Teaching the ABCs of Savings

For the majority of folks, the goal of saving remains elusive. Statistics show that our saving rate has been in decline since the early 80s. In the first quarter of 1999, Canadians set aside a measly 1.9% of their income for savings of all sorts. Our savings rate eventually fell into negative territory. And while the trend has been upward for the last little while, the amount of debt we’re also now carrying has put us at greater risk than ever before.

For all the mistakes we as a nation seem to be making when it comes to putting aside a little for a raining day, there are those people who, regardless of how little money they earn, manage to save. Why? Well, maybe it’s because saving was stressed in their households. Maybe it’s because they formed the habit early. Or maybe it’s because they see the benefit. Fact is, while saving may come naturally for some, for many others it’s a skill that has to be learned. And you, regardless of your current predisposition to saving, or not, you are your children’s teacher.

So here I want to present the A, B, and C’s of savings: Make savings automatic; bury your savings; and be consistent. Teaching your children the ABC’s of savings may make the difference between a child who has a good savings ethic, and one who spends every red cent he makes because he’s never learned to defer gratification.

A: Automatic Savings. When people decide to save what’s left over after expenses, very little every goes into the savings account. Smart savers pay themselves first each month. And they have a definite amount and date to save. For kids, the savings habit starts when you introduce them to the idea of putting 10% t of everything they get in the way of allowance or earnings into a savings bank or account. Started early in life, this becomes a natural part of managing money. And it’s a skill that will serve your children well for the rest of their lives.

B: Bury the Money. Out of sight out of mind is the mantra for successful saving for some folks. Left in their wallets, kids will soon find a good reason to spend their money. The ritualized act of putting that money in a container from which it is not taken on a whim creates a strong sense that money saved is untouchable — exactly what’s needed for a savings program to be successful.

C: Consistency. Remember the story about the tortoise and the hare? It’s the regular, steady, on-going additions that add up. Quick starts and stops are difficult to manage and bring far less of a sense of personal satisfaction.

But what about the child who refuses to save? What can you do? Here are some things to work through with your child to determine where the problem lies.

  • Why is she having difficulty saving? Expenses that keep cropping up may be throwing her best efforts off.
  • Help your child re-evaluate his spending plan. Perhaps he is simply not receiving enough to meet his commitments.
  • Where is the money being spent? She may be giving in to many of the same consumer pressures adults feel.
  • Is he able to anticipate and prepare for unexpected expenses? This, in itself, is an important lesson.
  • Is your child’s lack of commitment to saving simply a result of having too-easy access to the money (i.e., she hasn’t buried it deeply enough).

Saving can be surprisingly easy and rewarding for children. It helps them to develop a sense of security and mastery over their money. They can see the results of their discipline and efforts as their account balances grow. And, as they accumulate savings, they begin to see their money earning greater and greater amounts on its own. “With our pathetic rates of interest?” you exclaim disbelievingly. Well, you may have to step in here to make the point a little more exciting for your kids.

One of the most effective ways of motivating a child to get into the savings habit is with a savings-matching program. You offer to match every dollar your child saves within a specific period of time with a dollar of your own. Alternatively, you might offer to match her savings if she can save a specific amount by a certain date. “Molly, now that you’re working regularly (or getting a higher allowance), you may want to consider saving a little more of your money. Here’s the deal. If you can save sixty dollars by the end of the summer, I’ll match that amount so you can begin investing.”

A matching program is an excellent way to inspire children to stay focused on a long-term goal. How you choose to implement the program will be a matter of personal preference. You might decide that if your daughter saves her first year’s university tuition, you’ll spring for her second and third years. Or if your son decides to travel the world, you’ll spring for his Euro-rail pass, or some other part of the trip. What’s important is that your child sets a goal and actively works towards achieving that goal, and that you support his efforts.

34 Responses to “Teaching the ABCs of Savings”

  1. great advice. I wonder how much to give a child for an allowance. If I give them a $1 should I be doing that in 10 cent increments so that the 10% can be saved?



  2. I like the idea of matching Gail, and I intend to use it after I finally have that overdue sit down with my own children to discuss the importance of saving. It keeps falling off the rails, then the notes come home in Sept. asking for $X for this and $Y for that, and I always feel like I get caught with my pants down…as if I never expected September and school fees to come around again. Duh! 🙂

    @Jason, I go with Gail’s rule of thumb: $X for X years of age. My children started getting allowances around 7 years old at the amount of $7 per week. Did they blow it all sometimes? You bet! But do they ask me for money at a store now? No way, and the oldest is 14 now.

