As he ages, he is weaned off the trivial chores and moves towards earning money via “jobs” (e.g., mow lawn, paint, and etc). This means that as he gets older previous chores-for-pay may become general household chores (without pay), and he earns money via real Work. It is at this same time that real budgeting comes into play, and he becomes increasingly responsible for paying for his school lunches, clothing, and etc. I do not expect that all these expenses to come from his own earnings, because these are budgeted household purchases; things that would be purchased on his behalf anyway. The difference is that now he is charge of the expenses, instead of his mother or myself. (Of course we help him with this!)

Basically, as my child ages and develops my system changes.

Money for grades:
I am exploring the idea of bonuses after each semester for a good report card and parent-teacher-student conference. Why? Because I view them as the equivalent of employee reviews. My son is not allowed to work, and subsequently is not afforded any opportunities to earn a bonus or pay raise. I want him to know that his attending school each day is just as important as me going to work. I am still brainstorming on the specifics, but instead of money for specific grades, I will probably look at his overall performance, so the semester conference with the teacher will hold alot of weight.

My parents had other ways for us to earn money: When I was 13 or so, I earned extra pocket money by working as a payroll assistant and receptionist for my dad’s company. It was fun, and gave me experience working for a real company, which paid off when I applied for a real job during the summers in college. Also, my dad came home and dumped his change into a jar–we were then allowed to roll all the change–in exchange, we were allowed to split the money. Also, as school was our ‘job,’ we received $1 an A on our report cards (my sister wasn’t as good of a student, so my parents quickly expanded it to a B after a six weeks or so). In addition, we got to have a pizza party if we did really well.

If my sister didn’t do as well, but still tried really hard, she still got the money/pizza party. After all, it’s the effort that counts, some people are naturally better at school stuff. I would encourage you to not punish your kids if they really tried hard but couldn’t quite top a C.

The basic point of these trips is that they were infrequent – the idea being that they were a spontaneous expression of my parent’s pride, rather than something we deserved for our achievments. What they were proud of differed for each kid (for me, straight A’s were normal, for my brother, passing all his classes was celebration-worthy) but they clearly conveyed that while achieving was its own reward, it was also something that deserved recognition and celebration within the family. I think it was a good balance, and I would definitely do the same thing with my kids.

The program is a very interesting way to teach children how to handle money responsibly.

Jump to middle school. Your child has a chance to take honors English and Algebra, or take the normal classes. Why go for the hard? You might fail, and that would be punished! (by not getting a raise in the allowance.)

Or there comes an assignment where there is an opportunity to take a risk and present a unique perspective and make the project interesting, or they can take the safe road and regurgitate the teacher’s opinions. If the reward is tied to an A, why take the risk?

Reward hard work, and praise hard work in children (which is shown to have many positive effects as long as the praise is specific) but effects that are not based merely on effort stand the chance of gaming the system, and that’s the worst thing one can learn from the education system.

I had an allowance as a child, and I don’t think I learned much from it. I think my attitudes towards personal finance were shaped mainly by watching how my parents managed money.

So with my daughter, I am focusing more on being a good example, explaining to her why I make the financial choices I do, where our money comes from, and teaching her awareness of marketing and advertising.

She’s only three, so I have yet to see how this all turns out. :) I expect I will eventually develop some kind of allowance plan, but I don’t know what it will be yet.

I don’t think an allowance should be tied to accomplishments.

Chores are about personal responsibility, not rewards. And I think good grades should be their own reward. (Although I will be sure to say “I’m proud of you”).

Just my opinion of course.

I don’t think their system wasn’t really planned out. If I asked for my allowance, I got it, if I didn’t, no one else was going to remember. So, I had to be responsible for remembering. I probably forgot about 90% of the time at first, and gradually learned to remember.

They gave me a bank account and explained about interest, which was very exciting, even before I knew math. My money could earn money without me doing anything? I’d be a millionaire in no time! They showed me my bank statements where I could see interest accumulating and I loved depositing money.

When I wanted something small, like candy or a comic book, my parents would buy it for me. This was the most crucial part of their unintentional plan. They encouraged me to save my money for something I really wanted. And you know what I learned after painfully saving up hundreds of dollars and then spending it on something I really wanted? What I bought never gave me very much happiness.

My parents taught me to value my own money and not to blow it on things that I’m not going to care about.

I don’t think your system is going to work because it’s pretty controlling. Even if your child goes along with it in the short term, he is probably going to rebel against the tyranny of an absolute dictator/money-manager eventually. An allowance is, ultimately, your child’s. Teach him what you value and don’t take his money and he’ll learn how to save.

Trent, when your son asks you why he has to save his money, what will you tell him? So he can go to college? (What’s that? Is there a playground there?) For an emergency? (Is something bad going to happen to me, Daddy?) Young kids have no concept of this stuff until they are well into elementary school, if then. When will you let him spend his savings? What will be a worthy expenditure? When will he get to decide?

I’m going to digress with a story, but there is a point here:

I was waiting to pick up dinner at the counter of a Chinese joint. There was a young man there, probably in his mid-teens, socializing with the girl working behind the counter. He seemed to be a nice kid, dressed in the typical baggy style of today’s youth, and was fairly unremarkable except for one thing. His spiked hair was dyed the most exuburant shade of purple I’ve ever laid my eyes on. I thought to myself, holy cow, what was this kid thinking? What kind of parents let their kid do that?

Just then, an older (60ish?) gentleman walked in, caught site of the boy’s hair, and stopped dead in his tracks.

