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Rethinking Our Kids’ Allowances

By JLP | December 23, 2008

I’ve written in the past about how my wife and I handle our kids’ allowances. Basically, we pay our boys $10 per week. That allowance means that my wife and I are not hassled for stuff every time we go to a store. If they want to buy something extra, they have to use their allowance money.

The problem is that we live in a cashless society. Everything my wife and I have is automatically deposited into our checking and savings account. We rarely have cash unless I make a special trip to the ATM to make a withdrawal or remember to get cash back at the grocery store. The problem with this is that I rarely have the necessary change to pay the correct allowance.

So,…

I have been rethinking how we pay allowance.

I called our bank and found out that we can get our boys check cards that we can load up for them. The banker told me that he didn’t think they had fees but I’ll have to find out for sure. I have an appointment with him today. I’ll let you know what I find out. They also have a teen checking account that looks interesting. Only one of our boys would qualify for this type of account.

I’m a little nervous letting our boys have a check card but they have to learn to handle money some way and since their account would rarely have more than one month’s worth of allowance, I don’t see downside other than overdraft fees. I’ll have to find out more from our bank.

I can see this as an excellent learning opportunity for our kids. I can also see this leading to more responsibility in the future as my wife and I give them a clothing budget and make them responsible for clothing purchases (hey, they gotta learn sometime!).

Thoughts?

I do want to make one thing clear: my wife and I will still be very involved in their financial decision-making. In other words, our boys won’t have free-reign.

UPDATE: I just got back from the bank. I signed our boys up for “Youth Cash Card Accounts.” The accounts are in the boys’ names with my wife and I as co-owners. There’s no charge to have the cards unless the boys overdraft. I doubt that will happen. If it does happen, the boys will be responsible to pay it back AND they will lose their card privileges. It’s my goal to show them how to keep track of their spending so that they never get to the point where they are overdrawn.

The accounts are separate from our checking account but linked so that I can transfer money into the account for them—something I plan on doing once a month. The boys have no online access so they can’t logon and move money around or anything like that. They will have to rely on me or my wife to look up their balance. I will show them how to keep a register so that they won’t have to ask us how much money they have.

The only thing I’ll have to work around is how the boys pay their tithe. These aren’t checking accounts so they won’t be able to write a check to pay their tithes. I’ll figure something out.

The downside to this is that their cards could get stolen. But, I don’t see them taking their cards anywhere without at least my wife or me being with them.

Topics: Banking, Kids and Money | 20 Comments »


20 Responses to “Rethinking Our Kids’ Allowances”

  1. Beth Says:
    December 23rd, 2008 at 2:05 pm

    JLP –
    I think this is a good idea (as long as you maintain control and don’t have fees associated with the check cards). Last year, in 5th grade, my daughter learned how to balance a check register…as long as your boys can do that and you set up a ‘schedule’ to review it, I think it’s a great learning tool. I’m interested in hearing what you find out.

  2. Jim Vining Says:
    December 23rd, 2008 at 3:24 pm

    We have three boys and got them checking accounts with check cards when they were 9. We had their monthly allowance drafted from our checking into their accounts each month. It was painless and they did a great job. All three are out of college now and they handled all their finances in college. If they are old enough to add and subtract, they are old enough to do their own finances. The earlier you make them responsible, the better.

  3. Cathy @ Chief Family Officer Says:
    December 23rd, 2008 at 4:20 pm

    Your post reminded me of a recent Single Ma post on her daughter’s allowance. I’m not sure if you have access to USAA but I would think there’d be an equivalent card out there somewhere. I look forward to finding out how this works out for you – it’s definitely something I think about as my oldest gets older!

  4. Stacey Says:
    December 23rd, 2008 at 6:33 pm

    One downside is that they won’t be “making change” but perhaps they’ll use cold, hard birthday cash to still learn that lesson?

    Merry Christmas, pal!

  5. anna Says:
    December 23rd, 2008 at 7:47 pm

    just to be that guy, it’s actually “free rein” and not “free reign”.

    That said, giving people responsibility is the best way to teach them to use it. Hope it goes well with you and your sons!

  6. Christopher Says:
    December 23rd, 2008 at 9:09 pm

    We have the same problem with the cash thing and just this week we gave the kids all thier allowance for the last 8 weeks. They don’t get as much as yours because they are no where as old. We want them to save up but we are so inconsistant, its all our fault.

    On the check book idea, Arden does a checkbook in school with money given and taken away for assignaments etc. She has her own register and has to keep it and balance it and see if she has enough $ to pay to go to the monthly reward party at school. She has no problem with this so I am sure your boys won’t either. She is only 9 and gets $100 every month so it is decently big numbers. V

  7. Don Says:
    December 23rd, 2008 at 9:19 pm

    I assume you’ve read David Owen’s “First National Bank of Dad” … Good perspectives I think on teaching kids how to handle money.

  8. nickel Says:
    December 23rd, 2008 at 10:29 pm

    Interesting idea. We’ve run into the same thing. We keep a jar of cash in the kitchen to handle paying allowance, but when it comes time to spend I usually wind up paying and then have the kids pay me in cash (which goes back into the jar) when we get home. Not ideal, but it works. I like that they feel the money physically leaving their hands, but I don’t like that fact that it’s delayed from the actual purchase.

  9. Preston Says:
    December 23rd, 2008 at 11:12 pm

    Meh. Let the kids look up their balance on their own account as long as the account is theirs and theirs alone, in my opinion. It is a different world. Check registers are a thing of the past when you can simply pop open quicken and viola, you have your balance up to the hour (depending on your institution).

