Tuesday, March 03, 2009

Kids & Money

Money is a Good Thing (my recent obsession with Twitter makes it hard not to precede "Good Thing" with a #).

Oh yes, money is dead useful if you need to buy something or do something fun or eat, and we seem to go through an awful lot of it around here.

Beginning a couple of years ago, Ryan (now nearly 7) developed a keen interest in money of all kinds , and quickly grasped two key principles concerning money: More Money = Better; and My Money = MINE. Morgan is not quite there yet, but she is beginning to discover that we hand over money to cashiers at stores and we then get to bring items home. So she'll get there.

So Brendan and I began to discuss ways in which to help Ryan get the money he yearned for while making sure that we help him understand just where money comes from. Easy discussion, right? Ha! This money issue turned out to be the only major disagreement Brendan and I have ever had about parenting. (Tip: try to avoid major philosophical disagreements while one of the parties is pregnant or newly post-partum. I know it sometimes can't be avoided, but try.)

There seem to be two main schools of thought about how to teach kids about money: the Allowance School and the Chores School. There are many different combinations of the two ideas. When we first started talking about Ryan and his desire for money, I was very pro-allowance and Brendan wanted Ryan to get his spending money solely through earning it. It became clear that we had different ideas about kids and money, partly because of our own childhood experiences. What we ended up doing is defining some of the goals and thoughts we had about money, our principles, and have developed a way for us to satisfy all of them. I think. :o)

Ryan's Goal

To have money of his own!

Brendan's and My Goals

To help our kids understand:
  • How wealth is created
  • That earning money is tied to hard work
  • Money management skills, including budgeting and planning
  • The value of saving

Brendan was, and to a certain degree remains, very much in the Chore camp. Any and all money ought to be directly earned by the child working to do something meaningful around the house.

I also like the idea of the kids earning money through chores. Because of course it reinforces the concept that wealth is earned, and the Trader Principle, too. So what was my problem? It was all in the execution.

We tried the Chore route for a while last summer and it was really darn hard for me to keep up with. Now I have no problem paying kids (or anyone!) to do extra jobs around the house (especially the Cruel and Unusual kind, such as tax preparation and yard work and window-washing), but coming up with daily tasks that a kid could get paid to do was a big pain for me. Which tasks? How much should I pay? How much did I pay last time? What if I'm short on cold hard cash at the moment the task is/needs to be completed? (I often don't have tons of cash lying around. Uh, in case you were wondering.)

Not only were there administrative issues which I didn't enjoy and took up more of my time than I wanted to contribute, Ryan seemed to be unable to grasp the distinction between jobs we would pay for and things everyone needs to help out with as part of living in a family (aka responsibilities). So he was beginning to say things to me like: "You owe me a dollar. I just took my plate to the sink!" or my very favorite: "How much will you pay me?" when asked to do things such as clean up a mess of his own making or brush his teeth. Charming.

So I brought up the idea of a regular allowance again. I had received an allowance as a child, but Brendan never did. I liked having money of my own and being able to count on adding a certain amount to my stash each week. I still had the option of earning extra money if I wanted to by doing extra work around the house. Getting a regular allowance helps a person learn all of those money management skills such as planning and budgeting and tracking expenses. It's easy to administer and eliminates the Pay-For-Existing revenue model that Ryan was using.

Brendan's primary objection to an allowance was that simply giving money over to the child without explicitly tying it to industrious effort will result in an adult who somehow thinks money and wealth do not need to be earned and created, or worse, that it somehow comes from the government. He doesn't want our kids to think that money somehow magically appears. And of course, I agree.

But how to address the idea that wealth is earned and not a handout?

We can do this in two ways. First, we own two businesses, and the older kids understand that "Dad works for his clients in exchange for money that we use to buy things." They do the happy dance with me when we receive a check from the company that manages our cabin rentals for us, and accompany me to deposit the check in the bank. We always talk about how people give us money in exchange for getting to stay at our cabin, and that we use that money to pay for electricity at the cabin and other things, too. I really think that Ryan at least has a solid grasp (for a kid) about how we get our money--through our thinking and efforts. I really don't see how the kids wouldn't connect our earning money with our efforts, unless we tried to hide it from them for some reason.

