I am ambivalent about many things in life. Pumpkin spice latte or hazelnut macchiato? River or beach day? IPA or vodka cranberry? While I am usually quick to come to a conclusion (after analyzing all the facts available), allowance is one of the things that I have not been able to reconcile in my brain. Yet.
When I was a kid, we could buy a candy bar for $.50, and the bus cost $1.10 to get to the mall. If my mom handed me $10 (rare, but it was known to happen) I could buy lunch, see a movie with friends, and still have enough to get home at the end of the day. Now, my kid needs $20 for the same outing with friends, and she doesn’t have enough to get a Slurpee at the theater.
I’ve given her allowance on and off over the years. The amount has varied as well, and I find that the lack of consistency hasn’t affected her much. When she is interested in money, we talk about allowance. When she’s not interested in it, I don’t pay her anything. And, when she broke her retainer three times in two months, allowance was terminated for the rest of the year. Orthodontics are expensive!
How is allowance paid?
There are two main schools of thought about allowance: flat fee and pay for performance. Apologies for the Human Resources terminology. That’s just how my brain functions these days.
Flat fee is the belief that your child should receive some amount of money for existing. So regardless of chores or other household contributions, you give your child X amount to have money to spend.
Pay for performance is allowance based on some metric. Your child can either earn a flat amount based on completing a specified list of chores, or earn a specific amount for different individual activities. When I was a kid, my mother also paid us for good grades. We received a specific dollar amount for each grade, and a bonus if we brought home all A’s.
Further complicating the matter is personal beliefs about saving and/or donating part of their “income.” Some families encourage (force?) their kids to save a specific amount of their money for long and/or short term goals. Some families also require a portion of their money to be donated to charity or tithed.
What do I think?
I feel ambivalent about each school of thought. I do think that kids need to have their own money in order to learn financial responsibility. Especially now when the process of earning, spending, and saving is typically electronic. Kids don’t see cash very often and it’s difficult to accurately conceptualize debit cards at that age.
But I also firmly believe that children should participate in household chores. I understand the difficulty in persuading kids to comply, therefore causing the tendency to offer rewards for compliance. I personally do not agree that kids (or anyone in the household) should be rewarded for completing chores that benefit everyone in the home.
Allowance or no allowance, then?
My husband and I debated this subject for a long time. He believes that kids should earn any money they receive. I think that kids need to have some money to spend themselves. This is not only for financial literacy, but also to exercise their independence and decision-making skills. We compromised and decided to give our oldest daughter (she’s 12) a small allowance: $10 biweekly. We encourage her to save some of her money for larger purchases, such as her Adidas shell toes (y’all, why is my 90’s fashion coming through my daughter? Another post…). We encourage her to share the treats she purchases with her three younger siblings. This is basically like a donation, right?
Only our oldest daughter receives a steady allowance. Our middle daughter has refused allowance for years, and the five- and three-year-old have no concept of how to not lose money. But all of the kids have the ability to earn extra money by completing extra chores around the house. We expect each child to contribute on a daily basis by doing dishes, taking out recycling, etc. But if we need weeds pulled or a car washed, they can earn a little extra. We also chose not to pay for grades, although if they bring home a report card that demonstrates an increased effort over the months, I love taking them out to fro-yo.