Money, Money, Money, Mon-nay!

It was a big day in our household yesterday.  Connor our oldest child, began receiving an allowance.

It was a big day because it took me a long, long time to understand “allowance”.  I didn’t have any growing up, and neither did MOMD.  We have no frame of reference for what an allowance teaches, other than how to spend all of it in once place, at one time!  Because that’s what all the kids I knew who got allowances did.

So when Connor started talking about receiving an allowance (he was 5 or so) MOMD and I talked about it.  We didn’t have any strong feelings or opinions either way, other than “I never got one.”  I talked about it with my sister (who’s daughter was born 10 weeks after Connor) and my darling friend Ruby* (who has a daughter that is 15 months older than Connor, and a son who is 6 months younger than Connor).  I talked to these women not only because their children are close in age to Connor, but because we generally speaking have a similar parenting style.

Also: I talk to them a lot about all kinds of things ’cause I like them.

Anyway.  The main thrust of their positions on allowance was Yes, we should give Connor one and No, do not, under any circumstance, tie it to housework.

Then what the hell am I giving them money for???

But they were adamant: doing work around the house is part of your social contract.  You do it because you live here, because we’re a team, and because you contributed (if not outright caused) the mess to begin with.  I’ve all ready documented my support and expectation of the family social contract, so I certainly agreed with what they were saying.  And I certainly did not want to erode our social contract by giving him money because he kept him room tidy.

My sister & Ruby were never able to clearly articulate (so that someone as financially obtuse as I can be could understand) why you give an allowance and how/what it teaches the child.  Since MOMD & I did not feel strongly about giving him an allowance, we just let the topic die.

Every now and then in the intervening years, Connor has mentioned friends who have allowances.  He never outright asked if he could have one (although once he said, “When will I be old enough to have an allowance?”  MOMD & I side-stepped that question somehow) and we have never said one way or the other if he would ever have one.

A related side note: you know that adage about doing better for your children than your parents did for you?  Well, for MOMD & I to do that will take some feat.  Both sets of parents are still married, both sets of parents have kids who went on to get degrees and be productive members of society.  We had big homes, with loving families, pets, trips, clothes, excellent food… The list of everything we had is very long; maybe endless.  One thing that we both left home without though, was a solid financial foundation.  And let me tell you: when I was thrown into the fire by the credit card sales people at university  I had a hard and fast lesson in fiscal accountability.  But I digress.  My point is, this is one area where we thought we could do better than our parents did for us.

But how?  And when?  I mean, I don’t want to sit down with my young kids and show them how much income we have every month and what it costs to live each month.  That’s traumatic for me sometimes, nevermind an 8 year old!

And then about 6 months ago, my cousin sent me some articles.  Some articles on why parents should give an allowance, and what an allowance can teach your children.  The way these articles were written clearly and simply got me to my “ah-ha” moment.  I was waiting for this: that moment when your mind is not just opened, but the doors are blown off their hinges, never to be closed again!

The idea is simple: you segment.  Connor was given 4 plastic jars, with a label on each.  Spend, Save, Invest & Donate.  You know exactly what the “spend” category is for; short-term impulse purchases.  Things like pokemon cards and whatnot.  You use “save” for what my sister-in-law calls ‘planned spending’.  Basically, the kid picks something that they would like to have, that they have to save up to buy, and then once they save enough, they buy it.  My hope is that this category will instill in our kids the value of buying what you can afford.  The “invest” box is for long-term savings, with the child will not be able to spend until he’s at least 16.  This shows how over time, money adds up, visually teach compound savings and interest.  And finally, donate.  The author suggests that once a year MOMD & I choose 4 charities that work in our communities and where Connor can see his contribution at work, and present them to Connor for his donations.  He will have final say over who gets his money, and he may choose to share it around with a couple of charities.

MOMD & I decided that we would give 1 quarter for every year of Connor’s life.  That means 8 quarters or $2/week.  He has to put 1 quarter in each jar, every week and then he chooses where to put the other 4 quarters.

I was really excited to share this with Connor.  And even better?  He was really excited too!  His jars are proudly positioned in his room, their first quarters divided among them.  And what is he saving for, you may wonder?  A video game, called “Pokepark 2” of course.

Here they are! And that sheet of paper behing the “spend” and “donate” jars explains what each one is for.

Here are the articles my cousin sent my way: article on segmenting: http://www.thesimpledollar.com/2012/03/20/segment-their-allowance-79365/ and  article on earning extra through chores: http://mrsnespysworld.blogspot.com/2011/11/our-chore-system.html

*Ruby is not her real name.  It’s been changed to protect the innocent.  If she can be called “innocent”.