teaching financial responsibility/allowances

[lgliser]

Is there a great book or program out there geared toward younger kids (7 years old)?  I have thought about Dave Ramsey's Financial Peace Jr.  Is it good?  

And with along with this, how do you do allowances?  What we've done in the past is this:  

The kids have morning chores and afternoon chores.  If they do ALL of their morning chores they earn a quarter and if they do ALL of their evening chores they get another quarter.  They can do extra chores and earn bonus dimes.  They would get paid at the end of the week.  But we just sorta fell away from it.  They would slack on their chores and we would slack on paying them.  I used to have a picture chart (because we started before they could read) that they could reference to see what chores they needed to do but that doesn't motivate them anymore and I haven't come up with a new system so that they can actually see/remember what they need to do.  

I'm not sure if I should still divide it into morning and afternoon chores/quarters, or assign a certain amount to each chore... having some things that they do just because they live here (like what though??  I'm not sure which chores those should be)....

Help!

[MinivanMom]

I don't think I would use a formal program with kids that age. I think allowance (and allowing them to make mistakes with an allowance) is it's own best teacher. My kids have all been in the position of having blown all their money on candy and then not having any cash when the toy they really wanted goes on sale. They have had the experience of saving for a long period for something they really wanted. They have also had the experience of nearly having saved enough for the thing they want only to have a sibling's birthday come up. It's wonderful to see them choose to spend that money for a birthday present knowing that it will take them even longer to get the thing they want. I don't think these kinds of experiences can be matched by any curriculum.

 

Philosophies vary, but we don't link chores and allowance. The kids do chores, because we are a family where everyone contributes. They get an allowance (and clothes and music lessons, etc, etc), because we are a family where everyone benefits. Once they are old enough to earn their own money we won't give them an allowance anymore, because that's no longer a benefit that they need. We'll still expect them to do chores, though, because everyone contributes. This is what we've done so far:

5 yrs old - Started giving $1 a week allowance and strongly encourage the children to donate 10%

8 yrs old - Increased allowance to $10 every other week and strongly encourage the children to save 50% in addition to donating 10%. Once they have saved a substantial amount (we've been waiting until the $100 mark so that the savings is very tangible) then we take them down to open their own savings account. After that we take them down once every couple of months to make a deposit.

10 yrs old - Increased allowance to $40 a month.

Theoretically when our oldest turns 12, we are going to drop the allowance since she will be old enough to earn her own money by babysitting. We are wanting to start doing a clothing allowance instead. We will give her the amount we normally spend on her fall clothes or her spring clothes and let her do the shopping herself. If she spends under the budgeted amount then that money is hers to keep. We'll see how that goes.

[MinivanMom]

About getting chores done:

When my kids were younger, we had a set day and time where we did chores. I would announce that it was chore time and then supervise everyone closely until all the cleaning was done. Now that they are older I have a chart on the fridge that lists their weekly chores. They choose when to do their chores and check them off when they are done. If they haven't finished by Saturday morning, then they do their chores right then. Theoretically they aren't allowed to go anywhere or do anything else on Saturday until their chores are done. In reality, they sometimes do chores after the 9am soccer game or after the special family outing to the science museum. For us making chores a habit has been mostly dependent on whether I am willing to supervise and follow through. Daily chores generally get done without any reminders, but I always check and then remind them if I need to.

[robsiew]

As far as money training... we've done the following (sometimes linked to chores, but like you this made it more difficult and we've come away from that)

 

Amounts have varied... I think we started with $2/week per child.  They are at $5/week now.

 

We started with the banks that have a "spend, save, give" slots in them.  Now we just use a little stack of 3 drawers for them since the bills were hard to get in and out.

 

10% give (they can give to church or any charity they want to)

 

20%  save

 

70% spend

 

We put their "save" money in the bank and we intend to have them use that to buy a car someday.

 

The hard part has been letting them spend their spend money on anything they want.  Yes, some of them do buy silly things, but we figure if we let them have that freedom with little money, that once they get older they will understand better how to spend wisely.  Maybe not, but then it will be their money!

 

My dh and I never had any financial training growing up and we thought it very important to raise our kids with money sense.  My dh and I have done Financial Peace ourselves, but haven't done it formally with our kids.  We'll save that for high school.  We're just using the training we got to pass onto our kids in an age appropriate way.

[lgliser]

 

 

I don't think I would use a formal program with kids that age. I think allowance (and allowing them to make mistakes with an allowance) is it's own best teacher. 

 

Ya... I think you could be right!  Probably anything I used would just be more of a reminder for me!

 

 

 

The hard part has been letting them spend their spend money on anything they want. 

