Wednesday, December 26, 2007

'Llowance Lowdown

On the off chance that my recent research can get your family's child cash conversation kick-started, here goes:

1)Many people recommend an allowance of a buck per year of age, something large enough that a child can purchase tangible items of interest and can also benefit from saving money. She and she alone should decide how to use this money. She can spend, save, or share it -- and will benefit from hearing your beliefs -- but she must be empowered to make her own choices. To make it worth her while to save, pay her an exorbitant interest rate (at least 6%, steep but allows the money to grow visibly in child time) once a month, a la The First National Bank of Dad, a great book on teaching kids about finances that also provided the next point of advice.

2)Distance allowance from parental dollar hostage-taking from the get-go. It is tempting to threaten to take it away and effectively banning linking the allowance to behavior is important. That would be boring. And kids should have to participate in household tasks as part of a family team effort. Choosing not to do chores (ie I don't need that stinking allowance) shouldn't be an option.

3)Optional jobs offered as extra money-makers should be just that, optional, above-and-beyond jobs she can opt to do to earn extra $ above and beyond her allowance. These tasks will come as a set; just like there are parts of your employment you dislike but do anyways, she can't pick and choose from the xtra joblist. It's all or nothing. {I got this idea from Michelle Singletary -- I totally love her column The Color of Money and was reading her archives last week while on the hunt for books for my 10-year old entrepreneurial cousin (this and this look promising).}

4)Any ideas your kid comes up with that save your family money should go directly into her pocket, ie if she finds us a $1 off coupon for her favorite yogurt drinks, give her the dollar. This idea comes directly from my maternal grandfather. I totally loved when he did this for me as a kid. I still clip coupons.

Here's hoping that lots of discussion about money will help our kids have a healthy relationship with cash -- respect for the power of money to do good, to make our lives easier, and to provide freedom of choice and freedom from want.

Also, this via Green as A Thistle: by all means save, but only with a figurative piggy bank -- hoarding coins is bad for the environment. Think about that when you are fuming about the person in front of you in line (me?!) fishing around for exact change.


Lynn from said...

Who would have thought about the environmental repercussions of hoarding coins? Thanks for the link! For more on allowances, check out the Parent Encouragement Program. I took a class there about allowances. Their experts agree with you about not linking chores and allowance, but not about letting Junior decide how much to save and how much to give to charity. They maintain, and I agree, that those savings and charitable values need to be taught by the parents. We give our five-year-old $5, of which $3 is his to spend or save. $1 goes to charity (his first donation was to the library!) and $1 goes to long term savings.

Melanie said...

I feel deeply guilty about the amount of change knocking around the house right this very second. It's clanging and jingling and saying, "Meeeeelanie, take us to CoooooinStar. Don't let down the plaaaaaaaanet."

On a separate note: Could you e-mail me your mailing address? For stalking purposes only.