  10. Jamie Says:
    December 24th, 2008 at 6:02 am

    I use a cash system and keep a “petty cash” fund in the house to ensure I can pay allowances for my three kids. I like the debit card/account option for the older kid, but my kids tithe as well.

    One other issue I’d personally run into with the debit card system is not only tithing, but we also split off 20% for college savings (that I match when we deposit into their 529 plans) and another 20% off for a mid-term “goal” item (something they are savings toward). If everything were in one pot (account), nothing would get saved.

    Keep us posted on how this works.

  11. Holly Says:
    December 24th, 2008 at 6:20 am

    Same probably we have… living in a paperless society. I always forget to go to the bank… this seems like a good idea. My son gets $10, my daughter gets $5. They have to save 20% and tithe 10%. So in essence, my son gets $7 to spend and my daughter gets $3.50… Now, if I transferred the $7 and the $3.50 to their bank card and tithed for them in our check and then transferred to their savings account(which we already have set up) the “savings”. That would take care of the logistics problem… but it wouldn’t take care of the responsibility problem. It would all be done for them. They wouldn’t have to “give up” any of the money the got. I don’t know that they would realize they were saving and tithing… they would just know they got $7 and $3.50.

  12. Jaynee Says:
    December 25th, 2008 at 3:07 pm

    My husband and I just discussed starting our 5 1/2 yr old daughter on an allowance. She just got a “responsibility chart” for Christmas and we’re going to give her a nickel for every checkmark she earns during the week. She can earn up to 140 checkmarks, so that’s an earnings up to $7 per week. We, too, will have her put 10% to tithing, 20% to savings and let her keep the rest. So her take home, if she earns all checkmarks, will be $4.90. Fortunately, I am trying to be a “cash only” mom, so I’ve always got cash on me that I can dole out to her on a weekly basis.

    As for your check cards, I wish you luck! Fortunately you are teaching them EARLY about responsible use of plastic!

  13. Jaynee Says:
    December 25th, 2008 at 3:07 pm

    My husband and I were just discussing giving our oldest an allowance (she’s 5 1/2). She got a new responsibility chart for Christmas and will get a checkmark for every deed she accomplishes during the week. We’ve decided to give her a nickel for every checkmark (she can earn 140 checkmarks per week). This means she’ll earn up to $7 per week. $1 goes to tithe, $1 goes to savings, and $5 is hers to keep and spend.

  14. Saver in the City Says:
    December 25th, 2008 at 6:52 pm

    I think this is a great idea! Even if they do incur an overdraft charge or lose the card, dealing with the consequences can be a learning experience in and of itself. I am in the process of writing a post about how my parents taught me financial responsibility and one of the ways was to let me make my own money mistakes. I assure you, after doing something once with negative repercussions you learn pretty quickly to change your behavior!

  15. headknocker Says:
    December 28th, 2008 at 7:30 am

    I don’t think we live in a cashless society. I agree that we are living in a society that uses less cash, but our family is using more cash than we did two years ago, and we love it. Same for our kids…we pay them in cash and they save, spend and give it. When their cash ‘reserve’ is getting low, they curb their spending, and I never have to worry about an overdraft.

    I do like the idea of teaching them to manage money, but once they understand the pain of making decisions on where to spend their money, I feel confident they will be able to handle a piece of plastic.

  16. Duncan Says:
    December 28th, 2008 at 7:12 pm

    The banks want everyone cashless, as their own surveys have shown.. cashless means we spend more!

    Here in Australia, the Commonwealth Bank has done surveys and found that people spend around 30% more when not using cash. And thats not interest costs etc, just plain old spend more.

    Cash is better for kids and adults. To actually see it diminishing in your wallet or purse is an excellent way to limit your spending. Lets face it, we could all be more fiscally aware.

    DunCAN

  17. Sean Says:
    December 29th, 2008 at 9:45 pm

    When I was younger, my brother and I would receive a weekly allowance. My dad created an excel spreadsheet that detailed our finances much like a bank statement would. It included the date of allowance payment/chore money, amount deposited, running total and a description column. At the end of each month, he would calculate the interest earned on our account (which was higher than any bank could ever dish out)and add it to our total. If we were at the store and wanted to buy a game, it would be deducted from my balance.

    Even as a kid, I could actually see how long it would take me to save enough money to purchase the item. I would suggest this approach for younger kids. Not only did it teach me the value of waiting until I had enough money saved to purchase any item, but also the value of interest or any return for that matter. No fees, no concern about spending all of the money at once. Eventually I was given an ATM card with a $50 limit per day

  18. Gerard Says:
    January 8th, 2009 at 12:24 am

    JLP, as an ignorant foreigner, this question may seem a little silly but, isn’t it possible to ‘disallow’ the overdraft on the cards? I would have thought that you would be able to ask the banks to decline the card if there isn’t sufficient money in the account…

  19. The Thrifty Shopper Says:
    March 31st, 2009 at 4:41 am

    I think this is a great idea, learning to handle money and be responsible with any form of plastic card is great for children to understand. I think if we ALL teach our kids that plastic is ONLY a replacement for carrying the cash in your wallet. The money built up on credit HAS to be repaid. If only more adults could get their heads round this concept!

  20. nassy Says:
    December 12th, 2009 at 12:49 am

    That is a nice jobs !

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