5 Personal Finance Bloggers Share their Kids’ Personal Allowance Systems

Looking for allowance system tips for kids? 5 Personal Finance bloggers dish on the personal systems they use with their kid(dos). | http://www.moneyprodigy.com/5-bloggers-share-personal-allowance-for-kids-systems/

Allowance for kids can be tough to figure out. Especially when you feel like the new “it” Allowance System is not going to work for yours. Keep reading for some ideas from real-life systems used by personal financial bloggers.

Allowance systems can be tough to figure out – everything from coming up with a realistic allowance schedule, actually staying consistent, figuring out whether or not to tie it to chores (and which chores are appropriate for your kid’s age, anyway?), commissions, and what the heck you want your child to be responsible paying for with those new dollars burning a hole in their pockets.

Top that messy container off with the fact that everywhere you turn, someone is touting their allowance system as THE one. Even if you have a sneaking suspicion that it just isn’t going to work for your own kiddo.

Hint: there are probably as many allowance systems to choose from as there are Game of Thrones outcomes because kids are individuals and what works for one may not work for another.

I’m NOT here today to tell you that I’ve got the answer that’s going to work for you. Instead, I’m here to show you examples of what other personal finance bloggers are doing with their own kids to give you inspiration + ideas for how to get experimenting with your own child.

Might as well go to the experts who are dealing with it themselves, right?

Allowance System #1: Varying Pay Scale for Work Completed, Melissa Thomas

Age: 11 and 12 years old
Philosophy Behind the System: Melissa is trying to teach her kids work ethic along with getting paid.

Melissa says, “My boys don’t get an allowance for kids, but they do get paid for jobs they do – WITHOUT complaining about it.

For example, my oldest who is 12, is helping me this summer with my dog-sitting business. He comes with me and helps feed the dogs, change out their water, play with them, etc. I’m paying him $2 for every time he comes with me AND he doesn’t complain. HOWEVER, he has to keep a record of when he came with me and what he did. His payday is every Friday. He is doing a great job BECAUSE if he doesn’t write it down, he doesn’t get paid;) #motivation.”

“My youngest is 11 and he gets paid to help with extra jobs around the house like, bathing the dogs, helping with yard work, etc. Yes, the 11-year-old uses a checklist though. We write the jobs down for him to do and he checks them off once completed.”

Melissa adds, “they are expected to help with household jobs (cleaning, laundry, feeding the dogs) without pay.”

And how does her varying pay scale work? She says, “I should note that in each case, we don’t tell them upfront how much they will earn for each job. For example, after the job is done we might say, “You could have earned $5 for this job BUT since you complained or had to be redirected or asked more than once to do it, etc., you are only getting $3. On the flip side, they may get paid $6 if they went above and beyond what was expected. We don’t want money to be the reason they do a job well or not well. They are expected to do it well regardless of how much they get paid. Also, their pay is dependent on our budget so it varies.”

Allowance System #2: Allowance Tied with Spending Responsibility for All Entertainment, Kate Horrell

Age: Older Teens
Philosophy Behind this System: Kate doesn’t want to give her kids the impression that you help your family and the world solely for financial gain.

Kate explains, “We have four older teens. They have gotten a fairly generous allowance since they have had expenses. It is not tied to their family obligations, but I look at is as a chance to learn. They are responsible for all their own wants, which include entertainment, half of any field trip over $20, makeup, clothes beyond the basics, etc. While I think their allowances are huge, they are not nearly enough to get by without some scrimping or additional income.”

This helps with some of her bigger money lessons she wants to impart on her kids. She says, “It works for us. They know they have to pick and choose, and if they only work in the summer they have to budget to make that money last across the year, even if that field trip to Disney is in April.”

As far as tracking or tying it all with chores? Kate doesn’t have time for it, nor does she think it will teach the sort of lessons she wants them to learn. “I just couldn’t be bothered with tracking chores for money, and I also don’t want to give them the impression that you help our family and the world around you solely for financial gain. They are expected to help our family daily and our community on some sort of regular basis. For example, this week two are volunteering at a local drama camp.”

