, Chuck E. Cheese tokens or a Wii game. I'm very impressed with his goal setting and consciousness about it all. He also decides on charity goals. He gets 4 dollars a week and started all this when he was 4!

The younger guy - almost 5 - yikes. He just wants candy, has no idea what to save for, spends it all on junk. I wouldn't even give him an allowance yet, but his older brother decided it wasn't fair. He's the one we need advice on. He only gets 2 dollars a week now.

Allowance / stipends are not attached to chores. You work for the house because you live in the house.

Can I add in another question? How do the umama's feel about paying for grades? That was the system in my dh's house and I'm not sure how I feel about it yet. We are still a year or two away from this, but I'm still very undecided.

Wow. don't let my kids talk to yours! I pay $1/week to both my 4 and 6 year olds! I've wondered if I should bump it up, but haven't yet. I've been thinking about getting something going to allow them to start "budgeting" by dividing it up. I've actually been thinking of 4 categories, save for a specific, spend, share, and save for future which would go in the bank account once a month or so. I'm glad to hear it is working for folks. We're also of the mind that allowance is for learning about money, chores are about living in our house. They're not connected, although jobs that are not part of the usual chores often have some extra money attached. I just need to get better at having the money in my wallet every Monday, which is allowance day in our house!

I can't believe how time flies. I wrote 4 years ago how we hadn't started an allowance yet. And... we still haven't, and our girls are now almost-10 and almost-7. I think we'll start, though.

The past week, they have been collecting stray money - change on counters, lucky pennies on the ground. They would like to buy treats like these "japanese erasers" they found at collage on Alberta. They are just cute knick-knack things that are $1 each.

Over summer break, there were a few camps that gave kids opportunity to get things at the snack bar or vending machine. At one of those camps, we gave an allowance for the week to be spent however they wanted.

I do want to teach kids how to use, spend, and save, so I think I will be using suggestions from above (the 3-fold system) as guidelines. Clearly, they are eager to be given the responsibility over their own funds, and I think they are ready.

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