Rethinking Allowance: Taking Off the Training Wheels

As I mentioned recently, Sarah and I have noticed how our children’s relationship with their allowance has changed over the years.

When we first started giving them an allowance, we used a simple strategy where they split their money up among several items – investing, charity, saving for a goal, and free spending. We only required that they give a small portion to each slot, with the remainder divided up however they wanted.

They really enjoyed this at first. They got into the idea of setting goals. They enjoyed splitting their money up among different bank slots. Each week, they were really excited about their allowance.

Our goal was simple: we simply wanted them to become familiar with the basics of budgeting and saving and consider them “normal.”

Given that our children have used this system to save up for some pretty impressive purchases over the years, I would call this a success. They’ve saved up for items that have cost over $100, requiring many months of savings. They’ve chosen to not spend their “free spending” money to reach those goals, even though that meant not being able to buy small items that they wanted many different times.

Over time, though, some of the dynamics changed.

Today, our children rarely ask for their allowance. They still set savings goals, but instead of keeping track of their allowance, they instinctively estimate how long it will take to save that much from their allowance. Then, when three months or so pass, they’ll get really interested again.

They clearly understand the idea of saving for the future. They’re clearly patient. So what’s the problem?

The problem is that this system, as it works now, doesn’t make them responsible for their money. They don’t have to overcome impulses because they essentially cut themselves off from access to that money. They don’t have that temptation to tap the piggy bank for an impulse, thus denying any learning moments that might come from that.

So, we’re changing things.

First of all, our children have to ask for allowance each week. It’s their responsibility to remember it. It’s their responsibility to ask for it. We’re not going to be overly hard with it – if they remember a day late, we’re not going to deny it. However, if they miss a week, they simply miss that week.

Second, since they’ve shown responsibility with the rest of their money, we’re cutting out all restrictions other than charitable giving. They have to give a little to the charity of their choosing, mostly because we want to keep instilling the value of giving.

(Why not investing? They actually already have some money for investments because of what they’ve already saved and they’re learning about investing in that fashion. They have the option to contribute more if they wish, of course.)

In short, this new system puts much more of the choice and the money directly in their hands.

We feel as though we’re “taking off the training wheels” with this new allowance plan, which is now a week old. We’re planning on giving them weekly reminders about it for the first several weeks, then stopping even that.

Will it work out? Will this new system encourage a new level of money responsibility in our children? We think that it will. So far, we’ve seen that if the parents take the money issues seriously and exhibit good choices, so will the children. We believe it will continue.

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