Allowance System #3: Allowance Tied to Mixture of Chores + Family Responsibilities, Linsey Knerl

Age: 3, 6, 9, 11, 13, and 18 years old
Philosophy Behind the System: You help? You get allowance. You don’t? You don’t.

Linsey says, “We do $.50 per year of age per kid. They get paid weekly in cash. They have a list of chores they must complete to get it (and we live on a farm, so chores are like cleaning out coops and whatnot.) They are also expected to help in other ways for no money, just because (3 of my kids cook 3-4 meals a week, they weed the garden, babysit, etc.).”

Linsey also, “contribute[s] between $15 – 25 a month (depending on age) into a college account once they reach age 6 and are old enough to do chores. We are also not above tossing a wad of cash at them for really hard stuff (such as helping rip up floors in our rental, etc.) I have no time for a complicated system, so it’s an all or nothing deal. You help? You get allowance. You don’t? You don’t. And when a kid is gone at camp for the week and a sibling kicks in and does all the chores for that kid, the allowance transfers. My kids also support a Compassion International Child with their allowance each month, so if they slack off and don’t get much allowance, they might not have enough to support their child. So, they take it seriously.”

Allowance System #4: Learning Money Concepts to Learning to Earn, Andrew Daniels

Age: 5+
Philosophy Behind the System: First we used allowance to introduce money + money concepts to them. Now we’ve switched to having them earn the money so that they come up with their own ideas for how to do so.

Andrew says, “when our kids were young we started them out doing basic chores (making bed, cleaning their room, putting their dishes away) as their allowance. Now that they are a little older, we are switching to an earning method where they have to do things to earn getting their allowance. The bed making, and general household stuff is expected as members of the home. We did it this way at first because our youngest was only 5 when we started and wanted to be consistent between them. This was also how we introduced money to their lives. In the beginning, we were more wanting them to get the concept of saving half their allowance for bigger things. Now that they have the money concepts down we are switching to earning it, which I’m hoping leads to them finding their own ideas and ways to earn money.”

Allowance System #5: Allowance as A Vehicle for Purchase Conversations, Elle Martinez

Age: 4
Philosophy Behind the System: We’d rather her make a money mistake now while she’s small and we’re only dealing with toys rather than later when it can get messy. And expensive.

Elle explains, “We began when our little girl was 4. She was asking about toys so we figured it was time to start. We do $0.50 per year of age and she gets paid on Fridays.

As far as whether or not the allowance is tied to chores, Elle says, “she has core chores (like cleaning her room and dining table set up) that are not tied to her allowance. We do have bonus chores if she wants to earn extra money which she occasionally takes up. Right now, she’s saving up for a Power Wheel.”

Elle is using this allowance to teach her child about money. Her daughter’s money, “…is divvied up into save, spend, and give. To keep everyone on track and on the same page with everything we use FamZoo.”

It’s also a vehicle for purchase decisions. “And whenever she wants to withdraw and use her cash, we chat about what she wants to buy and why. We want to create awareness with purchases. We’d rather her make a money mistake now while she’s small and we’re only dealing with toys rather than later when it can get messy and expensive. For her Power Wheel, we’ve started having the conversation of waiting much longer for buying a new one or paying a lot less for a used one.”

If you read through all of these personal examples, then you probably noticed something. Each allowance for kids is different, yet whichever system each blogger is using works for their child. So, gain some inspiration from the examples above, customize for your personal child, give it a shot, and assess after a few months. If something isn’t working, tweak or move onto a new system altogether.

By experimenting, you’ll eventually find the one for your kiddo.

Savings Plan for Child – Catch All those Holiday + Birthday Cash Gifts Over the Years

Your kid savings plan: it starts this coming Christmas or even on their birthday. Plus I interview 8 moms (1 father) who have been using this method since birth, and they reveal how much savings their child has accumulated. Money challenge met! Savings plan for child. | http://www.moneyprodigy.com/savings-plan-for-child/

Potty trained. Check. Savings plan for child. Check (at least after today!).

