Put the kids on commission. work get paid, don’t work don’t get paid. just like the real world. Allowance gives the impression that you are entitled to the money without working.

The late Larry Burkett says you should give the kids some paid jobs/chores…. and some they won’t get paid for.

I suppose continuing this would not be necessary since they will now be earning their own income right?

But on top of this, what would you say to continuing this beyond The Allowance Years into the After-School-Job Years?

I’d think that it would be less of a shock to continue this if the kids had done it the whole time with their allowances, but I don’t know.

Like WM, I think the system outlined is too complicated. Young children should have fun money the same way adults do.
You can encourage your children to donate and save money through your actions. Every time we are in the store it is a teachable moment.

I don’t say, “we have no money,” I say we’re saving for emergencies, or we’re paying for things we already have still (borrowed money they understand), and we’d love to do x (say go see a movie), but then we wouldn’t be able to go out to eat too, etc.

I personally think children should get a part-time job when they are old enough, and they will learn about taxes then.

As the kids reach their teen years I anticipate giving them a bit more freedom with their money (a monthly allowance and checking account), and making them responsible in full or in part for some bills. IE If they want a cell phone, they have to pay for their monthly fees, etc.

That said, this approach might make a lot of sense when the kids are older (maybe 12 or so?) and can understand these more complex concepts and already have their financial values in the making.

Great point about bailouts/welfare/etc. I’ll have to think about that one. It is an antithesis to the point about robbing them of free will contribution, and definitely deserves consideration.

Per taxes – it’s not about teaching them the in’s & out’s of our current tax system, but simply to teach them that they will HAVE to pay tax.

As a father of 2, one of which we have been doing commissions with for 3 years (the other is 21 months old), I’ll explain why I’m still on the other side of the fence.

1> Work, get paid – conversely, don’t work, don’t get paid. We’ve always limited TV time, which cuts down on the amount of “I want this toy” that a parent hears. But at some point, in some store, that little girl is going to find something that she can’t live without. We’ve always been adamant that buying ‘stuff’, it has to come from her money. Her money being what she has earned from doing chores. The two affects of this that we have observed are A> She really considers the choice (as much as is possible at that age) of spending money since she knows what she had to do to earn it. B> She grows just a little bit with each of those decisions. When the money is gone, she’s not running to us expecting another handout. The honest answer is, “Sounds like you need to do your chores to earn the money to pay for that”.

2> Allowance = ??? – I don’t see a life lesson tied to an allowance – at least not a positive one. Allowance = Government bailout? welfare? co-dependence? entitlement? I’d argue all of the above. If the goal is to simulate the ‘real world’ (case in point: the taxes you’ve levied), then what are we teaching here? I see nothing redeeming about it.

3> It’s not the Children’s Labor Union – It’s 3-5 age appropriate chores. This does not preclude them from taking part in the household nor lead them to expect a dole for every little task. Our oldest takes scraps to the compost, clears her dishes from the table, and helps with her sister – none of which are her chores, nor does she expect payment.

A simple plan of commissions for chores, divided between envelopes for giving, saving, and spending has been quite successful for us, thus far. As teenagers, I could see starting to have them contribute to bills that they significantly use – cell phone for instance. Charging them taxes just seems cruel. Especially since our current tax system is counter productive and penalizes you the more you earn.

That would be a very solid way to encourage children to lower their use of utilities, etc.

Allowances are very useful in creating a basic knowledge of money and budgeting. I’m kind of surprised by how long a few of the commentators’ parents gave them allowances. Once a child reaches 16, I’m in the camp that they should get a job. That may be just me, but at 16 a job will start teaching them “Advanced money skills” which will be very useful once they go to college or enter the workforce out of high school.

I would raise one issue with the reasoning behind “25% to bills.” If the idea is to create “buy-in” from your children and have them cooperate in lowering expenses, the percentage needs to be a sliding rule. You can base it on your previous month expenses or do something similar. If you do it as a fixed rate, any behavioral changes they make to save on costs will not be realized by them. This will lead to a mentality of “I can’t make a difference, so what the heck… I’m going to use, use, use!”

MLR

Because of the rigors of raising four children, we were not always consistent with our money lessons, but I suppose much of it stuck because all four are very good at managing money today. I am a proud dad.