Why I Stopped my Kids’ Allowance

We need to teach our children about money and how it works, partly to curb their short term demands on us, but mainly for their own long term benefit. When I was growing up, the usual parental tactic was to periodically rant about how they weren’t ‘made of money’ and how it didn’t ‘grow on trees’, but there’s nothing in these revelations to discourage a child from adopting an unhealthy disregard or regard for the coin, and going on to develop irrationally spendthrift or miserly tendencies.

A few months ago, while searching for a more sophisticated approach, I was won over by this article that advocates paying an allowance divided unequally into four pots: spending money, short term savings, long term savings and charity. I even found piggy banks that are specifically designed for it, so it must be a sound strategy, right?

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A bad investment

My first piece of advice for anyone trying this is not to buy these piggy banks. They are insanely frustrating to extract money from, often resulting in torn banknotes. Given the change required to distribute funds in the correct proportions every week, this is a major flaw, so I resort to labelled jam jars after only a couple of weeks.

The other lesson that I learn very quickly is that for this to have any impact at all, you have to stop buying things for your children. Obvious, I know, but it’s a harder habit to break than I think it’s going to be.

Once I get into my stride with the new regime, however, it doesn’t take the kids very long to grasp the fundamentals that everything costs, money is finite and choices have to be made. In theory ‘spend’ money is for treats and low value ephemera while ‘save’ money is for something special that will take time to accumulate. In practice the distinction is harder to maintain because Stanley will conservatively transfer all his spend money into his save pot, whereas Carla declares any desirable item caught in her field of vision to be ‘something special’. When warned that a coveted headband will cost about 6 weeks of her spend and save money combined, Carla’s eyes ignite and the headband promptly goes from a ‘want’ to a ‘must have’.

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The $16 headband…a Veblen good in CarlaWorld™

Still, providing certain pitfalls can be avoided, I see the value of short term spend and save budgets, which is more than I can say for the allocation of ‘longer term savings’. These are supposedly for college or a car, but the recommended one or two dollars put aside per week is by any realistic projection unlikely to amount to a hill of beans compared to the many thousands of dollars (or bitcoins?) that will no doubt be required to pay for such things circa 2025 – and what conclusion would a young adult draw from that?

Then there is charitable giving. It’s more common in America than in the UK for people to give a percentage of their income to charity and encourage their children to do the same. To what extent this is down to differences in religious faith, taxes, welfare policies or other factors is a subject for another post (on another blog), but under this system 10% of the weekly allowance goes into the charity jar. This can be for sponsorship, raffle tickets, or maybe those charity collection funnels that make coins spiral interminably down a vortex of infantile fascination before rattling into an anticlimactic void. It’s a laudable principle, but does nothing in itself to help educate kids about – or engender empathy for – those less fortunate than themselves. To them it’s just money that can only be spent in a certain way.

Now that I’ve tried it, the overall concern I have about this system is that it promotes a sense of entitlement by guaranteeing an income while encouraging the notion that there are different ‘kinds’ of money, which is a disastrous combination. It’s one thing to earmark funds to ensure progress towards a goal, but the most profligate people I’ve met are those who consider their weekend ‘spend’ budget sacrosanct or who would never consider paying off nasty, boring debt with something as fun and exciting as birthday money, a bonus or that ultimate manna from heaven: the tax rebate (woohoo!). Affordable spending decisions come from a solid understanding that the numbers on pay checks, credit card statements, bar tabs, price tags, rental leases, grocery receipts etc all refer to the same stuff. Allocating income according to a set of rules, on the other hand, is a remedial measure more appropriate for helping people who (quite possibly through no fault of their own) have accumulated debt and need to start paying it off.

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Carla scrutinizes her finances (what’s left of them)

Having demonstrated to myself that the Four Pots Allowance isn’t going to achieve what I want for my kids, then, the question of what I am going to do instead remains. I’m currently looking at how other parents link allowances to chores or grades, and checking out online services that can facilitate more complex systems. I’m also giving due consideration to a contrary view that you shouldn’t give kids an allowance at all. I’ll post my conclusions here when I reach them, but in the meantime I’d be grateful for any opinions or experiences anyone would like to share on the subject.