I want you to say this with me, Mama Bear:

“From this holiday and birthday onward, I will set aside 50% of each of my child’s money gifts into their savings account.”

BOOM.

Making this one commitment will change the money course of your child’s future.

Yes, they might whine at you.

Yes, they might have their hearts set on something to purchase in a store with that money.

Psst: I did say 50%, not 100%, for this savings plan for child. So they could certainly still spend some of the money on themselves. Otherwise this savings plan for child might fail!

But when they turn 18, and you can hand over a savings account with (potentially) several thousand dollars in it − made up of $5 here, $25 there − they’re going to be über grateful that you did this for them.

Why? Because it’s textbook money for college. It’s first-apartment-deposit money. It’s car money. Wouldn’t you have loved it if YOUR parents had handed an account over to you with several thousand dollars in it before being thrust out into the real world?

8 Actual Parents Who Have Been Doing This + How Much It’s Reaped for their Kid(dos)

I started doing this myself – at 100% contributions of any cash gifts we receive ($110 so far! We’ll likely decrease the percentage once he figures out how a store works) – starting at our little guy’s birth. But he’s only 21 months old, and I want to know how this will play out for you (and me!) over the years.

So, I found several mothers who had started doing this when their kid(dos) were very young to see how it’s turning out for them.

After posing this question in several different Facebook Groups, I found that among 8 different families, the range of savings accounts from using this method is between $850 all the way up to $20,000! In other words, from covering two semesters’ worth of college textbooks, all the way to several semesters’ actual tuition cost.

Here’s a breakdown:

  • Jill (*name changed) daughter, 11: $850 in a savings account thanks to employing this method.
  • Jane (*name changed) son, 13: “What I have done with him is every time we go and see my parents for the last several years, when my Dad gives me $50, I set it aside and put it into my son’s bank account. I take him with me when I do this. I’m custodian to his savings account, which has about $3,500 in it right now.”
  • Ryan Inman, son, 2: “Contributions from grandparents towards college has been the primary reason for opening the account. Most of it makes it to the 529, some saved here for other investments. My son turns 3 in sept and has 12k in it. Started the account a few months after he was born.”
  • Jesse M Fearon, children aged 19 months, 4, and 5: We’ve had savings accounts for them “since they were born (well, since we received their SSN numbers in the mail after they were born). It’s just a simple savings account but we deposit all money in that account until they are 3, then the rule is they can keep the cash (if it’s less than $10) and any checks are deposited into their savings account. We don’t give our children birthday gifts, instead we deposit money into their savings accounts for their birthdays. Our children are 5, 4, and 19 months old. Our oldest has the most saved since he’s been around longer, but all of our children have over a $1,000 in their accounts.”
  • Holly Porter Johnson, 6 and 8: “I’ve been saving my kids birthday money since they were babies. I add it to their 529’s. They each have around $10,000 And they’re 6 and 8😊.”
  • Emma Healey, son, 5: “My 5 yr old has $2800. I bank all the gifts his grandparents send over. They live in a different country so always send cash and tell me to buy something nice for him but instead I buy him a $1 toy from the thrift store and bank the rest.”
  • Lee Huff, 2 and 6: “We started saving $100 a month in a 529 in my name for each child when we found out we were pregnant. Then we transferred the money into their names after they were born and had a SSN. Instead of birthday gifts, we ask people to contribute to their 529 instead. They’re now 6 and 2 and have a combined $20,000 in their 529s.”
  • Robert Farrington, 9 months, 3: “We have two kids, one is 3 and the other is just 9 months. We’ve put every cash gift they’ve ever received into the account. My oldest, at 3, has $1,700 in their account. My younger one has $1,000. We plan to continue to save all their cash gifts this way.”