    For savings, I’ve dropped the ball except when they’ve wanted some relatively bigger ticket item, whether it be a $75 game or a $40 belt. Then I tell them they can buy it outright after X weeks of saving their allowance, or go without and continue to spend. They evaluate and decide whether they want it bad enough or not. For savings, I have their RESPs, but they’ve not saved just to have a float in the bank, so I need to start teaching that one this week.

  3. Great post Gail! We’ve had our 11 y.o. daughter on an allowance now for a bit, and she likes having money that she can spend right away, and having some that she can spend later (gifts & other planned spending). She doesn’t yet understand why she *has* to put some in her long-term saving every week, but I’m hoping over time, she will develop the habit. It’s one I didn’t learn until I was almost 40.

  4. Most people follow the $1 per year of age. We have 7 kids, 5 are currently receiving an allowance. We start them at the age of 4. Because we have 5 kids getting one, we allocate 0.50 per year of age. So, our $10 year olds receive $5 a week. The allowance increases by that 50 cents every birthday until they enter high school. For high school, we allocate $10 a week.

    Except for our 17 year old, we force a 50% savings. Half goes into their piggy banks, half goes in their wallet (their piggy banks cannot be opened). They can spend the half in their wallet on anything they wish. The 17 year old is a hoarder when it comes to his money, always has been, so we don’t force a savings on him. Once the 10 year olds get to high school, we will probably drop that forced savings to 20% and then when they get part-time jobs, we will talk about the 10% rule.

    We talk about the importance of resisting impulse buying and saving that wallet money for something they want. If they want pizza day at school, they have to pay for it out of their own money. One of our 10 year olds pizza on October 1st and paid $6.50 out of his wallet. This past Friday (Oct 8), the order form came home for November’s pizza days and he said “You know what mom? It’s just not worth spending $6.50 to buy 2 slices of pizza and a drink”. Us parents looked at each other and smiled…our example and talks are rubbing off.

  5. I think $1/year of age of a child is too much money. I gave 50 cents/year and that was enough (I bought my son’s clothes for him, but gave my daughter a separate clothing allowance based on what I would spend on her clothing all year–she had to come up with the extra for the clothing she wanted). I think $10 for a 10-yr-old and $15 for a 15-yr-old is way too much money if they’re allowed to spend it all (if they need to save half of it for university/college, that’s different–we saved for our kids’ post-secondary education and they were expected to save most of their earned money once they got jobs at 16). We did continue their allowances until they finished high school because we figured they shouldn’t be penalized for getting a job.

    For those who argue that kids need $1/year of age to buy lunches at school, I’d say my house is/was full of food and the kids need to pack a lunch.

  6. I give my 8 year old $8 a week and boy is she excited to get that raise to $9 next month lol This amount works well for us because $1 goes into her ING savings account where she is learning about interest – it’s amazing how much she enjoys seeing those pennies adding up 🙂 $1 goes into her sharing envelope and every few months she donates it to a charity of her choice. $3 is her planned spending amount and $3 is for whatever her little heart desires.

    She still has her moments of asking for that toy at McDonalds, or expressing her frustration at how long it takes to save up for something, but it’s getting easier.

    Theres this electronic device she wants to get, but there isn’t enough in the planned spending envelope yet. I was considering offering her a few ‘extra’ chores, on top of the ones she has to do daily/weekly, to earn those additional dollars. Anyone think this is a good idea?

  7. avatar Elizabeth Says:
    October 13, 2010 at 9:03 am

    Our daughter is 8 and gets $8 a week in allowance. I ask her to save $2 each week and she can do what she likes with the remainder. The issue is not with the savings but with the spending. I hold firm in the no money no gum at the store but she always manages to weasel my husband to buy her the extras that the allowance should be for. He seems to think I am too harsh, and that our girl should have the money for what she wants but the gum and magazines should be bought for her. He did come from a home where the kids got what ever they wanted and mom didn’t say no often. Well I guess I am just mean. If I give you an allowance and you choose to blow it on gum… no magazine I guess. Hey maybe I should make pouty faces at the clerk in the store when I hit my budget and see if he/she will let my lotion go through just because my lip is sticking out. Or not… would be funny though.