Definitely!  So far they've just saved most of their money and spent it very rarely on a special toy or something.  I'm a penny pincher by nature and while I feel like there are worse things I could pass on to my kids, I still want them to learn how to handle money!  Spending 70% seems like so much!

[TracyP]

I agree that a program is unnecessary for those ages.

 

We have two "strands" of chores with my oldest two. (The younger kids don't have any formal jobs) The first is their daily chores. These are done because they are a part of this family. They are non-negotiable. The second is their paid chores. They have the ability to make $3.50 per week if they do all of them - 25 cents per job. These are 100% on them and I don't mind in the least if they don't get done.

 

I sorta allow them to do what they want with their money. They give as much as they choose and then save most of it. My 10yo and 8yo are both saving for college, a car, and a house. :)  I say "sorta" because they don't actually have the opportunity to spend very often. We live an hour from the nearest Target so we don't just stop at the store very often. I'm not sure it would be any different if we were closer, however. They are incredibly responsible for their ages.

 

The best advice I can offer is to be a good role model. Kids aren't stupid; you have to practice what you preach when it comes to being financially responsible.

 

Oh, and this is a piece of advice I got from my Mom. My kids will sometimes ask if we (mom and dad) can buy ____. I like to use the sentence "we don't choose to spend our money that way" when the answer is no. Even if it is something we could afford, we have to make choices with our money. I want them to understand that when we say yes to spending on one thing, we are possibly saying no to something else.

 

I also often discuss with them that we vote with our dollars. That can become a soapbox issue for me, so I will just leave it at that. ;)

[MerryAtHope]

I taught my kids a cash envelope system. We listed out their expenses in a brainstorm session, mainly:

 

spending money (candy, toys etc...)

Awana Dues/youth group

Gifts for Others

Saving

Giving to church or missionaries.

 

Then we decided how much for each envelope each week. The envelopes have changed somewhat over time, and how much they get has increased, but we started this when they were about 5 and 7, and they learned early on about budgeting. It's been a great experience for them. They have done things like pay each other for jobs to earn extra money, pooled their money together to get something, saved up money in a separate budget category that they created for something bigger they wanted, and so on.

 

They both have a daily job that is tied to their allowance, but have other chores that are just "because we're a family and we work together and help each other." They both can also earn extra money for things like mowing, making dinner for the family, raking, extra yard work, and other special jobs that are out of the ordinary. 

[threedogfarm]

I think the above posters have lots of good ideas.

 

I'll share what has worked in our family.

 

We've been doing this for the past three years and since we are still doing it, I am considering it successful:

 

We have a spelling blue book that has a red line down the center of each page.  Both children have two books--one for savings and one for savings.  Money that is given for birthdays, jobs, etc. gets divided 50/50 between the two books.  The left side of the book will list the date and the "source" of the money and the right side has the balance and the money that's being added (or subtracted).

 

I use the books for a couple reasons:  1.  I hate money "floating" around the house and being hidden in spots that end up getting forgotten about.  2.  Great reinforcement for math skills.  3.  I don't use the bank b/c then I'd have two more statements coming in every month AND that would mean a trip to the bank to take out any spending money.  4.  I never have to look for hard cash to pay my kids with.

 

To earn money in our house you need to have a job.  There are weekly jobs available and once-in-a-while jobs available.  Summer is a great time for jobs b/c we have a huge garden.  I pay my children a "working wage" because I do not buy them any toys, etc.  They have to do that themselves. It's amazing how many fewer toys and misc. stuff comes in the house b/c my children have to buy it themselves.  It's also great to go to the store and not have to worry about all the questions, "Can you buy me this?"  "Why not?"  "Please?????"  Now all I have to say, "Do you have enough money in your spending account?"  My daughter actually bought her dog a beautiful sheep skin pelt for Christmas because that's what she wanted to spend her money on.  She also has purchased velcro to make her Schleich horses some blankets as well as some more Schleich horses.  My son likes legos and that's where most of his spending money goes.  Their spending money is their spending money and I do not preach or question them about it.  Occasionally I will help them think through a decision but I never tell them no.  I feel that by making them put 50% in their savings account, I have already exercised significant parental control on their earned money.  

 

I always write on the receipt whose responsible for the purchase so that it can then be logged into their spending book.  

 

It's amazing.  My kids actually like to have a "cushion" in their spending money book "just in case" they find something unexpected.  I think that's sound money management!

 

 

[duckens]

1) We are not super at having our kids do chores at this age.  Our oldest just turned 7.  The kids are expected to help clean up when we pick up the living room together; and the oldest helps to set the table when asked.

