Friday, October 12, 2012

Allowance Debate

Let's talk about money for a minute, shall we?  Specifically, money for the children.

My husband and I both grew up in households that didn't provide an allowance for the children.  In both families, some of the now-grown children are very careful with money and others have had an extra share of money problems--mostly due to their own lack of money smarts, so to speak.  Neither of our parents had much money.

My own experience was that while I knew we didn't have much, I never had the impression that I was any worse off than any of my friends.  I knew that Mom made most of our clothes, I knew that tending the garden and animals were important (though I didn't know we often relied on them), and I knew that we shopped for groceries at the discount store.  But, though it wasn't frequent, we did go to the movies, we did go camping and we did do other fun things as a family.  Mom and Dad worked very hard to make sure we were protected from the financial frustrations they were experiencing.  The only clue I had regarding that was on bill-paying day; when Mom was at the table with stacks of bills all around her and her checkbook in front of her, everyone knew to be quiet and stay out of the way!

My experience with Dad and the money came when it was time to ask for lunch money or extracurricular money for things like an ASB card or a yearbook.  Each time I asked for money from Dad, he would begin to inquire about the cleanliness of my room or what extra things I had done to help the family that week.  It was frustrating because, first of all, I wasn't very clean, but also because I never knew what was expected.  Yes, I worked with the family, but was it enough for a yearbook?  Yes, I had done the dishes that night, but was it considered extra since Mom had to ask me to do it?

On the other hand, I had friends who's parents were completely open and transparent about the money.  While it could be argued that it was important for the children to know that frivolous purchases were just that, was it necessary for the children to bear the very grown-up burden of financial hardship?

When I left home, I felt wholly unprepared.  While Mom and Dad were open about generalizations--stay out of debt, make sure you balance your checkbook, don't write a check if you don't have the money in the bank--I didn't know a thing about how to run my finances.  I didn't understand how to, or the importance of, establishing credit.  I didn't know much about budgeting or making a long-term plan.  But, I'm a smart enough person that I knew I needed to study and figure things out.  I am naturally frugal so luckily I didn't get into crazy trouble while I was figuring!

When Justin and I saw our children beginning to be motivated or enticed by money, we tried to find a happy middle ground between telling them nothing and telling them too much.  We found it rather tricky!  We tried to use phrases like, "Not in our budget," or "Don't want to spend our money that way."  We tried to seek out and follow good advice from both experts and other parents.  Going to school frustrated some of our efforts because we didn't have any pennies to spare.  It became difficult to reward the children with money because we didn't have it!  We felt the need to teach them more about saving and giving, but we couldn't be consistent and worried that we would make things worse by giving sometimes and not others.

Now that we are done with school and taking in regular paychecks, we are taking another look at how to teach our children about money.  Dave Ramsey, who has been with us from the beginning of our marriage and whose advice made going to school possible in the first place, suggests giving children a commission (basically, work based allowance).  In General Conference over the weekend, two different speakers suggested an allowance to help children learn financial responsibility.

I like the idea of an allowance of some kind and really like the idea of letting the children know it isn't going to be automatically given.  As long as we establish and communicate our expectations, they will know how and how much they can receive.  However, having not come from this background, I'm unsure how to proceed!

What do you do in your family?  What did your parent's do?  What do you wish you had done?  How much are we talkin'?  What should we expect the children to buy (popcorn at the movies, birthday presents for friends or their own school clothes)?  Do you have a program or a book that you use?

Anxiously awaiting your advice,
Emily

9 comments:

  1. Some thoughts:

    I picked up on the allowance thing as well. We haven't done it yet as they are young, but they sure are motivated by it. I find its been nice for them to have some for things like a little toy they want to get at a garage sale. They feel pretty great when they pay themselves. My sister does an allowance, but instead of just basing it on the work itself, her system is based on teh ATTITUDE. So they have set chores that are not optional. If they do the chores without hounding, whining, or complaining, that's when they get the money. I thought that was an excellent idea, because honestly, its more about not havign to hear them whine than actually getting it done.