  8. Our son is 3.5 so we’re still not in the group yet but I think we’ll do the $1 per year for weekly allowance thing, I don’t find that excessive but may reconsider when he’s 15. Of that, 20% to savings and 20% to charity will be the rule. The rest will go to his impulse needs. We’ll still cover his clothes etc and save for his education (but ahem will be claiming his charity deductions, thank you very much).

    Also once he gets to a certain age (say 10) I’ll have him start investing his ‘savings’ money in investment accounts – he can own some apple stock so when his cool friends show him their ipod 9000 he’ll know he’ll be getting some of their money, etc.

    The other thing we’ll do that I think I read here is give it out on Sunday night, not Friday night, and with no payroll advance options.

  9. Hey, check out this guest post Gail did over at Get Rich Slowly today 🙂


    Awesome Gail!

  10. My son is 17 and we’ve talked about savings in depth. I doesn’t help that his mom is a credit counsellor:) But it did get him thinking. He puts most of his cheq into savings and only keeps a small portion for spending in his everyday account. He likes the nicer clothes and has bought himself a large tv with cash. He said it was a “weird feeling” walking in with cash and buying it outright but boy is he proud of it! He takes care of his stuff because he knows mom and dad won’t be repalcing it if he doesn’t.
    He knows he’ll be saving less per cheque when it comes time to move but for now he’s building a nice stash.
    Our daughter is 11 and on the same track.

  11. I am always amazed at the differences of opinion that people have regarding allowance.

    I have 2 boys 12 and 10 and they each get $5 a week. I automatically put this in their savings account. They also put a good portion of birthday and Chirstmas money in the bank. We don’t break down how much they have to save but they do have to think about what they want to buy as they can not use their bank card anywhere but at the bank.

    My boys have expensive hobbies. They dirbike and are always wanting new shirts, gloves, etc… If they need it then we buy it, but if we don’t think they need it we tell them that they have to buy it out of their own money. They definitely think twice and most of the time they decide against it.

    We also tell them we have the final say about big purchases. My youngest wants every gadget but he does not take care of his stuff so we are not allowing him to buy an ipod touch. (he has the money saved) We feel that he will loose it or break it. Both boys also want cell phones but we feel it is not needed at their age and we have told them they can get one when they get to grade 9.

    Our system works for us and the boys love saving and seeing the money grow. I talk about finances and the mistakes I have made all the time. Hopefully they will be able to learn from my mistakes and not make the same ones.

  12. avatar psychsarah Says:
    October 13, 2010 at 10:09 am

    I’m not a parent, so I’m recalling back to when I was a kid. I loved to save. My parents didn’t have to impose anything on me. I saved up enough to pay tuiition for the first few years of university, bought most of my own clothes, had an extensive CD collection, and went out with friends when I wanted to, all without seeking money from Ma and Pa, once I was about 14. I was fortunate to have a good paying job (teaching piano and regular babysitting gigs) which helped a lot, but still, I loved seeing the balance grow! On the other hand, money burned a hole in my little brother’s pocket. Eventually he learned and began handing over his paycheque to my dad, who would give him his spending money and deposit the rest for savings. He did this all through university too. I hope he’s learned now that saving is a good idea…he’s a new parent so he needs to pass this along to his kids! My parents are both good savers, so it’s interesting how different two kids can be.

  13. Psychsarah, it’s interesting that you and your brother grew up in the same household but have different inclinations on how to handle money! What do you think the difference was?

  14. @ Angela – quick question – why not let the kids buy what they want with their spending money? If he does break or lose the gadget, then he’ll remember this the next time he spends $300 foolishly. My parents were quite good at letting us fail forward, as they say. I think it also sends a mixed message – this is your money but subject to what we approve. Just my two cents, everyone’s parenting technique is different. I think an allowance is about learning about spending money and for the kid to learn the difference between a want and a need, not for me to tell them. What’s important to them may not be important to me. This will include them paying for a cellphone plan at some point too, that’ll be deducted from their allowance.

  15. My daughter does not get an allowance weekly. I know we should, but once in awhile we deposit cash in her account for watching her sister etc. She doesn’t ask for much…since I instilled the no asking from a very young age. Of course she wants things but needs to remind me a few weeks later if it is something she really would like. Very rarely does she remember 🙂

    I do try to pick things up for her that are the “cool” stuff at school. I picked up those silly bands last week, she was delighted but didn’t even know what they were called. We also splurge for 1 slice of pizza once a week so she is not left out.

