Real world math: put kids in charge of their money
There are many methods for giving kids an allowance -- tied to chores, tied to age, bonuses-for-extra-work, etc. How (or if) one gives an allowance is rooted in one's family culture, and doesn't lend itself to pat directives. But, no matter how you decide to give your kids an allowance, I find the key to increasing its power as a teaching tool is to put your kids in charge of how they spend their money.
Putting buying decisions in my kids' hands has done wonders for their money savvy, consumer awareness, and math skills. Specifically:
- Addition and subtraction ("How much to I still have to earn to buy x? How much will I have left if I buy y?")
- Percentage ("Hey, Mom! Museum members get 10% off in the gift shop!")
- Fractions ("Hey, Mom! X is on sale for half price!")
- Decimals (dollars and cents)
- Quality vs. value ("It's cheap, but it might break the second time I use it.")
- Needs vs. wants...or wants vs. other wants ("I want that video game, but maybe I should save my money for an iPad 2.")
- Long-term goals ("I want to buy a car when I get my license.")
A few key details make this strategy work:
Allowance must be big enough to be meaningful.
I got two bucks a week when I was a kid, but it was more of a token payment than anything else. We pay our kids an allowance equal to their age. Half goes to "spending money," and half goes to "long-term savings" which they get when they move out. They choose what to do with money they receive for jobs or gifts (spend it all or save part of it).
If they ask, I also "cash out" gift cards. That is, if they receive a store-specific gift card but would prefer the cash, I buy it from them, knowing it's a matter of time till I shop at that store myself.
We choose not to formally tie allowance to chores or work, except for specific jobs such as lawn mowing or washing the car. For us, changing the context from "family responsibility" to "cash for work" decreases teamwork and increases conflict and loophole-finding.
We no longer buy treats and trinkets.
This is essential. No more lollipops in the checkout line. No more cheap toys. The only way kids learn to assess value is to pay for impulse purchases themselves.
This also goes for "upgrades" to purchases we cover. For example, we have a certain budget for school clothing. If our kids want the too-expensive pair of shoes (or whatever), they kick in the extra.
We advise our kids on purchases if they ask, but we don't judge what they buy.
My kids decide what's valuable to them. Beyond the most basic guidelines (nothing unsafe or offensive), they can buy whatever they want with their own money. Sometimes they buy candy or crap toys, but rarely...they decided early on it's a waste of money.
We track allowance and spending electronically.
The roadblock we kept hitting was the actual handling of cash. We never had proper change when it was allowance time (or we'd forget to pay it). Someone would forget their wallet, or forget to put their money in the wallet, etc. We'd buy stuff for the kids, forget to get paid back...you get the picture.
An iPhone app solved the problem: Kiddy Bank. This simple app is little more than a smart ledger, automatically adding allowance each week, with the ability to debit for purchases and credit for earnings and gifts. We've created separate spendings- and savings "accounts" for each of the kids, as their allowances and savings rates are different. The app is not connected to an actual bank account, so no money actually moves around.
So there you have it...our allowance strategy. I'd love to hear what's working for you.
iPhone app giveaway: Kiddy Bank
The giveaway is now closed, and the winners have been notified. Thanks to all who participated. You're welcome to continue the conversation by leaving your comments!
Kiddy Bank costs 99 cents at the iTunes App Store, but I've got free download codes for four lucky Parenthackers! Just leave a comment on this post to enter. I'll randomly choose the winners this Friday, 9/30/11!
(A comment I'd love to see: your suggestions for Android apps or Web-based services that track allowance.)
Thank you, Pablo (Kiddy Bank developer), for passing along the download codes. I'm a huge fan of this app, and proposed this review and giveaway, and he was happy to oblige.
Related: More allowance hacks