QUESTION
Dear Adele,
My son is nearing seven years of age and is starting to ask more often for money to buy things he wants. I grew up earning an allowance by doing chores once a week but I’m not sure what is the best practice these days. I’d love your input to ensure my son learns the value of the dollar.
Molly Weasley Mom
ANSWER
Dear Molly Weasley Mom,
George Bernard Shaw once said, “If all the economists were laid end to end, they’d never reach a conclusion”. The business of acquiring money, spending money, saving money and knowing when to share it is the subject of much debate. Young parents like you, are often puzzled with knowing just what is the right way to help their children become fiscally responsible, because they know the truth of the words of P.T. Barnum, that money can be either an excellent servant or a terrible master.
Denise Cummings wrote an excellent article entitled, ‘Should You Give Your Kids an Allowance?’, which was published in Psychology Today, (September 2013). According to the research, parents fall into two categories on this topic: Those who support providing allowances to children feel that it teaches financial literacy as well as character traits of patience, thrift and generosity. Those opposed, believe that providing allowances takes away parental power and authority, and teaches greed.
Three approaches to providing money to children are common:
The first approach is to give an allowance freely, unattached to any obligation on the part of the child. The child is given money to spend, save or give as he chooses. Critics of this approach say it teaches children to think that money comes from authority and that they are dependent on the decisions of authority to get money, not on earning money by choosing to work.
The second approach is to give no allowance at all. People in this group believe that money coming into a family should be shared and they emphasize the communal nature of the family income. Proponents suggest that children learn that making a contribution is the highest value, and that work can and should be valued for reasons other than money received for doing it. Critics hold that this method does not teach children about how to get money for themselves later, possessing little understanding about being responsible for obtaining it and managing it wisely. They also say that children can become argumentative, often bargaining for money with parents.
The third approach is to have children earn an allowance. Supporters believe that money should be tied to work and that it prepares children for the real adult world where free money is not a reality. Proponents say that it empowers children and lets them know that attaining money is possible due to their own decision and willingness to work. Critics say that with this method, children sometimes choose to opt out of completing chores if they really do not care whether or not they get more money. This is especially true when most of their needs are already paid for by their parents, or when they are required to bank most of it, without freedom to spend it as they wish.
Psychologists suggest that children learn a lot about money and its management from their own parents. The family dynamics and values with which a child grows up, affects behaviour in their own adulthood, especially around work. The connection between effort, work and pay, or otherwise conceptualized as the link between performance and outcome, is predictable by the way money was handled in their families of origin. Children raised in ‘NO CHORES’ homes, often think they deserve pay just for showing up at work, and display less effort and contribute the most basic of performances in the workplace. The ‘WORK for MONEY’ group seems to have a much better understanding that the world owes them nothing, just because they are a member of a group or simply attend. Children raised in this kind of home usually study longer and harder because they understand greater effort in studying will get them a better grade. In the workforce, this group understand that if they want more money, they must ask for overtime, take on extra work or perform at a higher level.
Katie Hill wrote an excellent article in the Wall Street Journal (October 2019), entitled “Mistakes Parents Make When Giving Kids an Allowance” She states that two thirds of parents in the United States give allowances. The average American child gets $30 per week. 52 per cent of parents think allowances should be earned. 27 per cent think allowance should be partially earned and partially gifted. The average hourly rate for chores in 2016 was $4.43 and in 2019 $6.11.
Katie Hill thinks that parents should not get hung up on the amount of money they give children but rather use allowances to provide them with an opportunity to talk about money and money management. She suggests one dollar per week for each year of the child’s age. She says that parents should not wait too long before starting allowances. Children can make the connection between work and money as young as four years of age and that, that connection should become part of their life experience right from the get-go, the sooner the better. Katie reminds parents that there should not be different rules for allowance for boys and for girls but that they should be treated the same. She advises against giving money with no strings attached and suggests that children be taught to save, spend, and share along with instruction about taxation and interest. With this approach children will learn how to save for things they want, increase their ability to delay gratification, develop a habit of saving, learn about taxation, and appreciate that success comes from working hard, sacrificing and saving money for later, wiser expenditures. Katie believes that some chores should be required without any pay, so children learn that the family group functions because of everyone’s effort to make the social unit run smoothly. She supports tying money to the accomplishment of certain chores. Along with that, an extra list of different chores should be offered, so children can freely choose to work harder and have control over increasing their wealth.
I have a few ideas for you, about starting and implementing a sound method of delivery of an allowance for your young son. I suggest you use cash and four clear empty jars with lids. Mason jars or large pickle jars work just fine. Children of this age do best with very concrete and visual approaches to understanding concepts such as fiscal literacy. Label one jar SAVE, one jar SPEND, one jar SHARE, and the fourth jar TAXES. Post three lists of chores on the refrigerator. The first list is a mandatory itemization of chores with no financial remuneration promised or expected, because their completion is part of his contribution to the family. The second list itemizes expected chores, with the amount of money earned for completion of each one notated beside each job. The third list is an optional list of chores, from which the child can select for completion, if he chooses to earn extra money. This list also states clearly the required work and the amount the child can earn by choosing to do the extra jobs. Be sure to have check boxes which can be ticked by your son when the tasks are finished. Choose a regular day of the week and time when money is squared up and notate the child’s tallies in a notebook, or ledger which is kept for this purpose. Keep the record with precision and exact to the penny, just as if your child’s funds were deposited at a local bank.
Consistency in using this approach, will help your child understand that he has the power to create wealth for himself, that it is important to document money exchanges honestly, that he can develop excellent skills in money management, and that there need be few arguments about money when people understand how to get it, spend it, save it, and share it. Children raised with this approach, tend to become highly responsible with money in adulthood, tend to be strong thinkers with good decision-making ability, and tend to be hard workers.
I hope my response has been of help to you Molly Weasley Mom. I will sign off with a few inspiring quotations about money which I hope will assist you in guiding your son:
‘It’s good to have money and the things that money can buy, but it’s good to check up once in a while and make sure you haven’t lost the things that money can’t buy.” George Lorimer
“Empty pockets never held anyone back. Only empty heads and empty hearts can do that.” Norman Vincent Peale
“Annual income 20 pounds, annual expenditure 19 six, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery.” Charles Dickens
Sincerely, Adele
I'm looking forward to your questions! Email me at maryadeleblair@gmail.com and please put Heart to Heart in the subject line. Note that all columns will remain anonymous.