Wow. Inspiring, right? Remember that when it comes time to hand over these accounts to the kids (who won’t be kids anymore, but very young adults), they’re not going to remember that toddler-sized Elsa doll they weren’t allowed to buy with their money, or the latest video game they would have conquered in a few weeks anyway. They’re going to be super grateful to have had a mother with the foresight to know their child was going to need money to start their adult life. Besides, saving money for kids could also help steer them away from a paycheck-to-paycheck mentality. Your savings plan for child starts today!

Done for You DIY Money Summer Camp for Kids (One Week Schedule Example)

Here's your kid's summer camp activities list for money camp (includes lesson plans). DIY money camp this summer with this done-for-you schedule over one week (bonus: an extra lesson plan in case you'd like to substitute!). |  http://www.moneyprodigy.com/done-diy-money-summer-camp-kids-one-week-schedule-example/

Looking for a summer camp activities list for a DIY money camp? Check out this 5-day schedule + lesson plans below.

Would you like to structure just one week of your kid’s summer vacation as a DIY money summer camp? I’ve got a week’s worth of money lessons outlined for you below, plus the supplies you’ll need so you can skim ahead of time and have everything ready.

Psst: Mama Bear Prepwork: I really suggest you go through this post about figuring out what the heck it is you want your child to learn about money a week or even a day before your camp starts. This will shape what lessons you choose now & moving forward. Clarity is golden!

Here’s your summer camp activities list to choose from + an Ideal schedule to maximize learning:

Monday – Stretch Your Child’s Delayed Gratification Muscle as a Precursor to Goal-Setting

Looking for activities when teaching goal setting for kids and students (especially with a growth mindset)? This Delayed Gratification money lesson using chocolate coins is the perfect precursor to goal setting, as it ensures your kid will not only be goal setting in the future, but will be able to stick it until they reach their goal. Great for elementary and middle school. | http://www.moneyprodigy.com/use-chocolate-coin-delayed-gratification-lesson-precursor-goal-setting-kids/

Set up a Delayed Gratification Experiment in your own home.

Supplies You’ll Need: Chocolate Money Coins (you can pick these up at a Party City), plus either an item, experience, or more chocolate coins as the reward for waiting to eat the chocolate.

You can choose any duration of time you’d like to have your kids or teenagers wait for the bigger reward. Shorter duration works well with little kids (just a few days), and a longer duration works well with kids/teens who have flexed their delayed gratification muscles a bit. Since this is a one-week money camp, feel free to set the duration to be the end of this week.

Let’s see how your kiddo does!

Tuesday – Teach Your Kid to Save with this Money Growth Experiment

Get kids to listen to you about money, mom, by having them discover what you're trying to teach them on their own using this idea. You'll teach children to WANT to put money into a savings account after they go through this EYE-OPENING, hands-on money growth experiment. Kids save money? What a novel idea. | http://www.moneyprodigy.com/money-growth-experiment-to-teach-children-to-save/

This experiment takes several months to reach the outcome. So why did I include this on your summer camp activities list? Because once you set it up, you don’t need to do any other work. So, take the time to actually set it up during this week, then watch it unfold naturally.

Supplies You’ll Need: A jar (any old one will do), a savings account that earns interest, and seed money to populate both the jar + the savings account.

Wednesday – Savings Accounts Activities to Keep Your Kid’s Account from Collecting Dust

Savings accounts for kids tend to collect dust (moreso than money!). But yours doesn't have to using these tips. Check out these 3 money activities you can do with your children, even if their account is particularly growing at the moment. | http://www.moneyprodigy.com/savings-accounts-for-kids-collecting-dust-3-money-activities/

Choose one, two, or all three of these activities to go through during your DIY Money Summer Camp Week. Activities include naming (i.e. giving purpose to) their savings account, having your child shop around for the best interest rate, and starting a savings statement binder.

Supplies You’ll Need: A savings account for your child. If you don’t already have one (I walk you through how to set one up here), then move onto a different activity, or make the activity opening up a savings account together.