He paused for a moment, broke into a grin, and said, “Son, that is the most outrageous hair I have ever seen! And I bet everybody tells you that you can’t have purple hair if you want to get a job and all that stuff. But I love it! And I think that if you want to have purple hair, now is the best time of your life to have it.”

He was right, of course. Ever since then I’ve looked at the “foolishness” of youth differently. I want my kids to make mistakes. I want them to get into the occasional jam, to learn that there are consequences to their actions that don’t come from mom and dad. As long as there is no lasting harm to them or others, why not? If they want to blow their allowance on stupid stuff, fine. As long as there are obvious trade-offs (spend $$$ now, none later), they will learn the lesson themselves, which is the best way.

Of course it is important to offer guidance. When my kids ask if they can buy something (that is not my responsibiity to provide) I tell them it is their money and it’s up them. If asked, I’ll render an opinion on quality, usefulness, or potential satisfaction. I might also point out the trade-off the purchase entails. (If you buy that Nintendo game you might not have enough for the new baseball mitt you want.) A long as it’s not dangerous, illegal, or inappropriate, it’s their call. And when we started doing this it was interesting to see how their desires for material things were suddenly curtailed.

Also, we haven’t opened bank accounts yet for them, but when I do, I’ll give them an incentive to save by matching their interest or some such bonus.

There, that’s my (long-winded) take!

Great blog!

Ponz

PS – A great book about kids and money (and there are many) is “The First National Bank of Dad: A Foolproof Method for Teaching Your Kids the Value of Money” by David Owen. Full of common sense and aimed at making sound financial judgement self-evident to your “yutes”.

But I do agree that saving should be part of an allowance system. And I would add that donating to charity should be part of it as well. Make it fun. Have your own family bank – where you keep the money and they can only withdrawal for approved purchases. That way you can teach them how to shop as well.

As for grades – I don’t think they should be rewarded – especially with money. I think doing classwork and doing homework should be rewarded. The effort in and of itself is the important part. If you have a child with a learning disability, they may never have a 3.0 – even with hours of doing homework! The current school system does not recognize the differences in learning in children. I highly recommend you read books written by Dr. Mel Levine to learn more about the way kids learn.

When you reward completing schoolwork, you also avoid rewarding one kid over another simply for report cards. I almost guarantee you that one of your kids will be naturally better at school than the other. One of our kids ALWAYS gets an award on award day at school. The other doesn’t. The disappointment reads all over his face. And the funny thing is – the kid who doesn’t win – he actually scores better on aptitude tests.

Also, money for grades is ok. (My parents don’t “pay” me for my grades, but if they did, there’s no way I’d be getting a D in Spanish) I disagree with the statement about how if getting A’s is easy, then they shouldn’t get rewarded. It shouldn’t matter if it’s easy or hard, it’s still an A.

Personally, I think tying allowance to chores is just a good way to save the parents from headaches–if your child knows he won’t get money if he’s lazy about making his bed, then he’ll probably be sure to do it. You won’t have to nag or punish, simply remind.
When it comes to grades, however, your child won’t have allowance on his mind all the time. He won’t behave well in class, learn his lessons, and do all his homework simply because he’s thinking about the next allowance raise. No, I think it’s more likely that the allowance will be a superfluous reinforcement of something well and done. When the report card comes, if he’s done well, he’ll be happy to get more money. If he’s done poorly, not getting the raise will make him feel worse.

In response to Elizabeth–I disagree; by “forcing” his child to save at first, Trent will teach him the value of saving! How else do you expect kids to learn it?

Last note: $5 per week for a 4 year old????!!!!!

Anyway, he loves it. In the beginning he made some really poor choices. I expected that. But now, he’s making a lot better choices. He is way more discriminatory about his purchases. He hasn’t yet found anything he wants to spend his medium term savings on.

On a side note, we don’t let him purchase anything that goes against our family’s values. And I have to admit, I discourage the purchase of snacks because our house is full of them.

I love your blog. Thanks for your hard work!

The way my family did it was that when there was extra family spending money, we got an allowance and when there wasn’t, we didn’t. (I mostly didn’t get an allowance, but there were two periods of my life when I did.) And if there were chores to be done, we had to help. (We didn’t actually do much–cleaned our own rooms, loaded or unloaded the dishwasher, cleaned the bathroom, and later did our own laundry, plus other duties as required when company was coming). The two were obviously not related.

I really like this method, at least when all the allowance is for fun. Of course, your child will be learning about your finances like when you get a raise and when there’s a big unexpected expense. I’m sure it’s heartbreaking to take away all or most of a kid’s allowance, but those cute little things want to help Mommy and Daddy! Of course, you personally are in such good shape that this is unlikely ever to happen to you.

My upbringing would have been better if we had discussed various strategies (spending, short-term saving, long-term saving, donating). We were just told we could do whatever we wanted. (I saved all mine; my brother spent all his.)

Another idea I like is transferring a line item of the budget to the child. Mainly I’ve heard of this as giving kids all of their portion of the clothing budget for the season and letting them spend it as they wish. If they spend it all on a pair of shoes, that’s all they get until the next budget period. Many kids develop a sudden interest in thrift stores, garage sales, discount stores, and other places they wouldn’t dream of visiting before they had the reins. If there’s anything you buy regularly for the child, like a Sunday treat, annual school supplies, etc., you could use this method.

As your child gets older, you could also let him adjust the percentages for the different categories.