Our Kids’ Allowance System – Successes & Challenges

(For regular readers, a quick apology.  Three weeks of sickness in our family  – including 10 days’ illness for me – plus traveling for a month to see family and friends  knocked me off my regular blogging schedule.  Then, lucky me, a new work opportunity conspired to keep me away for longer.  But now I’m back and have several posts lined up to get us on track.)

 

Parenting teaches you a lot about yourself.  And teaching your kids about money reveals a lot about your own personal money mindset.  Since introducing our new allowance systems with our two boys last year, we’ve had some successes and identified some things to work on.

First, the successes:

  • Our boys have become very comfortable with managing their money.  They have a true sense of ownership and it’s made them think more about what they are spending their money on. When they ask for a soda when we are out, we tell them they can buy it out of their allowance. Often, they decide to stick with water. Or, if they hear about a new video game and want to buy it, it’s great to give the answer “Check your allowance and see if you can afford it.” Regular readers will smile as I share how happy I was to hear seven year old M tell his babysitter the other evening that the stuffie he won from the cursed Claw Machine cost $12.  “And it wasn’t worth it.”
  • They have become excellent “savers with a goal.”  They identify things they want to buy and save for them.  I love that this teaches them concepts such as delayed gratification and that they should be saving for things rather than getting into debt for them.  (And initially, they did try the debt route with requests for advances from the Bank of Mom & Dad which were denied!)  Occasionally, they help each other out to reach a goal faster and there are lessons in lending money to each other.
  • Keeping track of the allowances on FamZoo is a cinch.  The boys love being able to get an update on their financial situation when we’re out and they see something they want to buy (we just check via the iPhone app).  Z loves being able to track all their spending and saving so effortlessly.  And I love the fact that the allowance is paid automatically so it’s one less thing for us to think about each week.

What we need to work on:

  • Automatic savings without a goal.  The boys either save with a goal in mind or else just spend the money  (if they have it) when they see something they want.  As I thought about how to teach them to just automatically set savings aside, I realized that it’s not something I have ever learned to do.  I’ve always saved with a purpose in mind.  When I was younger, it was to fund traveling or buy a major item.  These days, it’s to fund retirement, property taxes, saving for our next new car and vacation.  (We use ING and have different line items for each savings goal, apart from retirement which is by automatic transfer to our Vanguard accounts.)
  • We’ve accidentally fallen into the habit of making them pay fines for things like not cleaning up around the house and other bad behavior.  Z and I are both aware that this is not the purpose of allowances so I’m now reading the parenting books to see how we can use better disciplinary methods.
  • The boys have not thought about any donations for charity. I think this is because we don’t talk about giving to charity in front of them. Z and I make our donations on the computer at night when the boys are asleep.  I want to encourage them to think about setting aside a portion of their money for charities that support what’s important to them.

Overall, Z and I like the track that we’re on. But we’re always eager to learn from others. What’s the best thing you’re doing to teach your children good financial habits?

3 Responses to Our Kids’ Allowance System – Successes & Challenges

  1. Etay says:

    We are using http://www.bankaroo.com to teach our kids about money and making smart financial decisions as well as tracking the kids funds and allowances from the web and our mobile devices.

    See an intro movie here: http://www.youtube.com/watch?v=rzlV_qmoq90

  2. Welcome back Suzanne!

    You might consider creating specific charitable savings goals with the kids that are associated with a charitable account that is fed by a portion of income. Here’s a shot of my 10 year old’s setup:

    http://www.flickr.com/photos/famzoo/6920814721/in/photostream

    • Suzanne says:

      Thanks Bill. Love the idea of creating a goal rather than setting aside money for an unspecified charitable need and then looking for what to spend it on.

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