Thursday – Start Up the Money Dialogue with Your Family

Use these free money conversation starters for kids to open up money dialogue in your household (plus keep the kids interested at dinner time and road trips). |

Grab your free set of printable money conversation cards for kids and parents. Use these on commutes, road trips, or around the dinner table. They’re super fun, plus you might be really surprised with what you learn about your child’s understanding of money.

Supplies You’ll Need: Printed conversation cards, available in the post, plus a jar or other holding container to put them in.

Friday – Ignite Your Child’s Entrepreneurial Spirit

Turn your child into a consultant by using the dialogues I’ve set up as an example to discuss with them about consumer needs plus fulfilling those needs to make a profit.

Then turn them loose as they figure out what some of your own household’s needs are, how much you are or are not willing to pay for them, and how to do the work to a customer’s (your’s) satisfaction.

Supplies You’ll Need: Nothing in particular. Just time.

Bonus or Substitute Lesson: Play Compound Interest Detective

Compound interest can literally change your child’s future. Moderate as they go through this lesson (there’s a 9:02 minute video to teach them what compound interest is in case you’re squeamish to do so) and open them up to the possibilities of money earning its own, actual, money. How cool!

Supplies You’ll Need: A savings account, and two consecutive statements representing two compounding periods from your child’s savings account.

Excited by some of these possibilities on this summer camp activities list? Now it’s time to choose one week to claim as Money Summer Camp, and schedule one of the money activities for each day. Remember that within some of the articles, there are multiple activities that you can choose from (or do them all and I’ll give you a digital high-five!).

How to Stop Your Child from Developing a Paycheck to Paycheck Mentality

Does your kid have an allowance-to-allowance mentality? Saving money for kids doesn't have to be hard. Teach kids this vital life skills set BEFORE they head down the path of paycheck-to-paycheck living. |  http://www.moneyprodigy.com/saving-money-for-kids/

Saving money for kids can be a difficult concept to get. In fact, natural mode for many kids (and adults) is to live allowance-to-allowance. Let’s look at how to break your child’s paycheck-to-paycheck mentality before they even get started adulting.

One thing I’ve heard over and over from working with adults + their money is how they hate living paycheck to paycheck.

In case you’re one of the lucky ones who’s broken free from this, let me give you a quick refresher of the life you (gladly) left behind: living paycheck to paycheck means when your paycheck ends, you’re unable to meet your financial obligations. In other words, there’s no savings and/or passive income coming in to keep your money momentum going…and yet the bills don’t stop coming, do they?

Psst: not sure if you’re living this life? Just ask yourself what happens if your next paycheck doesn’t come. Squeezed past that one? The next one after that doesn’t come either. How would that play out? If it’s looking scary as heck with a fire thrown in, then you’re living paycheck to paycheck.

This puts an even greater risk to you and your household in the event of unemployment. Sure, you might get unemployment insurance, but it’s a fraction of what your usual paycheck would be (which was mainly spoken for already).

Being one big car repair away from landing back on your mother’s (um, that’s you) couch is not what we want for your child, either. So, we’ve got to plant the seed that will stop this from ever starting.

Does Your Child Have an Allowance-to-Allowance Mentality?

Does your child currently live an allowance-to-allowance mentality? In other words, they spend all their money as soon as they get it, chomping at the bit for that next bit of allowance to flow into their lives and keep all their amazing wants afloat?

That’s a seed to paycheck-to-paycheck living.

Maybe it won’t lead directly to a paycheck-to-paycheck life. But it certainly seems like it could, right? Not to mention 50% of Americans live this reality, so it doesn’t seem like such a far stretch.

We want to keep your child securely in the other half of that 50%.

Let’s change that now, when losing their next paycheck doesn’t mean piling on tons of debt.

It’s time to break that allowance-to-allowance mentality by teaching your child to save their money first from week to week, and then from month to month.

