Another Interesting Idea for Teaching Kids About Money

Here's a very interesting/compelling idea someone suggested on my post titled Interesting Ideas for Teaching Kids About Money:

I say give them (kids) an allowance of $500 bucks a month. At the end of the month give them an itemized statement (like a paycheck) deducting $480 for boarding, food and clothes and let [them] spend the $20 as they like. That should get them in the real world mindset.

Ha! I couldn't help but think this might actually work. What do you think?

Comments

[Cheap Like Me]

Maybe so, as long as you model yourself after the old factory bosses and deduct the amount before giving the allowance.

When I was in high school, my mom got tired of fighting with me about clothes, and my family agreed that my "job" was to get good grades to prepare for college. So instead of working at McDonald's, I worked at home, doing a good amount of chores and shopping for and cooking dinner for my family just about every weeknight. In return I got $100 a month to pay for all my money needs -- and of course, some good practice preparing for adult life.

[Colonel Cash]

I think this is an excellent idea! The deductions could be like FICA, Insurance, Housing, Food, TV, etc. This is one of the better, and easier ways I've seen yet to help build a kids financial acumen with an allowance. Thanks for the tip!

[Hank Osborne]

This is still teaching kids the basic principles of welfare when you GIVE them money. They need to learn what the dollar stands for as in the labor value and sacrifice of time required to EARN the dollar. Allowances breed a sense of entitlement.

[escapee]

I only give my son allowance money *after* he completes the tasks that I assign him.

When I was 15 there was no allowance and no arguments about new clothes. Quite simply, if I wanted any at all, then I had to go get a job and buy them myself, so that is what I did. It wasn't fun at the time but it was probably the best lesson my mother taught me. I plan to do the same with my son as soon as he is old enough to work.

[Kevin]

This is an interesting idea. I will definitely have my kids do some type of chore for their $$ so they learn the value of hard work. I'm thinking just giving them money for nothing might not be the best idea.

[FMF]

For those of you "I'll only pay my kids after they do X number of tasks" (of which I am one BTW), you can still use this idea. They simply do the tasks and get the money -- less "standard deductions."

[Kyle]

I don't have kids so take my opinion with a grain of salt, but I'm not sure this alone would teach them much about money unless you make them work for that $500 allowance. Otherwise, they quickly learn they get $20 for nothing and ignore the rest.

[AJC @ 7million7years]

Might work if you also give your children: (a) a 'job description' and (b) regular 'performance reviews' and, (c) additional incentives.

[Craig]

I like the idea. Maybe I can tie the number of minutes in the shower into the calculation. My 14 daughter thinks she's an amphibian or something. :)

[financialgal]

What if the kids wanted to live somewhere with cheaper rent and utilities?

[escapee]

lol- that's when you give them a tent and tell them to pitch it in the backyard!

[Randy Peterman]

That's pretty clever :) I'll have to see if the wife goes for it!

[Richard]

This post is based on my origional comment. It's assumed the child would do chores in return for the money. I had a similar setup when I was growing up. I was given a lump sum for monthly chores and expected to manage my cash for the month. Expect there weren't deductions for food, clothing, and shelter. Instead my dad always made sure I understood the price of things by reviewing the bills he paid and taxes on clothes and food bought. I hated it at the time but now I'm (and my net worth) are very appreciative of what he taught me.

[Sarah]

Sure, teach your kids that the care you give family members is actually a service to be charged for. You'll really reap the benefits of that one when you're old and in need of their support!

[Mike]

I wouldn't do this. I'm imagining my kids looking at the total amount like they somehow automatically deserve $500/month, and I think the deductions would make it look like what their parents do for them are services rendered, as if we're working for them. Tying them to chores I think would be worse--then they might start having an attitude like "Hey, I did my chores, you need to do all this other stuff for me--chop chop!"

Right now my kids just get a small allowance and minimal chores because they're pretty young, but I prefer to view chores as required because you're a member of the family, rather than something I need to pay them for. I plan on increasing their chores as they grow older, and I also plan on increasing their allowance to teach them about managing money, but I don't plan on directly linking the two. The increase in allowance will be linked with more choice/responsibility and less free stuff from Mom and Dad--they can start buying their own clothes, or buy their own movie tickets and snacks, etc. I'll also require them to save, invest and give some of their expanded allowance to teach them those concepts and hopefully seed some good long term habits.