    99% of the time her clothes are hand me downs, from the thrift stores or gifts so these extra little things are not taxing to our budget. She loves getting cash for gifts and reports to her extended family how much she has saved. She purchased herself a 2nd hand 18 foot trampoline and was eager to not spend a penny to get her savings back up to $700.

    Hopefully our second daughter has the same mentality. She is an impulsive temper tantrum toddler already so it wouldn’t be surprising if she’s the same with money;)

  16. @SophieW – I think it’s definitely a good idea. If she was an adult, your daughter could (in theory) work more to earn money faster, which she can’t with an allowance. So I think it’s good for parents, if they can, to create opportuities for kids to learn that lesson too – if you want it sooner, you have to work harder.

    It’s funny for me to read all this, because my parents did not believe in allowances, and none of the 5 of us ever received them. Also, because of age differences, they handled money differently for each of us. For all our dramatic differences, one thing we all share is that we’re all quite responsible with money to varying degrees, so I’m trying to think how we learned those lessons.

    I think it’s that, in our house, you had to explain why you wanted something to our parents before you got money when you were younger, and they would question us about how much we needed, why we wanted it, what we would give up, etc. We also have a family business where all of us worked since we could walk, and our paycheques were directly deposited into our accounts (along with any birthday money) so our investments and savings accounts grew very quickly and that was a good motivator in itself. My parents took us with them when they went to the bank or to their financial advisor too, so we learned about investing and saving very early. Knowing that my life situation is not one that is likely to be replicated when I have kids, I imagine I would probably give an allowance… but it seems kind of odd to me still, in a funny way – smart and definitely important, but… odd. 😉

  17. My boys are 7 and 5 and they each get $7 and $5 respectively a week for allowance.. 1 dollar each has to go into their savings (% are beyond them at this point so 1 dollar it is) The rest is in their spending jars which they have FULL control of.. they get to decide when and where they spend it.. we had a few bumps along the way.. like the $20 spent in one night at the arena concession.. ( i had to really bite my lip that night) but guess what the next week when we went to the rink and he had no money and I wouldn’t buy him anything it was lesson learned!! Now he takes his time choosing one thing and trying to keep some money in his jar at all times so when things “come up” ( like the ice cream truck taking advantage of our nice weather the other night) he has money to spend.

    I dont’ dictate to them what they can spend their money but I help to guide them.. things like reminding them they have a similar toy like that at home and if they just wait longer they will be that much closer to the thing they really want…

    The one thing that is completely theirs to spend is gift money..birthday or Christmas – it was meant as a gift and they can spend every last dime how they want.. I recently gave my 11 year old niece $40 for her birthday.. I was TICKED when her Dad told her that 1/2 of it had to go to the church.. I will never again give her money… if I wanted to make a donation to their church I would have.. I wanted my niece to go and pick something that SHE wanted .. as Gail says “you wouldn’t make your kids return a present they got and donate half the money would you” so why when I give them money do they automatically loose half?? Different story if my niece decided to take the money I had given her and use it to be charitable.. because that’s what she wanted…

  18. The $ that my children get is for their spending and planned spending discretion, but they’re also limited to a clothing allowance as well. If they want 2 new pairs of jeans at $50/pr, but I’m only giving them $50 total say, then they’re responsible for using their banked allowance $ to pony up the other $50.

    Yes, I need to provide food, shelter, and clothing, which I do, along with a nice allowance. But they’re responsible for the “above and beyond” wants they have and understand their allowances have to kick in a portion of those wants. I think $1/year of age to spend on ice cream and gum is a bit much for my 11 and 14 year old to spend in a week, but they don’t spend on that, so if they want to get a new cool belt, t-shirt, whatever that wasn’t planned for in the clothing allowance, then they can fill their boots. I don’t want to dictate the spending and saving, rather I’d prefer to teach planning and consequences. So far, so good.

  19. I don’t think there’s any right amount but 50 cents per year of age seems quite reasonable. It would depend on what expenses the allowance was meant to cover. If an eight year old received 4 dollars a week and had to pay for his/her own pizza day at school maybe it’s not enough. But if mom or dad paid for the pizza, or other like expenses, 4 dollars would be plenty.
    There’s some very important lessons to be learned when the allowance money is all gone and the child must do without until the next week. Whining or pleading should not result in the parent supplying more money. If more adults had learned to spend wisely or wait until they had the funds we wouldn’t have all these people in debt and living on credit.

