My 21 year old son recently bought and paid for his own $15,000 car. He saved first for a $5,000 down payment, then paid his $10,000 car loan off in 6 months! I’m going to share in a future post additional factors that lead to him being able to do this. Both of my now adult kids at 21 and 23 are very smart with their money. Their very first lessons of learning the value of money and getting what they want from their money began with getting an allowance.
When they were pretty young, around 4 and 6, we started giving them a really small weekly allowance. I had a friend just a little ahead of me in this parenting gig and I saw it working well for her kids. And, of course, as soon as my kids saw their friends getting an allowance, they wanted allowance too.
One other thing that influenced our thinking about allowance was having hosted an exchange student from The Netherlands in our home for a school year. This was before we had any kids of our own. Our exchange student was 17 the year he lived with us.
I was intrigued when he shared with us how from a young age his parents would give him an allowance for different types of things that allowed him to make choices about how to spend his money. His parents would give him his school clothing allowance at the beginning of the school year. He could choose whether to buy fewer expensive name brand pieces of clothing or more pieces of less expensive clothing. His parents gave him money for his lunch and other discretionary spending at the beginning of the month. If he spent it too early in the month, he would be scrambling to figure out how he was going to eat lunch at school for the rest of the month.
Before we started giving them an allowance, the kids and I had a routine of once a week going out to lunch and spending time with our friends. We would eat lunch first, then my friend and I might do a little clearance shopping at JC Penney. Back then, I shopped a season ahead and got much of their clothing that way.
After we did any shopping we wanted or needed to do, if the kids had behaved we would usually take them to the Dollar Tree that was inside the mall for a little treat. After their shopping was completed there was an area in the center of our mall that the kids nicknamed “the circle” and they could run around there and play. Where we live in south Alabama, if you don’t have a pool, you stay in the a/c most of the summer. On our outings I got to have adult conversation with my friend and they got to play with their friends.
At the Dollar Tree the kids would each pick out 2 things, sometimes 3, and sometimes ask for more. They would sometimes ask for other things in the mall too and then again when we went to Walmart for groceries they would want to look in the toy section and ask for things there.
Of course, they didn’t get all the things they asked for, and it was very stressful for me that they were constantly asking for things and I was constantly having to assess what I could or would buy them and what I would say no to. Sometimes I felt guilty for saying no a lot. If I said no at the Dollar Tree because we had gotten something earlier in the week at Walmart, I mean, it was just a dollar. That felt kinda wrong. But it was rarely just one item they wanted.
We were a one income family and money was often tight. At that time we didn’t buy a lot of toys outside of Christmas and birthdays but we did buy some. Deciding what would have lasting value to them (what they would play with for more than 2 weeks) and what what be a waste of our money seemed so hard. When our friends started giving their kids an allowance we decided to give it a try too.
One crucial point to making this system work. They need to need their allowance.
We stopped buying toys and gifts except for Christmas and birthdays. We might buy a movie, VHS back then, but it was rare for us to buy any kind of toy. Other than that, they had to spend their own money. This made them NEED their allowance. If you continue to spend money on toys and things they want, you take away their ability to learn the lessons below.
Life-long Lessons My Kids Learned From Earning Allowance
When we started giving our kids an allowance, it was really amazing to see how quickly at their very young age they began to think about money differently.
- Right away, almost immediately, it helped them and me see what they really valued. In the beginning my son would very often say to me, “Will you buy this? I want it, but I don’t want to spend my money for it?” Wow. I suddenly saw that much of what my kids “wanted” and asked for wasn’t worth THEIR money. Exit all guilt about having said no in the past. It was a passing, “I see it and like it” want, not, “I really like it and want to spend MY money on it”. This was a really big revelation. I even saw this with our youngest who has Down syndrome when she started getting allowance.
- It put them in charge of deciding when to spend and when to save for something better. We would talk it through with them, but really left it up to them for the most part how to spend their money. More often they started choosing not to always spend their money at the Dollar Tree but save for just a few weeks for something they wanted more. Some things at the Dollar Tree were good and fun, but some were just junk. They were happy for me to buy those things, but when it came down to it, they often realized they would rather have other things that required a little saving.
- They could make mistakes with their money, and learn from those mistakes while it wasn’t a critical decision or a large amount of money. Because they didn’t get a lot of money, they really had to think about how to spend it. Most of the time it was well thought out. Occasionally they would later question whether a purchase had been the best decision. This was more the case with my son. He really became a saver. By the time he was a teenager and started doing yard work for pay, he would stretch that summer income to make it last the school year when he didn’t have a job or a way to make money.
- Delayed Gratification: By having to save for what they wanted, rather than it being given to them or them being able to buy everything immediately, they learned to both work and wait for what they wanted. Patience. None of us like waiting, myself included. It’s a fact of life though that sometimes it’s best to wait. It was good to learn this lesson when they were young. It helped both my older two kids when it came to buying a car. They weren’t overly tempted to buy a car sooner than they should or spend more than they could afford. They had been practicing for this type of purchase for many years when that time came.
It benefited us as parents too.
- Since the decisions were up to them, NO MORE ASKING or begging. Yippee! No more decisions to be made on my part. This was a huge benefit to me. Like I said before, initially for a little while, they might still ask me to buy something for them while we got used to this new system. I would just remind them they had their allowance and they could choose what to buy.
Allowance really solved so much of the decision fatigue on my part as well as teaching my kids some important life-long lessons about money. It was a complete win-win.
Was this allowance tied to chores? Yes. And no.
Our kids were expected to do chores from a young age. There are many reasons why we felt it was good for them. We didn’t set an amount they earned per chore. We framed it up as: when you keep up your responsibilities at home, you earn the right to have a little spending money.
They were expected to do the chores, period. But, we did consider receiving their allowance to be contingent on their willingness to do their part at home. From time to time there would be threats of not getting their full allowance if they didn’t do their chores, but we almost never had to make good on that threat.
How much allowance should I give?
We started them off at a paltry $2 per week. It wasn’t too long before we decided to bump them up to $3. At some point they earned $5 a week. Everything changed again when they were teenagers, but at a young age this is how it worked, and worked very well for us.
Jessie, our youngest who has Down syndrome and is 16, currently earns $5 a week. Earning an allowance has been a good learning experience for her too. I foresee a future post about our experience with allowance specifically with her since the situation is a little different.
How much are you already spending on toys/odds and ends/not necessities? What is an amount you think is a good number for non-essential spending for each child that is affordable for you? You can always bump it up, but nearly impossible to go back down without a mutiny. If you have any doubts start with a smaller amount with room to “give them a raise.” You want it to be small enough they have to save and think through their purchases and large enough that it covers what you would want them to have the ability to spend since you will no longer be buying toys.
Last thoughts…With parenting and teaching about money, begin with the end in mind.
If we were out somewhere and the kids saw something they wanted to buy with their money and their money was at home I would buy it for them and they would repay me when we got back home. They were young and it was too complicated to have them bring and keep up with their money every single time we left the house. That is a whole different lesson and it wasn’t our focus at the time.
When you’re trying to come up with a system that will work for your family, keep the big picture in mind. Don’t get hung up on particular details. Think through what the main things are that you want them to learn and devise a system with those goals in mind. Amend your plans as necessary.
I saw a meme once that said something to the effect that their parenting strategy (showing a gps) was recalculating, recalculating. Yes, isn’t so much of parenting like that?
Till next week,