The old school thought of allowance is to use it as a reward system to get your children to do chores or behave. I do not prescribe to this thought process. I like to use allowance to teach Tyler and Ember money skills and our family values instead of as a reward. They still do chores as part of their Miracle Morning C.H.A.R.M.S. (for Service). I call them family contributions and all members of the household are expected to chip in with no reward. The problem I see with attaching allowance to chores is that it hurts the internal motivation of the child to help without a reward and it creates an employee mentality (I have to work harder to earn more money).
Growing up, my parents would not let me get a job. They also did not give me an allowance, but whenever I needed money for something (within reason) they would just give it to me. I didn’t get any real money experience, however, until college. By then, I was on a scholarship and received a stipend for my housing, dining, and books. I had to pay my rent and utilities, buy a meal plan (or groceries) and purchase my books for my classes out of the money I was given each month. This was the first time in my life I actually had to manage my money and honestly, I felt rich!
To be clear, I was nowhere near wealthy, but I felt that way because my stipend was more than I needed so I had enough money to go out with friends, buy gas for my car, and go shopping. In my junior year, a professor submitted my name in for an additional scholarship and I received a check in the mail for $1500. Since I didn’t really need the money, I used it to go on a cruise. In my senior year, I was in a car accident with a tractor-trailer and walked away unscathed. My friend was driving her car, so my car was fine too. The trucking company offered us a settlement because they were afraid we were going to sue them. I got $5,000 in the settlement. Again, I didn’t need the money, so I gave it to my brother to put a down payment on a house and he paid me back later. All these experiences shaped my mindset about money and I grew up believing money was readily available and came to me easily. I think these beliefs served me well in my life because this is still my experience.
I want our kids to have these beliefs too and I want to give them these beliefs intentionally. I want them to work smarter, not harder and I can teach them that with allowance. Our kids get $15 each week for allowance and they have to break it up into 3 categories- spending, save to invest, and giving. The default setting for these buckets is 50% to spend ($7), 30% save to invest ($5), and 20% to give ($3). Buckets for allowance are nothing new, but the twist we have on it is the way we set up our buckets also teaches our kids our family values and an entrepreneurial money mindset.
We value contribution, which is why we have a giving bucket. The kids can choose how they spend their giving money. Currently, Tyler gives $20 per month to Save the Children. Ember gives $5 per month to The Human Rights Campaign. Our 9-year-old recently figured out that his $20 per month was not sustainable with his current level of giving money and told us he wanted to change his buckets to be 33% each so he could continue giving the $20 a month (proud Momma moment!)
We also value making our money work for us (or as I like to call it, Mailbox Money), which is why they have a save to invest bucket vs. a save to spend bucket. They are not allowed to touch this money unless they want to use it to start a business or put into an investment (stocks, real estate, etc.). We want to teach our kids that when you do it right, your money works for you and not the other way around. We want them to believe they are valued just for being themselves, which is why we don’t attach any strings to their allowance. Even if their behavior was awful, they still get the same amount of allowance. Even if they didn’t do any of their chores, they still get the same amount of allowance. There are other privileges they can lose, like screen time instead ;).
We also value a growth mindset and want them to have money of their own to spend so they can learn from their mistakes. We want them to see what it feels like to not have enough money for something they want and having to delay gratification. We want them to make mistakes with their money now while they are young and the consequences are relatively inconsequential. We want them to have the satisfaction of saving their spend money for something big and splurging. We want them to understand the value of their money and start planning ahead and making choices about what is important enough to spend their own precious dollars on. It also helps them with their math skills. Money is a great motivator to want to understand basic arithmetic.
As entrepreneurs and purposeful parents, we are always looking for things to make our lives easier and leverage technology to our advantage, and allowance is no exception. If you’ve read our book, The Miracle Morning for Parents and Families, you may know we used to literally have jars of money for each bucket. There is an advantage to this- the kids get to actually see the money go in and out of the jars so it’s not so abstract for them. However, for the parents, it’s a lot to manage! I don’t carry a lot of cash these days, so it was a pain to have to remember to have cash on hand to dispense allowance each week and I would often go weeks without giving them an allowance. Then we found an app called FamZoo and our lives have been simplified!
With this app, you can set up their buckets and it will automatically dispense their allowance for you. It’s not real money (although you can get your kids a debit card through FamZoo attached to your bank account that would be real money if you think they are ready for that option), but numbers in their “account.” It looks a lot like looking at your bank accounts online. This app also solves the problem of your kids losing their wallets (which each of our kids has done at least once). Now when we are in a store and one of the kids wants to buy something, all I have to do is pull out my phone and show them their balance in the app. It will also automatically update it on my husband's phone (as long as you are logged into the same account), so if they are out with him, he has an updated balance too. This is not a free app, but in my opinion, it’s well worth the cost to never have to remember to distribute allowance and to have my kids money at the tap of a button. With money getting more digitized every year, I think it’s good for them to get used to the idea of their money just being numbers on a device.
I’m grateful for the money skills we are passing on to our kids and being able to help shape their relationship with money through allowance. I’m grateful for finding FamZoo and how easy it is to use and the problems it has solved for our family when it comes to allowances. I’m grateful to my parents for the money beliefs they gave me (even if it was inadvertently). I’d love to hear your thoughts and what has worked for your family. Please join our community of like-hearted families in our Facebook Community.