  20. My son is 4 & he receives $4 per week pocket money, it was driving me insane & hurting my wallet everytime we went to a shop & he would ask for something. Now he knows if he spends all of his money then he won’t get anything else. He makes his bed every morning, always cleans his toys up when his finished with them & puts his plates, cups etc out in the kitchen to be washed up. At this stage we talk about saving but it’s not something i’ve enforced yet. He doesn’t spend his money all at once & he still asks for whatever toy just was advertised on t.v & that’s when I talk to him about saving to get things like that.

  21. I love reading all the techniques around this topic!

    I am a firm beleiver in A.B.and C. for myself

    My boys get $20/month BUT I hand them $10 cash and the other cash goes into their savings automatically (I figure my boss doesn’t pay me in cash, so it’s more real-life that way).

    We have also enforced some rules for the savings account money. It is only to go to NEEDS, not WANTS. We will pay for dental check-ups, but they will pay for any fillings out of their savings (it hasn’t had to happen yet, my threat is working to keep their teeth brushed!). We will pay for health or safety equipment (helmets, runners, glasses, coats, bike locks, etc) but they will pay for the other gadgets and replacing any items they abuse or lose (my oldest had to replace a pair of glasses from his savings for neglecting them, now he takes MUCH better care). We will also provide school supplies and appropriate clothing, but they have to foot the bill if it’s all about the trends! When the time comes they will be buying their own cars — I won’t let them borrow mine, that’s too easy. I am pretty sure we will help so they can get something safe, but it will be insured, maintained and fueled by their own money 100%. (I was 18 before I got my license because it took me that long to save up my crap-job paychecks to afford a car. But boy did I love the luxury of having my own car, it was worth the cost to get the life lesson!)

    Maybe we are too hard that way, but it’s real-life to put needs before wants, and there is only so much money to go around so priorities have to be made and followed.

    My oldest son really gets it. He will weigh a purchasing decision heavily before buying something… and often saves the amjority of his cash to the following month so he can get something cooler with the larger sum, my younger one spends like it’s burning a hole in his pocket and hasn’t saved a dime outside his untouchable savings account.

  22. I am 44 so I can hardly remember how much allowance I got, but I do think I got one. We were never told to save any of it, and my parents always paid for extra school-related stuff, they also bought me a cheap used car and I didn’t have to pay for the gas or insurance until I turned 18. Despite my parents both being very good savers, neither I nor my brother inherited that trait and both of us have had credit card debt issues. I got the feeling that they had to live very frugally when they were kids back in the 30’s and didn’t want us to have to live like that. Unfortunately it might have been better for us if they were less generous! Maybe we would have developed better spending habits.

  23. avatar tigerlily Says:
    October 13, 2010 at 7:24 pm

    Wow, *pol, I don’t know how old your kids are but it’s hard to imagine $10/month (what doesn’t go to the bank) as being enough for a kid over the age of 12. That’s, what, $0.30/day? I must be misunderstanding.

  24. Being told what to do with my pocket money would have failed spectaculary with me. (I was a contrarian brat.) It never happened with money (thank god), but with some other issues where it took me 25 years of shaking the bad habits that came from feeling I had a bait-and-switch pulled on me.

    I’m still surprised that it works for some kids.

    We handled it that my pocket money or money I earned was my own, no questions asked or judgements made. Monetary gifts “for something nice”, or money won were put in the bank “until something nice comes along”. As this was very “buried” — it took three days to a week to get at the money (I supect my mother fudged things) — I think I withdrew money from that account about three times before I turned 16 and closed the account to buy a motorbike with the money. The new account was a lot less buried because I had to pay tax and insurance on the bike.

    I got, in today’s money, about 2 Euros a week when I was five, 30 a month when I was twelve, 60 a month when I turned thirteen and took up photography, 240 when I was 16 and had to pay for my own transport. I would not have known what to do with five Euros a week as a pre-schooler, and could not have afforded a bus pass on 64 Euros a month as a 16 yo.

    I didn’t have to pay for school supplies or clothes, because I would have bought books instead. But I was free to spend the transport money on a bus pass, on the motorbike, or pocket it and bicycle to school. (Or walk, or hitchhike.)

