Money Lessons at Home: Our Family's Allowance System

Every parent wants their children to develop the skills for a successful adulthood.

By , we hope our children can be successful with their financial goals too.

This is a quick history of how we built an allowance system while our son and daughter were growing up. Some of the lessons learned were intentional, but many were a nice by-product.

Disclaimers

We gave outright allowances of money, but the kids had required daily and weekly chores at home not tied to money. With our children's personalities, time-consuming academics and activities, this is what worked best for our family.  Each family is unique and may have different ideas – please share in the comments section.

We also emphasized giving, spending, and saving. The details are not always included below but were ever present.

Necessity is the mother of invention

Honestly, I am not a morning person. In elementary school, the kids needed exact change several mornings a week so I started the....

Once-a-week allowance for the elementary school child

Although I packed a nutritious lunch, the parents' group fundraised by offering treats a few days a week.  

The problem: I wasn't good about keeping track of the treat days, the prices, and having exact change on hand.

The solution: Each Sunday evening, I put a set amount of single dollar bills and a few quarters on the breakfast table.  Enough for almost anything offered at school but not enough for everything, with a few more dollars for giving and saving.

The requirements: The only one – a Sunday offering. The rest could be used for the school treats, a toy, book, or a big purchase down the road. Their decision.

The lessons learned: Opportunities to buy are unlimited - money is limited. Cash is required - there are no pizza loans. Not having a second slice of pizza on Wednesday means there’s money for a larger ice cream treat on Friday.  Saving toward big purchases takes time and commitment!

Another problem: Toward the end of elementary school as their allowances were increasing, all those single dollar bills and quarters got to be chore to keep around so I went to a....

Once-a-month allowance for the middle school child

The solution: First of every month, each child got one lump sum. A slight variation of the elementary school allowance with more money, larger bills, and less frequent payouts.

Additional requirements: Friend's gifts were a co-pay system - I will pay half of a reasonable amount.  Premium brands also had a co-pay - the kids kicked in the price difference from a basic brand.

The lessons learned: Plan ahead - exact change means exact change! Some expenses you can predict – save for those you can’t. Keep track of your money – lost cash is lost. A gift should be thoughtful, not expensive. Sometimes the brand name is worth it, sometimes not. Money means making trade-offs.

Another problem: The money fights. Ok, we really didn't have fights - we had discussions like....

"How many pairs of jeans can I buy today?"

"If she gets a shirt at the store, can I get one too?" 

"Why do you need a new backpack when last year's is fine?" 

Sound familiar? So I went to a.... 

Payday allowance for the high school child

High school changes the game plan for many things in a family, including the budget! The money demands increase with stylish clothes, make-up, expensive field trips, band competition weekends, dates, proms, oh my!

I was tired of making on-the-spot decisions about passing out cash to a teen rushing out the door or purchasing this item or that item! Plus, boys and girls have very different things they want or need.  His shoes cost more, but her haircuts were more, etc.

The solution: All the money we spend on the kids during the year would be in their hands, along with the decisions. I sat down and added up the typical year’s expenses like….

* Church giving (still required)

* One good church outfit for each season

* Necessary basic clothes for one year

* Winter coat, backpack (replace every 2 years)

* Yearbook

* Occasional coffees, movies, dinners out

* School supplies and field trips

* Haircuts (forgot this one the first year)

* Make-up and specialty products

* School dances & club fees

* Friends' gifts

* Date expenses (junior & senior year)

* Prom (junior and senior year)

* And a little buffer

The total was divided by the 24 paydays and this was the amount they would receive each payday.

How we did it:  I set an automatic transfer to their checking accounts on our payday for their “payday.”  They already had been using a checking account, savings account, and ATM card at our bank. 

The deal:  The kids were responsible for their own expenses.  Period. We kept the lines of communication open because this was new to all of us. If they didn’t feel it was the right amount, a budget could be presented to negotiate for an increase.

The results: No asking mom and dad for cash.  Ever.  Occasionally they would ask, “Is this from my money or yours?” as we started this system. They decided their own wants and needs.They also started showing more appreciation for the things we did pay for when out together!  

I believe, in the end, we probably gave them less in allowances than we would have spent if we had to make individual decisions about what to buy, how much to spend, and when to hand out cash. Budgeting paid off for everyone!

The lessons learned: Target will deny a debit card if there’s not enough money in the bank. When shopping with friends at the mall, not spending $40 means $40 in the bank – not giving it back to Mom when you get home.  Basic clothing items don’t have to be expensive.  The clearance rack is a good place to start.  Coupons = $$. Accepting every dinner, coffee, or movie invitation isn’t possible – there are cheaper or free alternatives. 

Some big expenses only come once a year – like prom – so save early and often.

And too many to mention....

Learning their lessons well

Today, our son and daughter are in colleges that have very different environments with different needs, but this system continues to work. They also have one or more jobs to help with the additional college expenses.

Our goal is for them to have practiced their money lessons and be prepared to create a solid financial foundation for their adult lives. Class is going well!

Share what ideas have worked for your family in teaching children about money.

(This article was first published on Christianpf.com - August 16, 2011)

Cherie is an accountant by trade but has a passion for helping others gain control of their financial lives.  She facilitates Financial Peace Military Edition at local military bases and is the recipeint of a 2011 FINRA Foundation Military Spouse Fellowship for the Accredited Financial Counselor® Program.

As an empty-nester, Cherie enjoys spending more time with her husband of 23 years, quilting, and supporting Guide Dogs for the Blind and Valley Humane Society wih her career change Guide Dog, Miss Maybelle.