10 Steps to Implementing Allowance

PositiveParentingSolutionsAllowance

A couple of years ago my husband and I enrolled in an online parenting course called Positive Parenting Solutions by Amy McCready. We learned a lot of great tools to equip ourselves with for this crazy journey called Parenting.

One of the most valuable teachings we took from this program was the ABC’s of Allowance (for children 4 – 17). By implementing the allowance system with Little S over a year ago, we have seen so many positive changes that I knew I needed to share with other parents. With Amy’s permission, I am able to do so today.

Note: This post is a bit lengthy because there is a lot of information to share so I’ve divided it into ten steps to help you sort through the information. I suggest reading right to the end to gain the most from this technique.

By implementing allowance in this way, we have been able to:

  • Eliminate power struggles while shopping
  • Educate our child on the value of money
  • Instill the knowledge and desire for delayed gratification
  • Ignite the entrepreneur within her
  • Teach her the importance of charitable giving
  • Emphasize the importance of family contributions

10 Steps to Implementing Allowance

STEP 1: CHORES DO NOT EQUAL CASH

Think about your week in your own home; how many loads of laundry have you done? How many dishes have you cleaned? How many crumbs have you swept up?

A lot right?

And let me ask you, how much did you get paid for this? Nothing! Zip. Zilch. Nada. However you want to say it, the fact is that nobody is paying you to do the things in your house that need to be done. So why are you paying your kids to do it?

Being a part of a family, no matter its shape and size, means you contribute to the well-being of that family. You get to enjoy the benefits together like vacations, birthday parties, dinners out, etc. But you also contribute to its function.

Our goal is to motivate, but connecting an allowance to household duties does the opposite. By focusing on the payoff for the chore rather than the contribution made to the family, we create – and reinforce – a negative lesson. Rather than encouraging our child to do something for its intrinsic value, we instead teach them to ask, “What’s in it for me?” – Amy McCready, Positive Parenting Solutions

  • Do: Ask your children to do age appropriate tasks that contribute to the household.
  • Don’t: Bribe or pay your child to contribute to the family.

STEP 2: ELIMINATE THE WORD ‘CHORE’ FROM YOUR VOCABULARY

The word chore just sounds like a pain in the-you-know-what! To build on Step 1, we want our children to feel significant in the family and to understand the responsibilities that come with being part of a family whether you are the parent or the child.

By using the term family contribution rather than chore, each member sees their role in the household and does not associate these contributions with payment.

  • Do: Refer to the tasks your child does as contributions and reiterate how it helps the family.
  • Don’t: Threaten to withhold their allowance if a family contribution is not completed. Remember, there is no connection between household tasks and payment.

STEP 3: DIFFERENTIATE ESSENTIALS FROM NONESSENTIALS

Needs vs Wants

Depending on the age of your child, items to be considered essential to their health and well-being will vary. However, there are a few basic items that are considered essentials for all dependents such as:

  • Food
  • Shelter
  • Clothing
  • Education
  • Extracurricular activities
  • Transportation

It is these essential items that parents are responsible for providing for their children. Once these items (and any others you deem essential) are covered, anything else that your child wants is considered a nonessential. For example:

  • Video games
  • Gum/Candy
  • Toys
  • Name brand items
  • Comic books

These nonessential items will be covered by your child’s allowance and, as with essential items; the list will vary based on your child’s age.

Here is an example of differentiating between essential and nonessential: Your child plays soccer and needs a new pair of soccer cleats. You find a reasonable pair that will provide everything they need for performance and safety. Your child has their eye on a fancy, name brand pair. The essential that you provide is the cost of the basic pair; if your child wants the more expensive pair, they pay anything over and above the cost of the essential pair from their allowance.

  • Do’: Create a list of age appropriate essential and nonessential items that your child will need/want on a weekly basis.  Plan to provide the essentials but not the nonessentials.
  • Don’t:  Top up your child’s nonessential purchases at the store. This negates the efforts you are making in educating your children about money smarts.

STEP 4: SET BOUNDARIES

Deciding on the amount to give your child as a weekly allowance depends on many factors. To name a few:

  • Age
  • Your own financial capabilities
  • Number of children in your household (no you don’t have to give each child the same amount)

The amount you decide upon is completely up to you but be sure to set boundaries around it. Decide ahead of time what the money can be spent on and what it can’t and communicate this to your child.

Be sure that the allowance amount covers their basic costs but is not so much that it allows them to buy anything they want, whenever they want. Getting the basics today is a good thing for kids and learning to save for the coveted items helps to teach delayed gratification.

  • Do: Select an age appropriate amount and one that is not too generous.
  • Don’t: Change the amount from week-to-week; as your child ages you can adjust the amount to reflect their growing needs.

STEP 5: GIVE, SAVE & SPEND

Give Save Spend

Now t hat you have decided on the allowance you are going to give your child it is time to allocate it in a way that both teaches and represents the real world.

Use three jars (or any other container) and label them the following:

  1. Give
  2. Save
  3. Spend

The ‘Give’ jar is for charitable giving of the child’s choice; the ‘Save’ jar is for long-term savings (e.g. a computer, a car etc.) and the ‘Spend’ jar is used for whatever they chose to spend on a weekly basis (nonessentials).