The second way is to continue to pay them for Cruel and Unusual Work, as referenced above. This is how my parents did it with us, and I think there is room for both schools of thought in our house, too. It's similar to earning a bonus at work for doing an extra project.

But Brendan was still a holdout on the allowance issue, despite my well-reasoned and airtight arguments attempts to demonstrate that a child receiving an allowance would not necessarily guarantee that he will end up on welfare.

Brendan views allowance as a "handout." So I suggested that we instead look at a weekly allowance as a way to turn over to Ryan a very small portion of the money we already spend on him. We spend money on him all the time: we share our food and share our home and electricity and cars: why not share our money, the means with which we acquire those things we share with them? Brendan was worried that they would somehow get used to having money handed to them; the fact of the matter is that kids are necessarily dependent on us. They can't go get jobs, at least not yet, and rely on us to take care of their needs. In giving Ryan some control over a bit of money, we can provide him with experience in handling financial matters, and as he grows, the money and responsibilities will grow, too.

So we decided to try the allowance plan, to the tune of $3 a week, and have been on the plan since about October. I win! We reached a mutually beneficial agreement, which we can revisit later if things aren't working out according to plan.

We have a few parameters around his allowance.

Ryan is in complete control of his money. He can spend it or save it however he wants. I think this is important because it's his property. That means he is responsible for his good and bad decisions. There is no savings requirement and certainly not a charitable donation requirement, as many websites about kids and money seem to suggest.

He can buy whatever he wants to with it: toys, candy, books, etc. (subject to general restrictions like movies we don't think are appropriate, for example). Ryan seems to enjoy saving up for specific things, but he also splurges, too (he's a sucker for vending machine rubber balls). If he wanted to give all of his money to a charity, we wouldn't stop him--we'd probably have a chat about it, just to see why he wanted to do it; but we wouldn't make him do it either.

He is in charge of keeping track of it. As Brendan is fond of saying, "What can you buy with Lost Money? Nothing." Since Ryan has been responsible for his own money, he is very careful to put his allowance in his wallet and treasure box.

But, as a condition of us turning over some of the money we spend on him, we have told him, and he has agreed, that Brendan and I will no longer buy him LEGO or souvenirs on vacation. As he gets older, he'll receive more money, but will also be expected to be responsible for other kinds of purchases. For example, at some point, I don't know exactly when, he'll get a clothing budget and make all of those decisions for himself. The reason we started with LEGO and souvenirs is that those are two general expense categories where Ryan always, always wants us to buy something for him, and until recently he has had very little concern with how much those kinds of items cost.

Extra money can always be earned by working on household projects for a mutually agreed upon price.
This includes all of those jobs I mentioned before, and I'm sure we'll think of others that fall into the category. Picking up one's toys and putting one's laundry in the laundry room is a responsibility, not a revenue opportunity.

His allowance is not tied to any punishment or reward.
This was a hard idea for Brendan and me to work through, but once we did we renewed our commitment to non-punitive discipline techniques (PD). The allowance is shared with him, provided for him--in the same way we provide a home. It is not a reward for good behavior. And just as we would not withhold food from our kids as punishment, or take away a toy they love, money should be no different. I would hate to remove money or other property because it would give them the wrong impression that property rights can be violated at the parent's discretion.

I think the solution Brendan and Ryan and I reached is a good one for our family. It reinforces our values: property rights, responsibility, independent decision-making, learning about money management. It gives him the opportunity to earn more money if he wants--he's planning to do a bunch of yard work as soon as the weather clears up. It lets Brendan and me off the hook for certain optional spending--LEGOs, which are really pricey!

And we are of course still continuing our family conversation about how Daddy (and sometimes Mommy) earns money, why he earns it, the hard work that goes into it, what happens to the money we get, where the money that we spend goes, etc. The kids have always been involved in our work; it's just how we do things. We take them to meetings concerning the cabin; Brendan takes them to work with him; they help mail out bills and invoices; they go to the bank. And one day Ryan will get a job and get a more personal perspective!

