Thursday, May 17, 2007

How we handle our kids' allowance

pot of gold

A few years ago, our "allowance" system was broken and it was all my fault.

The system design was great. The flaw was that I was often too busy/distracted to implement it. Recently, I've resolved this defect (i.e. me) by opening a separate savings account for each child at my bank and using an automatic bank transfer from my checking account to ensure that the payments are delivered weekly. Transfers within the same bank (at my bank, at least) are free.

Removing myself from the loop is such a productivity gain! Nothing is forgotten. The bank is a disinterested party. The savings accounts earn interest. I no longer have to keep track of what I owe everyone. Everyone wins.

When a child wants to buy something, I pay for the item at the store. When we get home, I transfer the cash from the child's account to my checking account. When a child wants cash, I give cash, and make a transfer from the child's account to mine. We can forget about allowance for weeks (or months) at a time, with everything remaining up-to-date. It's wonderful.

Here's what we do:

Our family Allowance System:

  • As soon as someone is able to add and subtract (reliably), that person qualifies to receive an allowance. This is usually at the beginning of first grade. Until then, I feel the child isn't ready to understand prices. This is a great incentive and reward for acquiring these arithmetic skills.

  • Allowance starts at $1 per week. It doesn't sound like much, but they have few outlets for spending.

  • All requests for renegotiations and raises will be considered at Rosh Hashanah time (which corresponds to the beginning of the academic year.) Deferring the requests to an "annual review period" protects me from a faulty memory, and from unnecessary pestering. A convincing argument is required for a raise.

  • From this (and all monetary gifts):

    • 10% goes to charity (tzedaka)

    • 10% goes to save for college

    • 10% goes to 'long term savings'. (Rough translation: not soda.)

    • 70% remains for spending. Although we set things up this way, all of the kids are "savers", so these last two categories are merged in practice.

  • No advances without both a compelling reason and a short-term history of responsible spending. If you just chose to spend all your savings on a soda from
    the machine each day for a week, then don't ask.

  • Everything bought must comply with our household rules. The allowance may not be used to circumvent our family's rules. Buying a music CD that we don't like is one thing; buying something inappropriate or forbidden is another. Any purchase that violates this will be confiscated without a refund.

    This rule is most often invoked when one of the kids notices a black and white television on sale for $25 at the drugstore. (We don't have a television and would like to keep it that way.)

We don't pay for chores done around the house, including babysitting. We do for one another because we are a family. Taking out the garbage, babysitting for an evening, raking the yard, etc. are all things that must be done in order for our family to run. Nobody pays me to make dinner or provide laundry service.

I tell them (often to groans and rolling eyes..) they should be grateful to us for providing ways that they can be of service to us. We do more for them than we can list, and we do it cheerfully and with a sense of privilege for doing so. Taking out the trash (for example) is their way of doing the same.

I think I've perfected this lecture to a point where, in order to avoid hearing it, they'd rather just do the darn chore.

If only I could get the trash taking system fully automated....

Works for Me Wednesday header at post is part of the Works for Me Wednesday group writing project.)

Here are the rest of my contributions to the WFMW project.

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6 comments, so far. Add yours now!

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cwexl said...

I *love* this. The policy is so well thought-out and logical. You will raise kids who could teach Susie Orman a thing or two. At least they won't need to waste $ on financial self help books ;-).
I love that the policy provides them with an understanding of $, but eliminates the sense of entitlement that seems to come with standard allowance policies (imho)
And it's nice to know the "frogs" get paid (tee hee)
I hope to adopt this kind of policy in our house when my son is old enough. More more more of your household policies!

Neena said...

This is good, practical, advice. Even the best allowance systems don't work if there is no follow through.

clkl said...

@neena: I agree. The trick is, finding a system that makes follow-through practical.

Marcia said...

I love your post. Oh, my first time here over from Prod 501's 3 questions.

Such good ideas to get children to understand money but not to expect it. I love how you said no-one pays you to cook and do laundry :)

Juggling Frogs said...


Thank you, and welcome! I'm a fellow fan of Productivity 501.

All the best,

Anonymous said...

awesome blog, do you have twitter or facebook? i will bookmark this page thanks. lina holzbauer

If you liked this article, congratulations! You have great taste. Please brew yourself a cup of coffee.
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