I started giving my daughter an allowance when she turned 5, starting at
$3, now she is 8 and she gets $6 each week. Our agreement is that she buys any toy or book etc, but mom buys her all necessary articles of clothing, food and candy. She can spend it on anything, and we don't tell her she can’t buy a certain toy for example, although I might ask once (and only once) whether she really needs it, and to help her check quality. After two years, she has learned that many toys can be crappy, so my guidance on quality over time has become more meaningful to her. I usually also pay sales tax because its just too tricky for a kid to understand that a toy marked at a priced of $11 may end up costing $12.
I don't connect her allowance to any performance of any kind. Doing
well in school should make her feel proud of herself. Doing chores is
an essential part of being part of "family", and she has to know that
intrinsically she has to look after herself and take responsibility for
herself and her own things (gradually as she grows up). External rewards
such as money, in my view, completely muddy the concept of 'internal'
rewards and responsibilities. We never use allowance as a punishment or a
reward – rather it is used as a learning tool. After all at age 8, she is halfway through her ‘childhood’, so I want my kids to be able to use money wisely.
I initially tried to get her to divide her money into 3 - spend, save and charity buckets. But that never worked, and I realized that such a concept is just not meaningful for kids. After she saved $100 she found it way too difficult to decide how to spend it on poor people, and figured that she would not make a huge difference anyway. Hence she decided to be charitable in other ways. She gives her toys to charity instead, and we speak often about poor kids, and what that means for them. At her last birthday party she refused presents because she thought she was being greedy (we had asked over 25 kids!) and we had a book swap instead. As for savings, the idea of a "retirement" plan savings for a now 8-year old is way beyond her. The idea of giving an allowance is for kids to understand what spending means, and what it takes to save.
The results of our family policy have been nothing short of amazing. I am so proud of her understanding of the value of money after just a few short years. She discovered that if she saves, she can spend way more money that she could otherwise. Initially she used to spend her $3 per week on practically anything she saw – then she saved up she can buy much larger, and more desirable, toys. I have found that by not restricting her
choice of spending has meant that she was able to figure out for herself
what works and what doesn't.
Then she just got savvier and savvier about money. She has now almost $400 in the bank. At 7 she got her own ATM card, which was just a great moment for her. She would ask me in September to buy her a toy for Xmas, and that way she figured she would get the toy and not have to spend a cent. Same deal with birthdays etc.
She stops now and figures out about value. This spring she began reading the Harry Potter series and after the library was out of books, she decided to buy them herself. She forewent having the hardback versions for the softback because there was a $60 price difference, and she opted to pay the least amount for them that she could.
I had a garage sale at the start of summer, and she packaged up her old ‘silly’ purchases of toys, and sold them. She gets to keep the proceeds of her sales – after all, they were her toys – so she doesn’t have to save them for little sister. She went through a transformation that showed her what happens when we start owning ‘too much stuff’ and she found a solution by selling her things. It made her feel very responsible as she had to emotionally detach from her toys, and was a time to reflect on her past ‘impulse’ buying. Her brother suggested she could now buy more toys, to which she heartily responded that she needed a good education, a laptop and a cell phone when she was older, so was certainly not going to start throwing her money away now on just toys.
She reminds me of an old financial planning saying – “Savings is nothing more than a spending plan.”
I used to give her the money, and she would physically have it in her
room. However she used to play with it, and transfer the cash from purse
to purse and it would end up getting misplaced. So now I keep her cash
in my room, and each week we discuss how much she has. She has had a few windfalls from the tooth fairy who never had small bills (unfortunate
timing for mommy).
My sister has teenagers, and the agreement in their family is that she
gives them something like $40, and that has to cover their entertainment
and clothing as well. If they run out mid-week, there is no advance, so
they can't do their weekend dates as planned. I have decided that gradually my children can expand their spending choice to include clothing too.
I didn’t ‘teach’ my daughter anything about money - rather I feel that I provided her with a non-judgmental tool for figuring out about money and its value all by herself. And I am proud to say she did a marvelous job! If my daughter was restricted in spending her money, she would never have been able to appreciate what 'savings' means.
R., let your sons decide what to do with their savings - they might spend them quickly, but maybe they will save up for wat they really want too.