    *pol, aren’t you worried that they’d decide having a tooth rot until it needs to be pulled is cheaper and more manly than paying for a filling, or that glasses you mostly need to keep up in class are a waste of money? I’ve known a lot of 18 to 25 year-olds whose ideas of saving money ran along those lines.

  25. we received a modest allowance for about 1.5 years in my early teens because my step dad thought we should and he ponied up. It was awesome and we were so excited to have “extra” money that we were all very good with savings and charitable donations…without being forced. that being said my mom was terrible with money and didn’t really teach us any life lessons…and we’ve all had real life money struggles and made some bad decisions (yes, they went their separate ways in a relatively short time period)
    I think $1 a week per year of life is plenty and we will be starting that in our house in the new year. We’ll see how it goes. Gail rules all the way with teaching money skills to our young family!

  26. How timely. My son has decided he wants a $350 compound bow and he’s not getting there on his $15 weekly allowance, not when that allowance goes to the latest $50 video game.

    I discussed two approaches with him. He can either save more (spend less) or earn more. Since even if he saved his full $12 allowance he’d be a long time before he has the money – and that’s ignoring Christmas and birthdays he needs to buy for, saving more isn’t going to be good enough. He needs to earn more.

    So I’ve just helped him lay out a flyer to do leaf raking in the neighbourhood. If he does a good job, he’s hopeful it will translate into shovelling snow this winter. Both of those are likely to pay him more than I’m going to give him for allowance. And that will help him achieve his goal.

    What I don’t understand is why my daughter has the first dime she ever earned, at 16 has thousands saved and in the bank, with no push from me. My son would be in credit card debt at 13 if I let him. Same house, same upbringing, opposite ends of the spectrum.

  27. Funny this should come up. I have been trying to figure out how to do this allowance thing for some time. I have a 13 year old who we look after all of the expenses (clothing, school lunches, days out, birthday parties etc.). Lately we have been trying to figure out the best way to handle the allowance thing.

    I think giving $1/year is a little much at this age just for spending money, but saying that what kind of clothing allowance does a 13 year old need? I would like her to be responsible for purchasing own clothing and paying for a cell phone if that is what she wants, but hard to do this when we are used to paying all of her expenses. What is reasonable?

    We allow her to spend birthday/gift money as she pleases, so if this is a $100.00 sweater be it, when the money is gone it is gone and we would never dream of spending that much money on a sweater otherwise.

    What do you think? How much allowance would you give a pre-teen???

  28. I hate to say thins, but Gail, you are thinking too big in the matching dollar for dollar at University. You want to teach a kid to save, tell them that they have to save a portion of their allowance for when they want a new bike, but you will double what they save. My oldest girl is a really good saver and (3 years into this experiment) just bought a $450 commuter bike (well, a $300 bike + fenders, rear rack, lights, it’s all tricked out) and bikes to school everyday. The younger has always had a problem saving. Poor impulse control. But this rule has been in place since they were 6 & 7. The first year, she barely managed to get a garage sale special. A little sibling rivalry has encouraged to save enough for a quite good bike from Costco. This is a HUGE improvement from the “spend every cent and beg for more” girl we had when we started.

    Retirement or University mean nothing to a 6 year old, but a new bike…. Well, THAT”S something to strive for!

  29. My kids get an allowance. For the Mad Money and Planned Spending categories, they get a total of $1/yr of age/week. However, I also give them an additional $3 that they split between charity and longterm savings. On top of that, they get a larger sum specifically for school expenses, clothing and gifts for friends and family. That amount is $7/wk. We have been doing this for a whole year for my 10 yr old and it has worked out perfectly. The school/clothing/gifts jar seems to always have “just enough” to cover new clothes, school related expenses and any gifts for birthday parties and other special occasions. When you hear that my 10 yr old gets $20/week, it “sounds” like a lot, but most of it is earmarked for a future expense, which is the hallmark of great budgetting. Also, it has desensitized the children to large sums of money, so when they get their first paycheque at 17 yrs old and leave the bank with $300, they will KNOW that they are NOT rich! A child who has only been managing quarters, loonies and toonies in amounts under $10 will likely be mesmerized by “hundreds of dollars”… thinking it will never run out. My hope is that my children will know that $300 is still a very finite amount of money, and unless you plan out how that money will be spent, it will literally disappear in a flash.