    I was thinking about the issues of older ones. I'm thinking that if they are expected to buy their own school clothes they would have lot more say about what those clothes look like (modesty is a must), than if you were paying for instance.

    We didn't have set allowance much as I recall, but we sure did get good at giving backrubs, because it was 25 cents per limb (one arm = 25 cents). As a mother, I'd totally pay that for a massage!

    I think it would be good for some of them that are older to have their own back accounts even, learn about interest. Having them set aside percentages for things would be good too, 10% tithing, some percent for mission/college, another percent for long-term savings, another set to spend. If you're ambitious, you could teach them to track it on excel but that might be a little ahead of time.

    I'll be interested to hear what you think.

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  2. Interesting topic! I've thought about this a lot!

    My own parents did a 100% earn your own money thing from the time I was in 1st grade. They actually opened me my own checking account when I was like 8 - (yeah even with a legal form of I.D., which they also got me, stores were not especially thrilled to get a check from an 8 year old, but they usually did.) We had to buy our own school clothes, presents for friends, new bedding if we wanted it etc. They paid us for doing everything- cleaning our rooms, doing the dishes, babysitting our siblings. When we were a little older they even bought a Rainbow Snow and put it in front of my Dad's office, and had us run the business completely by ourselves. All in all I think it was a good experience, but here is my rundown of the pros and cons.

    Pros: Every dollar I ever had was always associated with the work I did. Therefore, I felt I was more careful with my money than my friends who were just handed it. Also, I felt a lot more control over my financial life, because I knew I could always work to get more money. I know some of my friends felt frustration in the fact that they never knew when their parents would toss some money their way. I think it got me thinking about money in a practical way from an early age. I knew how much things cost, and about how much work I needed to do to get them.

    Cons: Baden has pointed out that it is weird that in my family every time my parents ask one of my younger siblings to do some work the kids ask how much they will get paid. In his family it was like "you work because you are part of this family." This might become especially problematic if you don't have enough money to keep paying your kids. My parents never put a cap on how much I could earn, so I remember, for example, saving up for an American Girl doll and Doc Martens in 5th grade. But, if the parents don't have the money to give the kids at that time- does it mean the kids can stop working? You might be able to work through this by just paying them not very much for each chore. Also, you could try to find outside sources for you child to work. My dad actually made me get a job picking vegetables at a local farm when I was 12, which I HATED, but was probably a good experience in retrospect. I also sold pizza coupons and cookie dough door to door when I was 13 to save up for school clothes. I think this might be an important aspect, since often in real life it is not just working but FINDING the work to do that can be the challenge.

    I did have a lot of say over what I could spend my money on, because I had earned it- which could be a pro or a con. I think it is good for kids to learn from their mistakes with money. I'd rather them blow all their money on candy when they are 8 and learn the lesson, then have them blow all their money on a car when the are 18.

    Also, I have reflected that as kids my siblings and I were very...how should I put it- greedy? money- focused? materialistic? Making money was kind of one of my "hobbies." I was constantly thinking of things I wanted, and then working to earn it. Which was good in some respects, but also as an adult I've learned that sometimes it is good in life to try to put money out of your mind and focus on things that money can't buy.

    However, now just saying that I think that is also a good life lesson. Some teenagers might spend a lot of time studying, because education means a lot to them, while other kids may spend all their extra time working, so they can get things they want- but this is also true in adulthood. If making tons of money is extremely important to you, you should pick certain jobs. If you would rather make less money and do something you are passionate about, or gives you more family time etc., then you may pick another kind of job. And, I believe that neither option is wrong.

    Mary Ellen

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  3. I'm pretty sure one of my children would save every penny and the other would spend every penny they earned.

    I also get annoyed when chores will only be done for a monetary reward. Somehow I need to establish chores that need to be done because "you are a part of the family" and chores that earn money. Dishes, laundry, pick up toys and room- all seem to be "part of the family" chores. ????

    Dated a guy once who was raised with parents that would match earnings for big big things- like bikes, computers, and even college and missions. Whatever the child earns, the parents would match. I love that idea.

