Tuesday, June 30, 2009

Weekly Allowance

We teach about how to drive in school, but not how to manage finances.
~Andy Williams

What constitutes allowance widely varies. All parents have their own ideas about whether or not to give allowance and those who do it have different ideas, reasons, ways, times, and amounts. I think my parents tried an allowance a time or two, but it just did not stick--consistency was just not their thing.

My husband and I read books about how to structure an allowance and discussed our ideas quite a few times. I believe in children earning their money as both my husband and I did, but I have also heard children refusing to do allowance related chores because they will just get money from their grandparents or for their birthday, so we decided not to have allowance associated with behavior or chores, because our goal, at this time at least, is not to use it as a reward or punishment, but as a learning tool to teach her about finances.

We plan to keep her allowance small and add a "commission" approach for extra tasks as she becomes more interested in earning money. However, even now, if the Princess would like to make some extra money, she can do special chores, but we are only gently suggesting that now and then.

I was concerned most about being consistent and introducing an envelope system, which is what we use for our budgeting also. We agreed that the Princess would only need three envelopes: tithing, saving, and spending.

  1. Tithing is twenty percent, not just the usual ten. We decided on that because...well, giving more than what is expected is a good thing because we love our Lord.

  2. Saving is forty percent. This is quite a bit more than most people save typically, but after learning some things about self-made millionaires, it seems that living modestly on half of their income, having some saved and then investing a portion of the other half was key strategy.

  3. Spending is forty percent. It is not so much the amount that is the difficult part, but what rules to have about spending. We have decided to go with the Princess can spend on anything she wants as long as it is not against our morality. We want her to learn that if she spends it all then she will have nothing more to spend now while she is young and that no one will save her from herself if she is spending irresponsibly. Some parents allow sweets to be included, but I have some reservations on that. Perhaps my concerns are unnecessary, as she has not wanted to buy candy, but I need to be prepared for these issues. We do ration sweets rather meagerly in our home, so she may buy it, but that does not mean she gets to eat it whenever she likes.

We decided allowance would be two dollars given out on each Saturday. To be sure we are consistent, I have it written on our calendar. We started after she turned eight years old, even though we meant to start when she was younger--amazing how the time flies.

In addition to all this, we listen to Dave Ramsey on his radio program in the afternoons on the hour long drive home from piano lessons and going to the airport to pick up my husband. Although I do not follow Dave Ramsey's advice on allowance and I have my own budget system I devised years ago, which is very similar to his own, I want my daughter to hear how people can get over their heads in debt, how to live not using credit cards, and to, as Dave Ramsey says, "live like no one else so that later [she] can live like no one else."

The Princess has purchased some things, but she tends to forget her wallet when we are going out. Today, as we were coming back home from dropping my husband off at the airport, we stopped at Cracker Barrel. For my friends who have not heard of them, it is a chain restaurant located along highways with specialty "country" store having all sorts of expensive and inexpensive knick-knacks. The Princess was quite taken with a three-dollar wooden snake that seems to slither like the real thing and asked me to loan her the money until we were home, which I did. As soon as we were inside, she headed for her wallet with the receipt in hand and began counting out the money to give back to me. I was pleased with her taking this responsibility without having to be reminded.

I suppose at some point I should begin teaching her that when she forgets to bring money that she will not be able to get things, because she should not get in the habit of asking to borrow. For now, it is one step at a time.

~ My Lord, please guide us in teaching finances to our daughter. Please guide her to make wise decisions about managing money, so it does not manage her. ~

1 comment:

  1. Oh this is such a hot potato for us because we are on such a tight budget ourselves what with a disabled person & all Ditz's expenses. We have tended not to do allowances because the kids have been involved in expensive things ~ either sport or music & we could do either /or but not both. *However*...with the older ones working Dearest could see it was grating on Ditz to not have any *fritter* money of her own so *she* could be the one to buy & share round a treat or save for something silly doing the rounds of her friends. Like you family values have to be adhered to but other than that I don't fuss about what Ditz spends her money on & I must say she has been more of a saver than I expected & gets borrowed from quite a bit. Managing money well is terribly important; a real *life skill*.


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