Global News with Ann Douglas 23 March 2019
For Annie Boucher and her husband, a weekly allowance is a great way to teach their children financial literacy while also incentivizing help around the house.
“Instead of us just buying things, we said, ‘you can earn money to buy these things that you want,’” the Ottawa mom of two told Global News.
Boucher doesn’t hand out a $5 bill for every dish washed. Instead, if they’ve been “a good member of the family,” each child — aged 11 and 14 — receives $5 at the end of the week.
“They have to vacuum every Saturday morning. They get zilch until that’s done. But then, if you’ve shown a general willingness to do chores and you haven’t put up a fight every time I’ve asked you to do something [this week], then we’re on good terms,” said Boucher.
Financial literacy is of the utmost importance to Boucher and her husband. “Everything [our children] spend any money on gets a full cost-benefit analysis,” she said.
Parenting expert Alyson Schafer approves.
In her view, a weekly or monthly budget teaches kids how to: save, distinguish between needs and wants, make responsible purchasing choices and become more independent.
“Part of raising children is preparing them with life skills and financial literacy is an important skill,” Schafer said.
How much money should you give? And how often?
According to Schafer, the dollar amount should correspond to what the child is expected to pay for.
“Start small, and add budget items over time. Examples might be bus fare, pizza lunch money, book purchases.”
Receiving this money once per week allows the child to manage small sums of money over a short period of time. “As they get older and their skills improve, you could move it to once a month,” Schafer told Global News.
For Ann Douglas, another parenting expert, the amount and the frequency will depend on the family.
“Parents will want to take into account what the child is expected to do with the allowance — whether the allowance is for discretionary spending or whether the child is expected to cover clothing and other essentials,” said Douglas.
It’s OK to compare notes with other parents, but don’t feel obligated to match what other parents are paying. “Take into account what other families are doing, but then decide what is going to work for you,” Douglas said.
Boucher and her husband decided to give their kids $5 per week because they find it’s enough of an incentive to help around the house, without being exorbitant.
“I have a bit of a problem with paying household members to do things that household members should do anyway,” said Boucher.
“It’s kind of a nominal fee to say ‘thanks for contributing.’”
Allowances should not be connected to household chores
Parents might be inclined to attach a dollar amount to common chores, but this isn’t the best course of action, according to Schafer.
“[The] family is a social system, not a free market economy. You need to make your bed and help out with dishes because you are a member of a community.”
However, if your child wants to save up for a larger purchase and is looking for other ways to make money, Schafer recommends that parents offer “paying jobs” outside of regular responsibilities.
Douglas agrees. “I’m not a big fan of paying children to do chores unless we’re talking about a child pitching in on a really big job that goes above and beyond what might normally be expected of a child of a particular age,” she said.
“You want kids to grow up understanding that being part of a family means pitching in to help one another,” said Douglas.
“If you do decide to pay your kids for doing the dishes, you run the risk that your child is going to decide that the money you’re offering simply isn’t worth it, in which case they might decide to opt out of that particular chore — a situation that can be pretty frustrating for you as a parent.”
Working together is key
Discussing a purchase before it’s made is crucial to learning about finances.
“Since allowance should be tied to a budget, parents [should] oversee the spending to help assure the child is spending the money accordingly and make corrections and suggestions if they are mismanaging their spending,” said Schafer.
The child may need to change their spending habits, or parents may come to find the child needs a bigger allowance. “It’s an iterative process. Expect to teach and tweak over time,” Schafer said.
Boucher’s kids don’t receive physical money. Instead, their earnings are tallied.
If and when they want to make a purchase, they must pitch that purchase to their parents.
“We positioned it [so that] if you want something, let’s discuss what you want. How important is it to you?” Boucher said. “[Since] we’re holding the money, we can have that discussion for every purchasing decision.”
‘Expect a few stumbles along the way’
Mistakes are learning opportunities, said Schafer.
“If they spend all their money, and you bail them out with more funds to cover the shortfall, they will only learn that you’ll rescue them from mistakes. Instead, let them experience the consequences of going without.”
In Schafer’s opinion, it’s better for children to learn those lessons when they’re young with small mistakes than when they leave home for college or university and the stakes are higher.
Douglas echoed this sentiment.
“Giving children an allowance gives them a chance to figure out how money works. They also get the opportunity to practice making mistakes in a relatively low-stakes way,” said Douglas.
“This doesn’t happen overnight, and you should expect a few stumbles along the way.
Some other ways to teach your children about financial literacy
The easiest way to teach your children about money is through conversation.
The first step is tackling the difference between wants and needs.
“You may want a [designer] purse, but what you really need is simply a purse to carry your possessions,” said Schafer.
It’s also important to understand value.
“You may pay more for a Barbie than the no-name brand at the dollar store that falls apart in the first week,” Scahfer said. “You may also discover there is no difference between some brand and no-name brand cereal, so why pay more?”
Knowing how to navigate the secondhand economy is another valuable life skill.
“If they really want that [designer] purse, [show them how] they may find it gently used online,” said Schafer.
Finally, explore digital banking tools together.
“Likely all children raised today will be using online banking, and [there are] tools provided for tracking [your spending].”
“Kids learn experientially. It’s not enough to simply talk about money, they need to work with it.”
Boucher said her 14-year-old daughter has a solid understanding of money, and she credits that in part to her weekly allowance.
“I can see the purchasing decisions that my daughter makes. She really does say ‘OK I’ll save for this,’” said Boucher. “She sees that it’s all tied to something. It’s not just free money she gets for living.”
To Boucher and her husband, it’s crucial that their kids realize “that you only spend what you have, and if you don’t have it, you don’t spend.”
“Nothing makes me prouder than seeing my daughter run to the sales rack.”