In our house we have allocated 5% to the ‘Give’ jar, 10% to the ‘Save’ jar and 85% to the ‘Spend’ jar. Find the percentages that work best for you.

  • Do’s: Use the different reasoning behind the jars to educate your child on how important each is.
  • Don’t: Take from the ‘Give’ and ‘Save’ jar to top up purchases for your child.

STEP 6: DON’T BE A LENDER

Imagine this scenario; you’re at the grocery store with a cart full of food. You get to the checkout and attempt to pay for your order and you realize that you forgot your wallet at home. You put on your best ‘feel sorry for me’ face and ask the cashier if you can take the food now, and bring the money back later.

This is not likely to happen is it? This is not the way the real world works so it can’t work that way for your child.

  • Do: Remind your child before you leave the house to bring their wallet with them; do this more when you first start the allowance system and less and less as the process becomes habit.
  • Don’t: Offer to pay for the item at the store and allow them to pay you back at home.

STEP 7: OPEN A BANK ACCOUNT IN YOUR CHILD’S NAME

Take your child to the bank with you and open a bank account in their name. Don’t open an account online as the physical experience offers an educational experience.  As you child’s ‘Save’ jar fills up, take the jar along with your child to the bank to deposit the money.

  • Do: Use a paper format bank book so your child can see their transactions and watch their balance grow. Allow them to take care of the book on their own and store it in a safe place accessible to them.
  • Don’t: Make regular withdrawals from their account. Let them watch the balance grow as they work towards a goal.

STEP 8:  CREATE A WISH LIST

Now that your child has his/her own money to spend on appropriate items, you should start to see any power struggles that may have existed in the past, start to fizzle out. They will feel more empowered now when it comes to making purchases.

Once in a while your child will want to buy an item that they don’t have enough money for, but as in Step 6, it’s not your job to top up their purchase. This is a great time to start a wish list.

It can go something like this:

Child:  “Mommy, I really want this Barbie.”

You: “I see why you’d like that. She’s an ice skater just like you. How much is it?”

Child: “It’s twenty dollars.”

You:  “How much do you have?”

Child: “Only eight dollars.”

You: “You’re short twelve dollars.”

Child: “But I really, really want it!”

You: “Let’s add it to your wish list then. I can take a picture of it with my phone and we can add it to your list of items that you’d like to save for.”

  • Do: Help your child keep track of their wish list items on paper or electronically and help them to save for those items. This list can also come in handy for gift ideas for yourself or family and friends.
  • Don’t: You guessed it…make up the difference for them with your own money!

STEP 9: CREATE A LONG TERM SAVINGS GOAL

Save For A Goal

In our home, Little S is longing for her own computer. Since she is only seven, we aren’t quite ready for her to have her own yet; thankfully her savings will take some time and she’ll be at a more appropriate age once she reaches her goal.

Rather than telling her that she’s too young to have a computer or that it’s too expensive for us to buy, we have set a goal for her to save for it on her own. She has taken to the challenge with passion and gusto and it has ignited her inner entrepreneur.

  • Do: Help your child understand the rate of savings with a fun visual like a chart. This will help to keep them motivated and illustrate how saving works.
  • Don’t: Let them ‘dip into’ their savings for other items. If they are hoping for another item on top of their long-term goal, help them to understand how saving up their ‘Spend’ jar can achieve a shorter term goal.

STEP 10: BE PATIENT AND LET THE THEM LEARN THROUGH EXPERIENCE

When we first started the allowance system, I had a very hard time with Little S’ first solo purchase. She had unintentionally saved a few weeks allowance and we were at the mall in her favourite store. She spotted a pretty pair of earrings that she wanted to buy.

When I saw the price tag at $18.99 I almost fell over. I just didn’t feel that a six-year-old needed a pair of earrings that cost that much. I also knew that she’d like them for a week and then forget about them – which is exactly what happened.

I recall battling with her in the store and trying to explain to her that $19 earrings were a ‘silly’ purchase for such a young girl. I knew that she had no idea what the value of $19 was.

I was very frustrated and I wasn’t sure that what we were doing with the allowance system was right. But as time went on and with each purchase and decision-making, she has slowly come to understand the value of money.

Bit by bit we can see her decision making process on her purchases change and she is motivated to hold out for larger ticket items rather than small trinkets that don’t hold her interest for long.

  • Do: Be patient! It is a long process that is very rewarding but can also be frustrating.
  • Don’t: Make the same mistake that I did – let your child make their own purchasing decisions (assuming the items are appropriate) and only offer guidance not influence.

So there you have it; my ten steps to help teach your children financial responsibility through implementing allowance.

This is a very in-depth topic and there is much more to say on it from the experts. I have summarized my experience for you here today. For more information on Positive Parenting Solutions you can check out the list of free seminars.

Disclaimer: This post is not sponsored or affiliated with Positive Parenting Solutions or Amy McCready. This information is my own personal recommendation based on my experience and learning.

Need/Want photo via freedigitalphotos.net by Stuart Miles.

 Do you give your child allowance? What have your experiences been with it?

City Mom