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Andy and I were both raised in amazing families that taught us well when it comes to money, but we still grew up to make pretty stupid financial decisions. And I know we aren’t the only ones! Right now we handle things ok, but we are still paying the price of beeing foolish in our 20s. Let me be clear: what I’m about to say does not absolve Andy and I of blame (we made the mistakes!), but it’s an issue I see in our society: the advice that was once given to other generations simply doesn’t work in this day in age. Or, kids nowadays need MORE help than what they were given back in the day. I spent time reading many books on parenting and money and between that research and our own extensive experience in trial and error, I’ve created an money & allowance system for our family that has been a game-changer for how our whole family handles finances. I also find that it gives us a chance to teach our children about proper financial methods.
The Chores/Allowance Issue
As a child, the rule was simple: check off your chores (ALL of them) and you get your allowance. Skip anything, and you don’t get paid out. This, along with my mother’s incredibly strong work ethic, raised me to be a very strong worker, pouring 110% of my heart into my work. However, I didn’t always get that allowance money. I’d skip sweeping the floor one night. I’d get lazy one night about dishes. So when I did work, sure, I was great. But about 60% of the time, I wasn’t getting a paycheck
I learned some amazing lessons about hard work and getting paid. But nowadays, I think kids need to learn more about handling money. Connecting chores with money could make a kid miss out.
But does that spoil the kids? If you just give them money without them working for it? Well, not in my house. We work hard around here. My kids work because that’s just what we do in this house. Honestly, they resist me no more or no less than when they got paid to do it (BIG FAT DISCLAIMER: I don’t have teens yet!). I’m still teaching them the value of work (heck, I feel like I’m even teaching them the value of service too!).
Here’s the other problem I encountered when working with the chores/allowance connection. We’d get caught up in our busy lives and I wouldn’t post a new chore chart, or we’d keep changing chore methods constantly, and I found that it was a rare moment when we could actually have an allowance payout day for the kids. We were truly struggling with consistency, which meant our kids missed out on learning how to consistently handle money well.
Our kids have been able to learn about hard work and managing money well, without us having one of those lessons being dependent upon the other. Sure, in the “real world” hard work can help you earn more money, but from my own experience, I’ve seen that you can work incredibly hard and still be broke if you aren’t managing money right. And if you are raised to be a hard worker no matter what, then in the “real world” perhaps it will pay off. Since my kids are still young, I can’t say for certain that this method is the be-all, end-all method and my kids will be raised to be hard-working debt-free adults (again–our parents did an amazing job educating us on money and we still made mistakes). However, I’ve been reading what experts have said on this topic, and most seem to be in agreement: making allowance dependent on chores could cause our kids to miss out on learning about money.
I have also found that by using this method, the chores I need my kids to do can vary day by day. One thing we like to do is play a show like America’s Got Talent, and on commercial break, we all work together as fast as we can on a particular cleaning project in the house (unload the dishwasher, fold laundry, etc). And yes, I pause the TV and have everyone FREEZE when the 6-year-old catches on that if he doesn’t work, others will pick up the slack.
The Problem with Invisible Money
When my Mom goes to a coffee shop, to this day she still uses cash to pay. But my generation hardly uses cash–and I don’t expect the next generation to suddenly bounce back to the cash-method. Nowadays, even if you are a cash person, most of the money that you will handle is completely invisible. So it only makes sense to me that when I teach my children about money, that I teach them with invisible money.
In fact, I teach them about money using the same system that I use to handle our “grown up” finances. I handle our finances on Saturday morning (I find this day is best because it keeps us from going cray-cray with spending money on Saturday), I call the kids in to allocate their allowance. I don’t need cash on hand, everything is done in the software program that I use when I handle our finances, You Need a Budget (YNAB). I will show you in a moment how we do this. I wanted their way of handling finances to replicate how I handle the finances as an adult.
“In the Bank”
In one of the Friends episodes, Monica loses her job and her Dad tells her she shouldn’t be worried at all because what has he always taught her? Where should she always put the first 10% of her paycheck? She replies almost robotically, making it quite apparent that she’s had years of this drilled into her: “In the bank.” Now, sadly, she hasn’t followed that advice, so maybe that’s a crappy example! But his advice has always resonated with me.
