Introduction

Parents often wonder if and how to introduce an allowance system to their children. Some argue against it, reasoning that money isn't free and that it teaches that chores are not for pay. However, allowing children to earn money for tasks can be an invaluable learning experience in financial responsibility and decision-making. In this article, I'll share my experience and reasoning behind introducing a weekly allowance to my own children, and how it can be effective for other families.

Why Allowance?

Allowance isn't just a way to give children money. It's a tool to teach them about financial literacy, saving, and the value of work. It also helps in breaking the cycle of buying treats only when parents feel like it. Instead, kids learn that money is earned through effort, and that every purchase requires careful consideration.

Key Lessons Learned

Teaches Financial Literacy: Young children can learn that different things cost different amounts, and saving up for something they really want is a valuable lesson. Encourages Saving: By earning money, children develop the habit of saving, which is crucial for future financial stability. Makes Kids Think Meaningfully: The responsibility of managing their own money can prevent them from making impulsive decisions.

How We Implemented the Allowance

At the start, we adopted a simple approach. Instead of tying allowance to chores, which can sometimes lead to children feeling coerced into doing tasks, we provided a base allowance as part of being a family member. Additionally, we allowed for extra money for unusual chores if a child was saving for something specific.

Base Allowance and Family UBI

The allowance was a base amount, much like a Universal Basic Income (UBI) for the family. This not only avoided the pressure of having to do extra chores for extra money but also made it clear that family money was a shared resource. This approach also helped to eliminate feelings of insecurity and entitlement that can arise when money is tied strictly to chores.

Chores and Additional Earnings

While we didn't tie allowance strictly to chores, we did have a system in place for additional earnings. Children could earn extra stickers (or other small rewards) on a chore chart, which could later be redeemed for books or other small items. This way, children still had an incentive to help around the house, but not in exchange for money.

Amount and Adjustments

We started by giving each child a weekly allowance based on their age (1 dollar for each year). Initially, this seemed like a reasonable amount and the buying power was equivalent. However, as time passed and the effects of inflation became more apparent, we adjusted the allowance a couple of times.

Outcome and Reflection

The results of our approach have been positive. All of our children are now financially responsible adults, and they understand the value of money and the importance of managing it wisely. By introducing allowance in a thoughtful and meaningful way, we've set them up for success in the long run.

Conclusion

Allowance isn't just about giving children money; it's about teaching them valuable life skills. By carefully considering the implementation and adjustments, parents can effectively use an allowance system to nurture financial responsibility and independence in their children.