Choosing whether to give your kids an allowance can be stressful, especially when considering tying an allowance to chores. What should you do if the chores are not done? What if they are done but not up to your standards? And more importantly, what financial lessons might your children learn when they begin earning money for the first time?
A parenting preface
Parenting is obviously a very individual thing. But certain themes are more universal than others. And allowances are one of those.
What is less universal is thinking about how to teach our kids about personal finance and financial well-being. Looking back, my relationship with money growing up was unhealthy. As a result, I wish I had more financial lessons from my parents. Naturally, this becomes something that I think a lot about with my own kids now…
My kids, however, are still very young – 5 and 3 years old plus a newborn. So, while we do already bring up financial responsibility in age appropriate ways with our older kids, allowances are not in the picture yet.
So, I asked someone who I think has an amazingly healthy and wise relationship with family and money to weight in. And that person is Brian Zdrowak, CPA, CFP of Buckingham Strategic Wealth. They are a partner of the blog. But more importantly, you may remember Brian as the financial planner who helped Selenid and I jump start our financial plan as discussed here.
So, take it away Brian!
Should I give my kids an allowance?
When I was a kid, I earned my first allowance of $2 per month by doing assigned weekly chores.
I was eight years old. And my chores included making my bed, emptying my garbage can, dusting and vacuuming my room. My dad would have surprise “military” inspections, for which we were given plenty of notice, to see that we were doing our chores properly. Looking back, I would guess that my father gave us plenty of notice of upcoming inspections to avoid the stress of having to deny our allowance.
Whether we gave an allowance tied to chores or not, my wife and I both agreed that it was important to teach our children how to manage their money at an early age. Rather than waiting for the right day, whenever that may be.
When you think about it, by waiting until they are older, we are leaving it up to our culture to be our children’s financial educator. Considering that our culture encourages spending, is this the financial acumen you want your children to learn?
(Nope! It took my years to overcome this as I talk about in this post: Overcoming Consumerism in a Culture Obsessed with It.)
The real value of an allowance
Luckily for my kids, and my marriage, we went with my wife’s idea to give our kids an allowance. This allowance was a teaching tool, not a reward for doing chores.
Initially we made this decision to avoid the monthly stress of figuring out whether chores were completed to our satisfaction. Over time, we realized that this decision allowed us to focus on teaching financial discipline. We were able to provide feedback on their three choices of money management: to spend, share or save their income.
The perfect example
I remember the time my six-year-old took a ten-dollar bill from her Lion King purse and put it into an animal shelter donation box (yes, I was initially tempted to break the box open).
This gift was overly generous for her, being months of her savings. However, for us, it was an inexpensive opportunity to teach money values.
What I will remember most was the proud look on her face as she looked up at my wife and me, saying “I just helped the animals, it was my share money.”
At six, she was learning that with every dollar, we have a choice to spend, share and save – and how the choices we make with our money often reflect our values.
Ok, Jordan here again. I asked Brian his thoughts on this via email and above was his exact response. And I love it.
I actually did get an allowance when I was a kid for doing chores. And it was fairly strictly upheld in that I didn’t get the allowance if I didn’t do the chores. Fair is fair.
The big problem with this arrangement is that the whole allowance thing became transactional. And it didn’t help me learn any money of finance lessons. I made the allowance and then spent it willy-nilly…definitely not in an intentional way like I recommend.
What Brian proposes is something much more lax in a literal sense. But much more meaningful in the long term. It’s a good balance between fostering work ethic and financial responsibility.
Two great lessons if you ask me!
What do you think? Do you give your kids an allowance? Will you in the future? Why or why not? Let me know in the comments below!
I will also say that while I completely believe that all doctors can manage their own investments, Brian is one of the true good guys in this field. If you are looking for an honest and skilled financial advisor, you can learn more about Brian and his team here. The opinions expressed here are their own and may not accurately reflect those of Buckingham Strategic Wealth.