Being the “diamond shape” in my marriage, I happily took on the role of CFO from day one. David has his strengths and I have mine. And, yes mine include charts, graphs, percentages, and numbers. While he is SO much better at creative play, magic tricks, and telling jokes. (Can you guess who is the “fun” parent?)
And this is why I don’t give my kids allowance. (You can also read all about my thoughts on budgeting – or what I like to call…smudgeting!)
Technically, I give them a monthly salary.
Say what?!?
I firmly believe that you and I as parents, have an immense responsibility to model and teach our kids how to give, save, and spend money. Or in a broader sense – budget. So in order to foster this with my children, I created a system where each month our kids (currently 14, 12, and 9) have the ability and responsibility to manage their own finances. Instead of a small allowance for just incidentals, we provide them with a monthly budget (starting at age nine) that they are responsible to manage.
At the beginning of each calendar year they are each presented with an individual “Monthly Budget” (like above) that outlines what they are going to be held responsible for in the upcoming year. (I left off details like numbers etc., but you get the general idea.) This document lays out exactly what each child is responsible for and what our expectations of them are as well. Additionally, in January of each year they are eligible to receive a raise if they have demonstrated good financial responsibility over the previous year.
Banking:
Our bank has an option for our children to have a personal (student) checking and saving account. So for each of our children we opened up their two accounts with a balance of $25.00 in each. (The understanding is that they need to not touch the $25.00 in either account.) Then, tied to their checking accounts they each have a personal debit card, so that they can shop online, purchase from stores or pull out cash from the ATM.
Giving:
To encourage them to give some of their money away, we require that they give 10% away of their monthly salary. They get to decide to whom they want to give. Again, we want to encourage this so that it becomes a habit and something that they think to do first.
Saving:
When their monthly salaries (amounts are different and based on their age and responsibilities) are deposited each month: 90% of their monthly salary goes into their checking account and the other 10% automatically goes into their saving account. We are trying to encourage automatic savings and the rule is that they are not allowed to touch their savings accounts – as they get older we’ll give them some more freedoms with their personal savings accounts, but for now they don’t touch them!
Spending:
The remaining 80% is their spending money. As you can see above, Ainsley who is our 14-year-old, has quite a few things listed under her spending responsibilities. Within these responsibilities, she gets to decide where she wants to shop for clothes, how much she wants to spend on a pair of jeans, who she wants to buy gifts for, and what “extra” activities she wants to participate in (dances, movies etc.). (We do pay for sports and various sports equipment and of course school related expenses such as school supplies and/or field trips.)
Our younger two children, Connor and Berkley have a similar break down, but different age appropriate responsibilities. For example, we still buy gifts for birthday parties that Berkley attends, but she is completely in charge of buying her own clothes. I loved helping her last month look for a new pair of tennis shoes for PE. She wanted to shop around to find a good “deal.”
Does it Work?
I can’t begin to tell you how proud I am of our kids and how they each already understand financial responsibilities and choices. We moved away from a traditional allowance when Ainsley was nine and five years later she is proving to be a very wise money manager. It’s truly been a simple system that has actually made our job easier as parents!
TELL ME: Are you a “Spreadsheet Queen” or a “Joke-telling Queen?”
KISS ~ Good financial health is important too!