I'm certain that there are many different solutions to the money question. We haven't encountered some things yet, since our oldest is just getting into the money thing. One day I imagine that we'll open bank accounts and show them how to balance a checkbook and do a budget. Right now, the main concept that Ryan is having trouble with is the idea of "making change." But since he has just cottoned on to the subtraction idea recently, I think we'll make some good headway there pretty soon.

How do you handle money with your kids?


For some interesting pro-allowance essays, see Kids Money.
Clark Smart Parents, Clark Smart Kids, by Clark Howard.


Deb said...

My kids (age 7 and 9) each get $2 per week for doing Their Job properly, which is being educated and doing their work. We'd been having some trouble with motivation early in the school year, and I hit on this as a means of keeping them from descending into whining over school tasks. I didn't much like it, philosophically, but then it worked like a charm. It was working out to about $.40 or $.50 per day in nickels, so after they totally changed their attitude and got the message that this was their job, we just made it $2/week without having to count up.

Then, there is the Birthday of the Day.

Every morning, we do a Birthday of the Day, and every evening at dinner, for each fact each child remembers, she gets a nickel. If she takes the time to do some extra research during the day and learns even more facts, she earns even more nickels. This adds an average of $.40 to $.70 cents per day.

Interestingly, the girls are much more interested in *earning* the nickels than in making us GIVE them the nickels. We often have a loose accounting method wherein we all kind of estimate how much we "must" owe them given that we haven't paid them in a while, and then we give them the cash.

They like to bring it out sometimes and get small-change items at the grocery store or play video games when we're out. They sometimes save up for medium-sized ticket items.

Madison (9) is a MUCH better saver than Ella (7) so far. That money seems to burn a hole in Ella's pocket. Madison has about $50 saved and is in no danger of spending the bulk of it.

One absolutely unbendable rule I've had from the start is this: I don't lend money for on-the-spot purchases (especially on-the-spot purchases of crap). If they want to spend their own money, they must think of it as we're heading out that day and bring it along. None of this "I-promise-I'll-pay-you-back-at-home-Mom" stuff. I want to reinforce that when we spend, we do so mindfully. We think hard about what we're purchasing, and we plan for it.

objectivistDad said...

An allowance is a handout. However, so are many of the things we give our kids. If they want some toy or game, getting that for them is like a handout.

When we started our son on an allowance, this money handout evolved from the non-monetary handouts. Instead of deciding every month or week (or day?) if we'd get him this or that as a handout, we decided our life would be easier if we set a budget for that set of things, and gave him a degree of control over that part of our budget.

It has worked well for a few years now.

Lady Baker said...

My husband and I both agree, you're spot on! Great post :)

brendan said...

"(Tip: try to avoid major philosophical disagreements while one of the parties is pregnant or newly post-partum. I know it sometimes can't be avoided, but try.)"

a-HA! So you ADMIT that you were COMPLETELY IRRATIONAL during that little "discussion". I mean, I knew it of course, as did Ryan and all of our neighbors. But I'm glad you can admit it. :-)

I'm teasing of course. I'm pretty sure Ryan won't end up on welfare. Morgan, on the other hand...

Jennifer Snow said...

Kudos for you deciding not to withhold allowance as a "punishment". My parents withheld *everything* as punishment, including food and a place to sleep. Needless to say, this didn't endear them to me in any way. I could not understand why it should be my "job" to do sixty percent of the household chores (esp. when I wasn't allowed to enjoy any of the things that I was cleaning) when it was also my job to spend 10 hours at school every day AND do homework AND go to volleyball practice etc. etc. etc.

LB said...

Excellent post - great comments.

We've never given allowances but will pay for work above and beyond being part of the household. I could never get over the unearned payment aspects of an allowance - but I've come to realize that maybe I've missed out on an important positive teaching tool.

Time to rethink.

Kendall J said...