In our religion, we already give the first 10% off of our paycheck to tithe to our church. That’s not our money. I can’t even begin to tell you the blessings we’ve received in our lives when we’ve paid our tithing. Andy was raised with this method, so for him, it’s just a no-brainer. His parents had many years of asking him “Where do we put the first 10% of our money?” and his reply “To the church!” But I wasn’t raised this way, so when I first learned about this concept, it was an awful learning curve. Each month, I’d write a check for hundreds of dollars and think of how much that could help us pay for X, Y, and Z. But since Andy grew up with this method, it was totally drilled into him and automatic.
My family emphasized putting money into savings, but I found that I didn’t have anything left at the end of the month to put into savings.
Because of this, we are teaching our kids Jack Gellar’s “in the bank” principle. They learn to both tithe and put money to savings the second they get paid (I’ll show you our system in just a second).
How We Handle Allowance Time
Saturday Morning Allowance
My kids know that Saturday morning is allowance time. The kids enjoy some Saturday morning cartoons as I go through our family finances for the week and approve and categorize purchases in YNAB. I then call each kid in one at a time. My time with each kids takes no more than 5 minutes. Let me break it down:
Paying Out Allowance
I ask them “How much do you get paid?” Their allowance reflects their age. K is 7 years old so she gets $7/week. We enter in the transaction together:
Next, we head over to the budget section of our software. And I ask, “What do you do with the first 10% of your check?” The child replies, “I tithe it.” We take a moment to allocate that money.
Since I don’t want our church clerk to have to deal with .70 transactions, I save this category up and have them pay it once it reaches $20.
I then ask, “What do we do with the next 20% of our money?” And their reply, “It goes to savings.” We allocate that savings:
During each allowance week, I take some time to talk money with them. We talk about random situations and I ask them how to handle it, “You really want a puppy toy, but you are $5 short. You have $5 savings, do you pull from there?”
I share what credit cards do–how buying a toy for $5 with a credit card actually means you are spending WAY more on it as interest accrues.
We talk about how much it costs to eat out vs eat at home (with them seeing the numbers right in front of us, it’s easier for them to understand).
I share experiences when Andy and I foolishly dipped into a credit card to pay for bills, and how if we had a savings account with money saved up, we could have prevented charging so much money.
I often quiz them on little things they’ve learned. This discussion only takes 1-2 minutes, but I’m hoping that all of these little nuggets will add up over time and help them as adults.
Next is the activity they love: picking toys (or whatever items they want, but it’s always toys). I have them list out anything that they would like to save up for to buy. This is the only time they can determine what items the money goes to and how much goes to each item. We can’t be standing in line at Target and they decide they want to buy those mini Lego kits that sit temptingly at their eye level at the register! ALL decisions for what to save up for happen on Saturday morning. I find they soon forget about that impulse buy (and fingers crossed that transfers into adulthood!). They can change whatever they are saving up for, as long as it is done during our Saturday session.
During this session, they also determine how much of their money that they want to go to each toy they are saving up for. Jack likes to throw all money at one particular toy, Kristi prefers to spread hers out a little and is ok waiting a little longer to get it (oh bless her! Please stay this way, sweet child!!!!).
What’s also nice about doing this at home (and not in the middle of Target) is that we can go online and look up competitive prices. Jack was saving up for a puppy toy that we found on clearance online, but it rang up differently in the store. That cutie went with me to customer service to try to sort out the error, and he walked away with his toy, that he saved up for, at the clearance price he researched. You can also order online and use Ebates, getting a small percentage back from your purchase (I keep that little bit for myself–#momtax).
For example, Kristi is saving up for a fidget spinner. So we looked on Ebates to search for what places carry the fidget spinner and what their prices are.
Other Side Effects of this Method
This method has not only helped our kids, but it has also helped Andy and I tremendously. We have never put money into savings first, until now. If we are teaching our kids this, by-golly we should be doing it too.
Another benefit of this method is the kids hold us accountable. The more my daughter has learned about how much money we waste by eating out, the more she reminds us of that when we decide to eat out. Dang it, she got me!
Do you have a method that’s working well for you with your finances? I’d love to hear! Or maybe you are struggling with something in particular with teaching your kids about money–share below, perhaps others in our community can help!