    I am clueless as well. My kids do not understand money yet...and I'm a softy and get them random toys at the dollar store every now and then...just because.

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  4. I love the phrases- "Not in our budget" and "Don't want to spend our money that way." We've used those with our children. We've let our children know that we must pay for things like our home, the lights, the heat, the phone, and our food. We use our money first for those things and then if there is money left we can decide how to use it on things we want (including saving it for a future purchase).

    We had to have a pretty serious conversation with our oldest about this because a neighbor girl whose family was on public assistance as well as receiving help from the church came around with a pillow pet. Our daughter wanted one and just couldn't understand why this other girl could afford one and we couldn't. That's where we came up with "not in our budget" and "choose not to spend our money on that." My oldest is 7 and sometimes I worry that she is so concerned about how much money we have so I am careful about what I say. I think it's good for children to know the value and necessity of money, but I also think that they shouldn't be burdened with the stress of paying all the bills.

    Our children are still young so we're still working out our plan for teaching them about money. Right now, they earn money for regular chores and then they can more for doing extras. We cash in each week and then take out tithing and savings. What's left they can spend how they want (mostly- I do veto a few things). They also get money from grandparents for birthdays and christmas that I let them spend how they want.

    My husband and I had very different experiences growing up. His parents didn't expect much by way of chores and gave money for anything he didn't want to do and they wanted him to (which seems more like a bribe to me, but that's another topic). He could spend his money totally on whatever he wanted- he wasn't expected to buy his own clothes or pay for trips or anything. In my family, my dad was self-employed and when I was younger he made really good money. My parents decided to set up the business as a partnership (better for tax purposes) with each of the children as a partner. They legally had to pay us, but they made us do things to earn it. We got paid for doing our regular chores, but we also got paid for things like piano practice time and even extra reading (not homework). When his business did well we made pretty good money. They set up a savings account for each of us and then we were expected to buy our own clothes and such from the money.

    I think it is good for children to experience earning money and having to buy some things for themselves. There are lots of ways to do it and I think you just have to find what works best for your family- and even each individual child.

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  5. One more thought: I don't think it matters as much the amount of money- or even (to some degree) how they earn it. The important thing is that they learn the value of work and money- including budgeting and saving.

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  6. My kids have to do extra, not expected of them chores. I find things for them to do when they want something. When my kids come to me because they want something, I say sure-if you have the money to spend on it. That phrase a lone has helped my "greedy/want this want that" child to re-think the things he thinks he needs/wants.

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  7. Kora and Canon are just getting old enough to use it, but I really like myjobchart.com - really fun for the kids. They earn points to redeem for rewards. Rewards can be set by you as $$, special events, one on one time with mom and dad etc. You define what they can spend their points on, you can set your own value for things, and it's really nice fun way to keep track of everything :)

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  8. Oh and it's possible to set up a savings option AND a place where you can set up a tithing option:)

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  9. This is kind of a delayed comment...but we had the same concerns with our kids. It's only by very good fortune in my choice of spouse that I am not in terrible credit card debt as an adult because I had no idea how money worked when I left home. (Beyond a checkbook and an ATM card.)

    We taught D, our older child, to use a basic spreadsheet. He has a (very minimal) weekly allowance that he keeps track of on the spreadsheet. We have expectations about family chores that he should do either without being asked (put away laundry, keep room reasonably disaster-free) and other chores that are extra (pairing socks: $.05 a pair; I hate pairing socks). If he gets money for a gift, he puts it in the bank of mom and dad and adds it to his spreadsheet. AT the end of every month, he calculates his interest on his spreadsheet. He is saving for a bike.

    I can't say we're super consistent about when things come out of his "account" and when they don't, but he is learning how to use a spreadsheet and how interest works. We also had an interesting credit experience with him; he wanted something he didn't have the money for: soccer shoes above our budget threshold. So we loaned the extra to him and he had to work to pay off the debt. After eight weeks of all allowance and all extra money going to pay off the red ink--meanwhile the shoes were already trashed--he said, all on his own, Wow, I wish I hadn't borrowed that money. Good boy!

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