Tuesday, February 21, 2017

Teaching Fiscal Responsibility: A New Twist on Allowance

By: Elizabeth Redhead Kriston



The other day my oldest daughter walked to the corner store and bought herself deodorant using her own money. In that moment, I felt victorious!

Of course I would have bought her deodorant, but she never asked. All of my years of teaching her the value of money and financial responsibility paid off. She just might be ready for the real world.

Every child needs to learn the value of money. By starting to teach them at a young age, we can head-off mistakes in adolescence and adulthood, mistakes which bury them in debt and cause financial ruin. 

“Children should understand that things like water and heat aren’t free.”


Modeling good money management and talking to your children about how you spend and manage your money are key in teaching fiscal responsibility (this does not mean you have to share actual dollar amounts). Children should understand that things like water and heat aren’t free. They should understand that we work to make the money that pays for the things we need.

The key to success in this endeavor is to ensure your children have their own money to manage. Because every family member has a responsibility to maintain and care for the shared home, the money children receive should not be directly related to basic household responsibilities (chores).


“Paying children for chores teaches them that they have a choice”


Paying children for chores teaches them that they have a choice, that it is not a reality of life. Rather than pay for chores, provide each of your children with an income. Starting somewhere in the preschool years, a child should be paid weekly one dollar for each year they have lived. (Yes, they get money just for being alive. Stick with me it will make sense later.)


3 Categories of Pay



1. Spend: The child keeps and spends 70% of the income.  This money can be spent on whatever the child chooses within the rules of the household. Autonomy with spending money helps him understand what things cost and to have realistic expectations of what he can truly afford.

2. Save: The child saves 20% of the income.  Work with your child to decide how best to invest this money. Savings accounts accumulate and teach about earned interest. Buying stock and watching it gain or lose value prepares her for future investing. Place money into a TAP 529 or other mutual fund accounts. Buy bonds or life insurance. The experience of saving and investing applies math skills and teaches money management.

3. Donate.  The child donates 10% of the income. Once the money has accumulated, help your child donate the money. Talk about options in categories like people, animals, or organizations. Research the charity. Teaching philanthropic ideals at a young age will foster empathy and philanthropy.


4 Stipulations

stip·u·la·tion
Function: noun
: something required as part of an agreement 

1. As your children get older and no longer rely on concrete evidence that money exists, switch from cash payments to a ledger system. In today’s world our money is virtual. Learning how to manage money from a spreadsheet is harder and truer to life.

2. If your child does not complete her daily responsibilities (chores), she will have to pay whoever completed the chore for her. These fees should be predetermined.  Every person has the right to not complete her own chore if she finds another person willing and able to complete it. She can barter by swapping jobs or pay the other person the agreed upon fee. If no one agrees to take over the responsibility, than the person assigned the job must complete it. If she refuses, she must pay double and face a consequence determined by the parent. 

3. The parent may restrict the child from buying things that do not fit in the scope of the family’s values.  If the child wants to purchase an item that is not age appropriate or is not allowed in the home (candy, toy guns, etc…) than the parent can veto the purchase with a clear explanation of why the child is not permitted to make the purchase. If the child wants to buy an item that seems excessive or frivolous but does not go against the household rules, the parent should discuss the pros and cons of buying this item. The final decision is the child’s. The child may regret the purchase. This is part of the teaching process.

4. Your child should be able to earn extra money by performing chores outside of the scope of daily living. Washing dishes, taking out the trash, folding laundry and caring for the family pet are things that need to be done. Washing the car, scrubbing the inside of cupboards, and painting the fence are tasks that a child should be paid to complete. This teaches them to value themselves and their work. It teaches them to expect others to value their contribution. Work ethic and knowing that your effort deserves reimbursement are complicated lessons to learn and to teach

We all know that financial stress is one of the most common and most destructive stressors of relationships. By making thoughtful attempts to introduce our children to earning and managing money we will set them up for a life of success. 

By all means pay for your children’s necessities like deodorant, but if they tell you “I got this mom,” relish in the fact that you have done a great job of teaching your child that nothing in life is free.



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