Kids And Money: The REAL $50,000 Question

A friend recently posted this question about allowance on her Facebook feed:

“I’m not of the thinking that you hand your kids $50+ when they want to do something with their friends. So today is a big day of yardwork. Once completed I will reward him with some hard earned cash. Seems fair to me… do you agree?”

The responses were, unanimously and resoundingly, “YES!”

Money doesn’t grow on trees.

It’s a question for the parenting ages, isn’t it? Should children be made to earn their pocket money or is a certain amount of spending money a necessity that we, as parents, should provide them with? Lots has been said and written by financial experts and parents alike on the topic of teaching kids about money.

Most experts agree that there are three main schools of thought on childhood allowances:

1. Pay for Performance: children are assigned chores and are paid for acceptable completion of said chores. If assigned work is not completed or is not to an acceptable standard, no allowance is paid. This is the most traditional model of the childhood allowance, and the thinking behind it is that there is no free ride in life: if you want money, you have to earn it. The sooner children learn this lesson the better.
2. Share and Share Alike:  children chip in to help around the house along with other family members, and no financial reward is given. The ideology of this approach is that the family needs to work together to accomplish household chores, and nobody gets paid for them. Doing chores is simply part of being in a family. Families who follow this model also give children the opportunity to ask for spending money and/or special treats. Some of them even encourage kids to “pitch” for what they want, reasoning that kids will learn to be persuasive as well as to weigh the pros and cons of purchases, as they will need to be prepared to face their parents’ objections in some cases.
3. Free Money: children are given a regular allowance with no requirement to do chores to earn it. The thinking behind this model is that it teaches children how to manage their money by letting them make their own spending decisions (and presumably learning some hard lessons on a smaller, safer scale). Some families require that money be allocated according to a particular pattern with the “save/give/spend” model being quite popular. In it, children must save 1/3 of their allowance, set aside 1/3 for charity, and then they may spend the final 1/3 at their sole discretion.

My kids are 11 and 13 now, so I’ve had a number of years to think about and try various models of giving allowance and where I fit philosophically.

Living in a family means you have to suck it up and contribute.

To be honest, I have tried all three at various times, and I’ve seen benefits and drawbacks to each approach. Here’s a summary of my experiences and my opinion on each.

Model 1: Pay for Performance

This model does indeed teach children that money doesn’t grow on trees and must be earned, and it was my initial choice when my kids were young, but it began to backfire as my children got older. At some point, my kids realized that making their beds every day, or putting away their clean laundry, or putting their dishes in the dishwasher (or whatever the chore) was not worth the money I paid them to do it. Eventually most kids will value their time and/or autonomy more than their allowance and will simply decide not to do the chores, happily forgoing the allowance in exchange. When this happens, you either start to nag and yell a lot or you realize that the “Share and Share Alike” model has some real merit.

(I suppose the enlightened among us might say, “fair enough… you’d rather have no money than do your jobs” and wait them out until they ask for money, at which point you can say “nanny-nanny-boo-boo” and “I told you so” and refuse to give them any because they refused to do their chores. Natural consequences FTW! However, to do this you will need to be prepared to either a) live in squalor while you wait them out or b) burn yourself out picking up their slack while you wait them out. Because by-the-by: when it comes to proving points with their parents, teenagers show remarkable tenacity.) 

Model 2: Share and Share Alike

Understanding that household chores need to be done whether you like it or not, and that nobody is going to pay you for them, is a pretty important life lesson to learn, in my estimation. By necessity, I switched to a version of this model when my kids started doing the math and realized that they’d rather have no allowance for no work, than do a bunch of boring chores for a few bucks a week. At the end of the day, there are certain things in each household that must be done, and living in a family means you have to suck it up and contribute. Also: at some point your kids are going to need to be able to do their own laundry/shopping/cooking/cleaning, and helping with the housework/errands is a great way to learn how.

Simple is always better.

The only problem I encountered with this model is that you then have to figure out a system for deciding on special purchases and/or doling out money for activities like going to a movie with friends. And while it is a novel experience to have your children put together a flashy and well-researched powerpoint on the merits of getting a new bike, it isn’t always practical to have your kids “pitch” you for the cost of a chocolate bar at the corner store. If you’re not careful, this method can devolve into kids who are expected to help out at home (good!) but are always asking for things and/or money (bad!). They risk losing sight of the connection between hard work and earning money, and you might find yourself shouting, “do you think there’s a money tree in the back yard?” And nobody wants that.

Model 3: Free Money

In the final analysis, although this model may seem to be the least valuable in terms of teaching kids life lessons, it is the easiest to implement. You pick a number and give your kid that much money each week. No chore lists or star charts to keep track of, no constant pestering for cash or arguments when you refuse. For this reason alone, I like it. Simple is always better. In addition, (and not everyone may agree with me on this score) I also think that it is our job as parents to provide our children with their basic needs as well as some treats along the way. Life’s too short to be stingy, and I want my kids to also experience the joy of just treating yourself to something nice once in a while. This model allows for that.

Conclusion:

After trying out all three models (plus a few hybrid versions) I’ve settled on one that I think is a brilliant plan for my family. But more on that next time. Until then, what do you do for allowance in your family? Which philosophy resonates most with you and your experiences?