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12 Responses to Why I Stopped my Kids’ Allowance

  1. If only there were chimneys to send them up in order to earn their gruel money. Sigh.

    Seriously though this is interesting. My twin sis and I were recently remarking on the bizarre fact that our younger bro and sis (ten year difference) seem to have a totally different view of money to us. Possibly because we did chores for ours (including babysitting them after school) and got joint presents, while they got more at our age because money wasn’t as tight. Has made a huge difference as grown ups. They’re much less independent.

    Be interested to see what you decide.

    • TrailingHusband says:

      Circumstances are definitely a factor. Money isn’t as tight for us as it is for many people but that isn’t necessarily an advantage when it comes to bringing up kids to be good with money. Thanks for commenting!

  2. Melloney says:

    My sister and I worked for our pocket money. One did housework on a Saturday morning and one worked in my step-dad’s shop. This was supposed to teach us the value of money. When my half sister was young he would “magic” her presents from his wardrobe on a Friday night. We told him that would lead to trouble. She later worked in his shop (for £10 – the same money we received 15 years earlier!). Not sure what happened because I still borrow money from my parents and she very rarely does. Mind you he does just buy her whatever she wants.

    • TrailingHusband says:

      It’s very hard, if not possible, to treat siblings exactly the same, especially when there’s an age gap, but I can see it’s important to try to be as equitable as possible.

  3. Really interesting read, Craig. I’m not sure I have anything valuable to contribute in terms of feedback, but I’ll be very interested to see what conclusions you come to.

    • TrailingHusband says:

      Thanks Kate! I’ll bet you were given everything as a child and have been simply fabulous with money ever since! ;)

  4. Teresa B says:

    As the youngest child in a family of 6 kids I was never given an allowance and chores and working (for free) at the family owned business was expected. My mother started giving my sister and I a quarter each to do our jobs when we started to rebel (at the ripe age of 7). My parents were bad with money and although they were able to convince us to all go to college we were also encouraged to get credit cards to improve our credit without any training on how to use them appropriately. As such all but one of us amassed a large amount of debt and three of the six of us have gone through bankruptcy.

    I was in my mid 20s before I realized I was in serious trouble and it would take a decade to dig myself out of my debt hole. (Maybe I should have gone the bankruptcy route too, oh well).

    I have a son of my own now and don’t plan on giving him an ‘allowance’ and I don’t expect him to understand money efficiently until he’s probably 8-12, then I plan to start teaching him the lessons I learned in my 20s in the hopes he won’t spend his young years struggling to pay rent and bills because of debt. It’ll allow him to enjoy that time of his life in the same way I enjoyed my 30s.

    • TrailingHusband says:

      I think specific lessons might be a better idea than leaving it to some kind of artificial system too, but I’m not sure how I would actually deliver those lessons. They’re not going to just sit down and listen to me, that’s for sure! Thanks for sharing your story, Teresa!

  5. negs says:

    “Stanley will conservatively transfer all his spend money into his save pot, whereas Carla declares any desirable item caught in her field of vision to be ‘something special’. When warned that a coveted headband will cost about 6 weeks of her spend and save money combined, Carla’s eyes ignite and the headband promptly goes from a ‘want’ to a ‘must have’.”

    To me, this is a success. Everyone has to go through this stage to understand how to use money, and the sooner the better. Carla will spend everything on her current desire, until she doesn’t have money for the big item that she wants. Its better for her to go through this trade off with you to guide her, than for her to do it throughout her 20s and beyond.

    And as for Stanley, you have an oppositie situation, where he is taking his fun money and putting it into a rainy day fund. Isn’t that what we are supposed to do? Seems like you had a great system going, mom!

    • TrailingHusband says:

      You’re right, they have learned some things from this exercise, and I expect it’s also been a predictor of future behavior too, but my feeling is that they can learn these same lessons with a less onerous system than this one, and I’m still concerned about what I consider to be bad thinking habits in terms of defining different kinds of money. I might decide that this is in fact the best approach and come back to it, but I can’t help feeling there must be a better way.

      And don’t call me ‘mom’! ;)

  6. Molly says:

    I think money lessons do need to be learned and I look forward to reading more about how it all goes. Funnily enough, my older sister (by 3yrs 4mo) is very sensible with her money and has never needed parental assistance or got herself in any debt etc, me on the other hand … :-/

  7. Pingback: Allowances: Studies vs Common Sense | Trailing in Florida

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