Teach Your Kids Good Money Habits With This Allowance

One of the oldest parenting tricks in the book is giving our children an allowance in exchange for good grades at school or chores done around the house. My parents did it when I was a child and I started to give my daughter a weekly allowance somewhere around her fourth birthday with hopes that some incentive would make her a more responsible child and eventually, young adult.

 

The basic premise of an allowance is to teach our children that they will be rewarded for doing good things and more importantly, that they will need to work for money to spend. It’s a noble idea, and it must have worked at some point in time or else parents wouldn’t have done it for all those years.

 

What got me thinking though, was that it didn’t work for me. Even though I got an allowance and was rewarded for doing well in school, my money management habits left a lot to be desired. The system that my parents used was the plain old fashioned one that parents had used forever.

 

I took the same concept of an allowance that my parents used with me and I tried it first with my four year old daughter. If she got good grades in school, I rewarded her. When her chores were completed all week, we gave her five dollars to spend at the Dollar Tree. We did this for about three months before realizing there might be a better way to teach her responsibility.

 

After experimenting with several different methodologies, I came away thinking that maybe the traditional allowance isn’t the best way to teach our kids good money habits. Maybe thinking outside the box and finding a different system could yield better results.

 

Here are the “allowance systems” that we experimented with while trying to come up with one that would teach Hailey how to earn her own money and how to balance that money wisely between what she wanted and needed.

 

1). Learn To Earn

 

One of the principles of the allowance that I learned from my parents was what I like to call “Learn To Earn”.

 

It works exactly as it sounds. To earn money, my child had to excel at school and at home. If her school work wasn’t up to par, she didn’t earn any money. If her spelling tests and reading weren’t always improving, she wouldn’t earn any money.

 

For this one to work properly, we had to come up with a system to measure her school work on a consistent basis. We found that paying her for good report cards wasn’t a good option because so much time went by in between reports.

 

Instead, we spoke to her teacher and asked for a short note each week to keep us informed on her progress and behavior. Most teachers worth their salt will be more than glad to have a parent cooperating with their child’s school work and helping to hold the child accountable. Unfortunately, this doesn’t happen enough these days.

 

2). No Work, No Play

 

Instead of giving our daughter a list of chores for the week or a daily chore list, we decided to make a list of chores with a “payout” for each one. For example, cleaning up after dinner would pay 50 cents or helping with the dishes would pay a quarter.

 

What prompted us to try this?

 

We tried the weekly list of chores, with little success. I found that with a list of chores and no set goal for achieving each one, it was hard for her to complete all of the tasks.

 

Some kids are different, but my daughter has a fairly short attention span that she gets from yours truly. Giving her a list of things with no clear direction or definition of the reward led to procrastination.

 

By outlining each chore and giving her a reward for each one, it was more like a job to her. The harder she worked, the more money she could earn at the end of the week. Sound familiar anybody? It’s the basic premise of every working individual out there.

 

3). The Balance Beam

 

The third iteration of the allowance system we use, I like to call the balance beam, because my daughter does gymnastics and can relate to it.

 

Basically, the balance beam system consists of jotting down a few things each week that your child needs and a few things that she wants. You then let her choose a couple of the things she wants and one thing she needs. These are the three things she will buy with her allowance that week (or month).

 

By allowing your child to buy things she wants, you keep her motivated, but by making her buy something she needs like toothpaste or shampoo, she learns the importance of balancing between needs and wants. If you want to take it to the extreme, replace the work allowance with “budget” and really give your kids a financial head start.

 

 

An Allowance Is Good, But It Helps To Do Some Tweaking

 

Giving your child an allowance can be very beneficial, but as I’ve pointed out, you should do some tweaking to reflect the goals you wish to accomplish using it. It’s important to teach our kids good financial habits from an early age and using an allowance is just one of the tools available to us.

 

Make it your own. Don’t follow the rules of parenting. Experiment with what works and what doesn’t until you get it down to a science.