"But, as a condition of us turning over some of the money we spend on him, we have told him, and he has agreed, that Brendan and I will no longer buy him LEGO or souvenirs on vacation. As he gets older, he'll receive more money, but will also be expected to be responsible for other kinds of purchases. For example, at some point, I don't know exactly when, he'll get a clothing budget and make all of those decisions for himself. The reason we started with LEGO and souvenirs is that those are two general expense categories where Ryan always, always wants us to buy something for him, and until recently he has had very little concern with how much those kinds of items cost."

OMG, this is brilliance! What a great principle. Linking the two together is sheer stinking brilliance. Yes it's a handout, but at the same time it is a limited resource that must be budgeted, and he is motivated to do so by his intense desire for those things. I don't have a problem with this "handout" because there are all sorts of things in life which have value, but are not necesasrily traded explicitly. Your own time, and your spouse's patience are a couple of things I can think of. It may not be necessary to learn that everything is earned, but it sure as hell is still necessary to learn that everything is finite, and values have to be budgeted, within a context to be succesful.

Amy said...

I think you've got it right. My husband and I plan to do the same thing. It really makes sense to continue to provide for the child's needs, but more and more in money form as they get older. Money for extras needs to be earned. But once you've given the money, or committed to giving it, you can't take it away as punishment.

I don't like the idea of giving little bits of money for good behavior or learning. I don't get paid for keeping my temper in check. Just as time-outs are not natural consequences and too far removed as a negative consequence, money for behavior is just not the way life works. You get money for producing, and the allowance that you give a child, whether in money or goods, is an exception due to the fact that kids can't produce from birth.

Rational Jenn said...

Thank you, everyone, for your thoughtful comments! And yes, Brendan, I agree that there is no way that Ryan will end up on the government dole, and we'll just have to see about the others. :p

I have a couple thoughts based on the comments you've all left:

Yes--an allowance is a "handout" but not in the undeserving sense. I prefer to think of it as part of the financial support that I'm morally obligated to provide for my kids, an extension of it, if you will. (Not that allowance is the only way to go, of course.)

When I hear the word "handout" I picture someone receiving something that they don't deserve, have no right to. Kids don't deserve an allowance per se, but they do have a right to certain things from their parents in terms of finances. So I'm hesitant to call it a handout, unless there's an opportunity for humor, of course!

Amy, I liked what you said about not getting paid to keep your temper. I think that's exactly the nature of PD right there--we don't punish/reward adults in such ways when we behave properly. There are positive and negative consequences to adult behavior, of course, but those will happen apart from any punishment/reward system, and can be educational experiences.

Kendall--you are always welcome to tell me I'm brilliant! Actually, ANYONE is welcome to tell me that! I did get the idea somewhere else, but it was not explicitly tied to the principles we are using--slowly turning over larger amounts of money and fiscal responsibility to the kids over time, as a Win-Win for parents and children. Parents Win because there's no extra outlay of money--no financial sacrifice--and are relieved of certain financial obligations (LEGOs, clothing, etc.). Kids Win because they get more responsibility and money and practice and experience.

Principled Parent said...

Thanks for this post! My husband and I haven't discussed this issue yet and this post is a fantastic jumping off point.

Beth said...

Great post and discussion.
I have a 16 y.o. and a 13 y.o. and we have gone through many permutations.
It all started when I tried to figure out a way to deal with the constant requests for me to buy them something when they accompanied me shopping. When grocery shopping--back when they fit into the cart--I let them each choose one off-the-list item. This later evolved into an allowance which was presented simply as one of many things their dad and I shared with them because they are our children and we care for them.

We made it clear that the allowance was in lieu of our paying for certain categories of items: toys, candy and other junk food (this freed me up to say, "Sure I can stop by Burger King on the way home, but you have to pay," which soon put an end to such requests) and personal movie rentals (we didn't have access to "channel TV" so this was a big item.)
The allowance was not taken away as a punishment nor presented as a reward for completing their share of the household chores (cleaning up personal messes, care of their pets, and weekly shared work like hot tub maintenance, trash removal, cleaning out the car, spraying the back yard and the decks to get rid of chicken poo.)
I also had a list of jobs they could do for extra money: laundry, mow the lawn, pull weeds, stack firewood--but those were spotty and sometimes a bit contrived.

