Remember counting out your pennies the day before allowance day to see if you had enough left over to buy, well, anything? Not anymore – there’s a growing number of parents who are doling out the allowance in one lump sum.
Imagine, no more weekly pestering by the kids for cash.
I read about the concept over at the Wall Street Journal this weekend, and I was intruigued. The WSJ’s San Francisco Bureau Chief Steve Yoder was doing this for his son, a recent high school graduate, but I can see how it would work for younger kids too (albeit in smaller increments than a year).
I was taken aback by what the Yoder’s were expecting him to use it on – a haircut is an allowance spending? Isn’t that quality of life stuff that parents should cover anyway? Perhaps they look at an allowance differently from most folks.
My understanding of an allowance is spending money, be it blowing the whole thing on candy or saving up for a big ticket item. It’s for the extras, the stuff parents don’t normally cover (like the quality of life items – the deodorant, the toothpaste, what have you). Earned via chores or provided as a reward (for good grades, stellar behavior and the like), it’s the money they can spend THEIR way.
But setting up lump sums carries with it the ability to teach your kids money management skills. Give them say $20 a month, and it has to last ALL month. There will be no more cash flowing on Mondays, so they need to budget out candy purchases for the next thirty days. As they age, the time frame can be extended to two months or every quarter and beyond until you find yourself putting a yearly amount in their savings account like one dad in Yoder’s column.
Having a savings account in and of itself can teach kids good spending habits, so why not?
My daughter hasn’t hit allowance age yet (and I never got one – but that’s another story), but I’m debating this method already to provide her with some appreciation for what money means. Would it work in your family?