Giving kids’ allowances raises lots of questions for parents: How much to pay? Should the money be tied to chores – and if so, which ones? Can the kids spend the money freely, or must they save part of it?
One family I read about in the Journal of Financial Planning paid their kids $6 a week, but allowances weren’t tied to chores. The purpose of chores, said the parents (a financial planner and psychiatrist) was to develop a work ethic, while the purpose of an allowance was to help kids “learn to think, chose and consider alternatives when it comes to money.” The $6, though, was divvied up very specifically: $2 went directly to the kids, who could spend it however they chose; $2 went to a charity of the kids’ choice and $2 went to the bank. At the end of the year, the kids could withdraw half the money saved and spend it, leaving the other half to grow for longer. The purpose of the plan is to help the kids learn how to make smart decisions regarding finances and learn about the three main uses of money: spending, saving and giving.
I recently learned about another novel way to give allowance. One mom of a 4-year-old daughter, Alisa T. Weinstein, decided to forgo the traditional idea of paying for household chores. Instead, she compiled a list of careers and simple “kiddified” tasks associated with them. (A market researcher, for example, could do a small verbal survey of classmates’ favorite ice cream flavors, or a banker could give different denominations of change.) Each week or so, her daughter would take on the role of a certain profession and perform the associated work. At the end, Weinstein rewarded her daughter with a “payday,” according to the New York Times’ Bucks blog, which profiled Weinstein.