Sometimes, rather than nag or fight over a job not done or done poorly, I "fined" them--but this experiment was a failure once they started calculating how much it was worth to them to not have to follow through on their responsibilities--and I really didn't need the money. I needed them to do their work.

When the dot-com crash hit right after I quit my job, and our personal finances were squeezed, we ended up dropping the allowance. In its place, we helped them come up with ways they could earn money. My son paid for the chicken feed and then sold the eggs. My daughter put out flyers for pet-sitting jobs. They still were required to do their share of the chores without being paid.

My son eventually figured out that he wasn't really making any money selling eggs and has learned to get by with odd jobs and birthday money--and says he's going to get a real job next fall.(I hope he does.) My daughter has a weekly job as a mother's helper and occasionally baby sits. We've never gone back to an allowance and it's working out quite well.

The kids are quite frugal with their purchases of clothes, but if that ever changes I will reinstitute the allowance. They still pay for their "candy" (sushi, gelatto and chai latte)and "toys" (iTunes and texting.) They've figured out they can get videos for free from the library or over the internet. Other items are worked out on a case-by-case basis, but any requests for funding are accompanied by the assumption that the ultimate responsibility to pay is theirs.

Key principles which served as helpful guides in our evolving approach:
1) The benefits gained from being a part of the family are accompanied by responsibilities, therefore, there are some things we each do without direct payment simply because we share a house as a family.
2) It's not my job to fulfill your every desire, but I love you and will share with you some of my bounty
3) Ultimately we are each responsible for our own happiness, and that involves offering productive work in exchange for the things we want.

It's not always been obvious how to apply these principles in every particular situation. Also, my kids are incredibly bright and have challenged me in ways that caught me off guard (I think it's in their job description.) But, at this stage I can see that I'm doing something right and they are developing both a sense of self-responsibility and of generosity. I wasn't always sure we would get here. I sure could have saved myself a lot of grief if I only could have known.

Rational Jenn said...

Beth, that was a wonderful comment! I like how the allowance ida evolved into "let's help you think of ways to earn money" and then ultimately into "real" jobs. I didn't mention this in my post, but my own allowance was phased out as I got old enough to earn real money, mainly through babysitting. That is definitely where I see things headed for my kids. When my husband was objecting to the allowance idea, he was thinking they'd get jobs as teens, so why not wait? Another point in favor of allowance is that it gives kids lots of financial experience until they are old enough to get a job.

Thanks for the look ahead! We're about 10 years behind you!

Sarah V. said...

Jenn thanks so much for your post. I had both an allowance and extra monies paid for non-personal responsibly chores. Clothing budgets can be awfully difficult to gauge, especially when your children are still growing, clothing items wear out unexpectedly, or an unforeseen need arises. My mother's solution to this problem when I got older and started wanting special versions of need based things (ie. designer jeans or expensive shampoo) was to implement a plan that she would pay the price of the lesser item to me and I could make up the difference with my own monies. I also used my own monies when I desired more clothes than I actually needed, clothes horse that I am. When I got older work was only available inconsistently so my mom decided to maintain a $20 a week allowance and with additional funds for non-personal responsibility chores. Since the government continues to raise the minimum wage this may be a reality for your children too. $20 per week is not a lot and certainly didn’t cover the cost of my first car, insurance, or gas. This system allowed me to learn fiscal responsibility and have a bit of pocket change while not discouraging outside work to pay for the extras when available.

I think the fact that you inI respect that you have not included any savings requirement with your plan although I’m interested to hear how you and your husband deal with the issue of college funds or future savings for your children. Is this something that you deem to be you and Brendan’s personal responsibility only? Do you encourage your children to contribute to their future? What’s your plan or have you already posted this elsewhere? This also may have been covered elsewhere, but how do you deal with personal responsibilities in your family. Most of the parents I know struggle with this issue and I’d love to know a positive discipline approach to handling this.

Jenn Casey said...

Hi Sarah, thanks for your question about saving for college. I'm actually working on a blog post on that subject, and I'll get that out soon. :)