Pssst: looking for a really unique, engaging way to teach your child to save money? Be sure to check out my Mt. Everest Money Simulation by clicking the image below.

Teach children to save through the Mt. Everest Money Simulation Program.

Wait a Sec…My Child Has Already Developed an Allowance-to-Allowance Mentality

Rest assured, Mama Bear. You’ve got time to turn this money ship around.

Saving money for kids doesn’t have to be hard. Instead, it can be incremental.

I’ve got some tweaks you can make to your current allowance system that I’m numbering from least aggressive to most aggressive. Sometimes your child will get the hint (the least aggressive option) and other times it’s going to take a bit gentler nudging.

Note to yourself: doesn’t matter which one they take to. No judging here! We’re looking for results, and each child is different. If your child needs one over the other it doesn’t mean anything.

Also, one may be more appropriate for where your child’s money development is than another. Or you might fear being too controlling or helicopter-y, in which case you’ll want to pick one of the more hands-off approaches while still (hopefully) getting the result you want.

Allowance Tweak #1: Pair their Allowance with an Incentive Program

Saving money for kids could be as simple as giving them an incentive. Heck, it works for adults!

Introduce an incentive, just like banks have, when your child saves part of their money. But only for the dollars that make it past the allowance period. For each dollar left at your next allowance rollout, give them $0.25. Or $0.50. Or $1.00.

How will this change your child’s savings mentality?

Depending on how chiseled your child’s instant gratification muscle is, you could start with a one-week incentive, a bi-weekly incentive, or a full-month incentive. Pick the one that is a stretch, but not outside of the realm of their ability.

Allowance Tweak #2: Stretch their Allowance by One-Notch

The longer the time in between when they get allowances, the more they’ll have to adapt to planning, budgeting, and actually saving their money.

So stretch their allowance period one notch up from wherever it’s at right now.

Examples:

  • On-Demand: If you’re doling out money on-demand, then instill a weekly allowance ritual to introduce the concept of waiting + budgeting their money.
  • Weekly: Take their allowance to bi-weekly.
  • Bi-weekly: Take their allowance to monthly.

Allowance Tweak #3: Tweak the Amount You’re Giving Them

Hand over a few purchasing responsibilities to your child, but don’t actually give them enough in each of their allowance payments to cover both what they want AND what you have told them they are responsible to pay for.

I mean, how many of us adults get paid enough in each of our paychecks to cover everything we want AND need at the moment? Not many (certainly not me!).

This means if they don’t learn to carry over (i.e. that dirty word, “save”) money from one allowance payday to the next, then they never get what they want. Or they make an even worse decision, and not buy what they need, making the lesson hit home even harder.

Eventually, they’ll get the hint.

Note: I think this one will need to include some conversations from you to remind them that you are fully giving them enough money to buy the things they want + are responsible for, but they need to manage their money differently in order to see it happen. Talk about a teachable money moment!

What this could look like to increase saving money for kids:

  • You let your child know they are now responsible for a few extras they’ve been sneaking onto the grocery list (aka a ‘want’, such as that really expensive designer shampoo you’ve never even purchased for yourself), plus something that has previously been paid for and chosen by you (aka a ‘need’, such as their backpack for next school year).
  • Figure out how much extra they should receive in order to be able to cover these extra responsibilities you’ve given them. In other words, figure out how much you, as a responsible and budgeting adult, would be comfortable paying for each item. Then if the child wants to splurge to the next level, they’ll have to figure out whether or not spending their own money on the extra is worth it + how to actually save up to make it happen.
  • Increase their allowance amount to account for the extra costs they’re now responsible for, but not so much that they can pay for the items in one fell swoop. How far should you stretch it out? Well, that’s up to how far along you think their instant gratification muscle has developed.

Pick one of these allowance tweaks, and go with it. Test it out for a month or two, and then tweak it or move on per your child’s taking to the actual lesson you’re trying to impart: curtailing the allowance-to-allowance mentality by having them discover the need to save their money.