 

2) There is no allowance in our household.  My children will know the value of a dollar.

 

3) I pay for grades. :ohmy:   Or rather, I pay for schoolwork.

 

Disclaimer:  This is not the best choice for every family, but it is what works for us so far.  Yes, I know the research that demonstrates both the strengths and the research that shows the risks of paying children to learn.

 

When my older sister turned 16, she got a job working at Perkins Restaurant.  She often worked  the (post) bar shift for $2.01 plus (lack of) tips from drunk people.  She saved her money carefully for college.  Her best friend Heather wanted a job, too.  "Your job is school," her parents told her.  Guess which girl earned a full ride scholarship to Baylor University in the Honors Computer Science program?  Guess which girl has never finished college?  Guess which group I want my kids to be in?

 

Older dd earned 5c/subject or page for Kindergarten work.  She earns 6c for 1st grade work.  It makes sense that harder work should pay better, and more education should pay better.  In this way, when my younger starts K and says, "Why do I only get paid 5c when older sister gets paid 9c?"  I can explain that 4th grade work is harder.  If younger dd wants to work double-time to get up to 4th grade and a higher pay grade, I will help her however I can. 

 

This system also works well because if a child is doing 2nd grade math, but all other subjects for 1st grade, the child will be paid accordingly.

 

This pay system also internalizes that more education = better pay.  As in: those with a high school diploma get paid better than those who don't.  Those with a college degree get paid better than those who don't.  Those with a graduate degree get paid better than those with just a B.A. or B.S. 

 

This system also teaches a work ethic.  If daddy doesn't go to work, he doesn't get paid.  If you don't do your work, you will not be paid, either.

 

4) I also pay 25c/ practice for piano, and a nickel each for math facts and typing.  There is also a 25c bonus for getting everything done by the end of the day.  This is extra incentive to get everything done, and it helps to keep us on track.

 

5) When we go to the store, and the kids want to buy something, I ask, "Did you bring your money?????"  Most kids when ask that think, "Oh.....I didn't want it badly enough to spend MY money on it."  My dd7 already budgets her money and determines whether she has enough money to make the purchase, or whether she needs to go home and do a bunch more schoolwork.

 

6) The first year we did this seriously (age 5ish), dd spent everything she earned.  She was tearful when she didn't have enough money to purchase something. 

 

Age 6, I got smarter.  I divided her pay into 3 parts:

a) impulse buying, because everyone finds good deals on short notice

b ) short term savings (saving for something specific)

c) long term savings for one year (we put it in a box with a lock, and I wrote the date on the back)

At the end of the year, dd had an epiphany about saving money.  Part of this was age-appropriate maturity, too. 

 

We also talked often about how, "It feels good to have that money saved."  THIS IS A KEY LESSON THAT I WOULD LIKE MY CHILDREN TO LEARN.  It IS fun to spend money.  It IS fun to get new things.  But I want my children to take joy in saving, too.

 

This year, dd is a force to be reckoned with when it comes to schoolwork.  She is driven to get everything done by the end of the day.  She understands the 25c bonus, and she understands having money  for things she wants when we go to the zoo, science center, or any other local events.

 

In the future:

By the end of this year of saving, I am hoping that dd will have ~$100.  I am hoping to steer her toward investment opportunities for children.  Possibly U.S. Savings Bonds, or we'll have a talk with the investment counselor at the local credit union.  If anyone knows of a system where young children can invest minor amounts in the stock market, let me know.

 

In the next decade:

IF dd has any "job" income (teaching piano lessons, babysitting, lifeguard, summer internship in high school), I will encourage her to bank EVERYTHING in a Roth IRA.  Kids don't generally have enough income to pay much in taxes, so no almost no taxes going in;  and earnings on Roth IRAs are not taxed, so no taxes coming out.  40 years from now, her investment from a silly high school summer job could yield some serious retirement cushion.  As soon as they can file a 1040EZ, they should qualify for a Roth.  Different states have different rules, so check with your state for details.

 

 

[lgliser]

Wow, I just love hearing what works for everyone!  Duckens, you have really thought that through - love it!

[Element]

We don't tie allowances to chores here. They do chores because they are part of the family. They receive small weekly allowances to learn basic accounting. They have to save half and they can spend half, but it's all done in the same cash box so they have to use a log to keep track of what they can/ can't spend, what they have spent, and what they have received. It sounds complicated, but my 8 year old can handle it so it's not *too* complicated, I guess. Dh audits their record keeping every couple of months to make sure they're on track.

[mskelly]

Check out The Entitlement Trap.  They suggest starting at 8, but I don't see why it wouldn't work with younger kids.