Your Child's Allowance

How to teach your kids about managing money.

by Babble Editors

November 13, 2009

What do parents need to know before they give their kids an allowance?

Expert: Anton Simunovic, technologist, entrepreneur, father of six and founder of threejars.com, an internet service teaching kids how to be responsible with money and the importance of giving back.

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1. Practice Makes Perfect
Allowance is the best tool parents have in getting our kids to be responsible with money. With 18-24 year olds declaring personal bankruptcy faster than any other age group, we need to instill healthy financial habits in our kids before they leave the nest. Learning to be responsible with money — the primary objective of allowance — takes lots of practice. As parents, we readily understand hard work and practice is required for kids to become solid athletes or musicians. Yet, we are reluctant to empower our kids sufficiently to practice money. What a waste, we think! Trust me. It's better our kids learn from little "mistakes" today — when dollar amounts and consequences are low — than much larger ones later.

2. Embrace Technology
If we're lucky, our early money memories may conjure up thoughts of piggy banks, counting coins on bedspreads or updating passbook savings accounts. As parents, we want to recreate these fond memories for our kids. Our kids however, embrace technology. To them, technology is fun, engaging and immediate. Unlike parents, technology is consistent, accurate and never forgets, giving allowance the respect and dignity it deserves.  

Technology can also be used to adjust your child's allowance to meet their personality. For instance, my three older kids hear the same lectures, go to the same schools and eat the same dinners, but their money styles couldn't be more different! One is a spender, the second a saver and the third can't wait to give her money away. Is one better than the other?  Not really. While we all want to raise a saver, saving to the point of hoarding isn't healthy. A focus on money for its own sake makes us small and petty. Of course, it's not good to overspend or to be completely selfless either. Responsible money management requires balance and a respect for money. 

Use the Internet to allot a portion of every dollar your child earns to three jars: one for saving, the other two for spending and sharing. Technology can be used to tailor the amount placed in each jar according to your child's specific money style: for example, if your child is a spender, consider putting 60% in the save jar, 30% in the spend jar and 10% in the share jar to instill better habits. Technology allows your kids to visualize their money as a picture, where it comes alive and makes financial lessons more tangible. By graphically tracking decisions daily, kids quickly learn frivolous spending means less saving and less earned interest — not a great outcome. Sharing even a few dollars makes them feel good and grateful for what they already have, building self esteem.

3. Don't Tie Allowance to Chores
Of the thirteen million families in America that pay allowance, roughly half believe allowance should be tied to chores. The thinking goes that kids need to earn their allowance because that's how real life works. The other half believe that since mom and dad don't get paid for chores, why should the kids?  In my mind, allowance and chores are two completely separate issues.  When it comes to chores tell the kids "Whoever lives in the house has to help manage the home —  case closed." Our kids lose TV, Internet or cell phone privileges rather than money to ensure beds are made and the trash is taken out.  Practicing money skills through allowance is too important an issue to gum-up with chores. Remember, paying effective allowance is our best tool to get our kids responsible with money before they leave the family nest.

— as told to Andrea Zimmerman

©2009 Babble


“Couldn’t agree more, these are great suggestions. As a single parent that was *less* than good with money throughout my youth, teaching children about money is CRUCIAL, in my mind. I’m not going to blame parents, schools, etc, but quite simply, I clearly “didn’t get it”, and I am still paying for those mistakes a decade later! And quite frankly, I hate the position I got myself in, everytime I pay off my past debts… I could have used my time/money sooooo much better. A program was suggested to me by a friend, that teaches kids to be responsible with money, and puts them in control of their money. It’s a fun, interactive booklet + personal website that makes tracking their money fun – more importantly, the tugs on the pantleg going through the grocery checkout and the tantrums have all but disappeared! I guess that’s a little self centered of me… but any parent knows those situations all to well. For the record, I too used to do this to my parents, I was apparently horrible to bring into a store… oops! If anyone is interested, the program is designed by KidsWealth: http://www.kidswealth.com (hope it’s OK to post URL, I put it in my comment description to). Just my .02c (no pun intended) !!”

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November 19, 2009

“I also bought a Biz in a Boxx for my son, who's 14. He now has 2 businesses and is certainly learning first-hand how to effectively manage the money he's earned from these businesses. He doesn't get an allowance anymore. He told me he had his own money and didn't expect a hand-out anymore. I was flabbergasted at his maturity. I know all this has come from his business ownership. I encourage parents to investigate www.bizinaboxx.com and buy the boxxes for their kids. It works.”

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November 19, 2009

“I don't pay my daughter to do chores. It's expected that she help as a member of the household. But, I also needed to teach her the value of a dollar and that wasn't going to happen if I just gave her money for the things she wanted. She was 12 when I encouraged her to start her own business using Biz in a Boxx, www.bizinaboxx.com and the money she makes is hers to do what she wants. The result is that she spends and saves it wisely. I agree with wholeheatedly with this article and that it's imperative to teach kids to not only be responsible with their money, but to learn how to be hard-working, productive adults.”

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November 17, 2009

“This article is fabulous. My nine-year-old daughter received some money for her birthday, and I was attempting to figure out the best way to help her use it judiciously. While the $30 price tag for www.threejars.com makes the cheapskate in me balk initially, I will probably use the trial to evaluate the site's value. Thank you for a well-timed, thoughtful article on a subject that should be important to every parent attempting to raise a self-reliant and responsible child!!”

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November 16, 2009
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