  30. this has been an interesting read for me. i recall (dimly) a small allowance as my parents saw to everything. course, you have to remember i’m 52 now! i was not a saver but boy oh boy has that changed with ms gail taking charge of my finances now! every single paycheck i hear the “pay myself first”, “make it automatic” phrases in my head.
    fortunately my daughter has been a good saver all her life, especially since she started earning her own money with a part-time job at 16. now that she out-earns mom, she faithfully puts in her 401(k) with a thank-you-very-much-for-the-match to her employer AND has an automatic withdrawal to her savings account. how she became so responsible is beyond me because i can say in good faith, i was never a good money manager until i found gail. her father, on the other hand, could make those darn pennies scream for mercy! perhaps it was his fashion; when she wanted something he made her explain why, what, how much. i think a part of that remains with her to this day, as she carefully weighs out a weekend date with the girls vs a nice little get together at her home.
    it seems her dad taught her solid money/financial skills and i think that was a huge gift on his part. to this day her dad will still pay for her to fly home twice a year and i believe he’d pay for anything to help her out. as long as she can still explain what, why, how much…

  31. I have a 4 year old but I have not started his allowance yet. When he gets better with helping and following requests, then I will reconsider an allowance. I do put all the gift money in his bank account or RESP, and regularly contribute as well. I like the idea of a regular charitable jar, and think this could be a family project. Recently I have helped to council a friends 8 and 11 year old about starting their savings early. I used a bank savings estimator to get my point across about regular small deposits, vs. large imposing deposits infrequently. They thought it was brilliant. I thought this was a good age since they are starting to consider babysitting as a good way of earning extra $. Also I have thoughts about the older teenagers that are earning $ and getting arguementative… like teenagers do get… I am going to request that they pay 30% to the household, but put it away for savings for them and when they are needing the extras for college or help with establishing their first apartment. I came up with 30%, because that is the % that subsidized housing charges. I feel that although this could be call the long term savings, I just do not think that a teenager would regularly put 30% away. Yes it is steep, but it is realistic! And when my child come to the bank of JCB, I will be able to say there is some money available. One more point is for the kids who forget to put milk back in the fridge before school… Everytime a milk sits on the counter, goes sour and then has to be replaced, the child gets a deduction in their allowance!!! Strict, but it probably will not be done more than once!!!

  32. @ JCB – I think it’s all about the approach. To me, an allowance is a lesson in how to spend money, not a reward for doing things or a punishment for not. In other words, withholding an allowance as a punishment is not an option. He gets that allowance each week no matter what, and the other punishments are on the table (grounding, witholding of privileges, etc). For similar reasons I won’t give money for A’s in school – it’s his job to do well in school and my job to provide for him while he does so. Everyon’es approach is different, which is fascinating to me.

  33. Diane: On the clothing allowance for a 13yo, here’s what I would do.

    I would calculate how much I have spent on her clothing the previous year, half that, and put in on her allowance.

    Doing this on a weekly basis seems very hard because she’d need to save for weeks to get as much as a T-Shirt, which encourages wasting money on small things and skirting the big expenses. I’d hand it out monthly or quarterly unless you are very sure of her saving skills.

    The other half you keep back to supplement her wardrobe should she miscalculate. (I.e., first snow finds her with only summer clothes and a coat two sizes too small, and you do not want her to freeze to death to teach her a lesson.) If she does not miscalculate, take her for a nice shopping trip with it and shift the second half towards her in increments over the next three years.

    Cell phone, I’d also go with what you have spent over the last year for her. Give her the whole of it if she is using the phone responsibly. Keep an eye on her expenses so that she does not get into debt with the cell phone company — it’s an easy trap for a teen to fall into. (Don’t know if it’s possible where you are, it is where I am and leads to the average 18yo being more than 1K Euro in debt.

    Sit her down and tell her how you reached the new allowance she is getting and what would be a sustainable way to spend it, when you will pick up the slack and under what conditions (“I need to bail you out, I’m going to dock it from your allowance”), and what might be up for re-negotiation last year. I would work into that talk that she might start to consider saving birthday gift money for her first car, or something similary tempting.

  34. The ABC concept is perfect for kids, but I’d say there are plenty of adults around that could benefit from this as well! While each step is important, I think ‘burying’ it away is the most significant. I would go a step further and perhaps bind it… like tying it up in a way that you cannot access it, even if you want to. Bonds and term deposits are great for this!


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