Part 2 – Starting an Allowance
Posted by Gail | Filed under Gail Club News, Kids & Money
Funny Money: Where does the term “cheque” or “check” come from?
The simplest way to start children off on the road to a balanced financial life is to give them some loot to manage. How much you give will depend on your personal circumstances and your attitude towards the whole concept of an allowance.
To learn how to manage money responsibly, children need an income they can rely on – one given at regular intervals. The experience of handling a steady flow of cash will teach many fundamental skills, including how to plan ahead, the skill of setting goals (both short- and long-term) and how to save.
The amount you choose to give your child will depend on how much you can afford, your child’s age, and what you expect your child to do with her allowance. If, for example, the most you can afford is five dollars a week, so be it. While many parents are stuck on the two-dollar-a-week allowance, just think about what two dollars can buy in this day and age (after you deduct for saving and sharing) and you’ll have a good idea of how effective that amount will be in teaching money management.
Naturally, younger children need, and are capable of handling, less money. If all your child is buying is candy and the occasional toy, you may want to start her off with a relatively small sum. At five years old, 50 cents a week may be more than sufficient.
If you expect older children to buy some of their own clothes, pay for their own haircuts and plan for big-ticket buys such as camp, a television or car insurance, you’ll have to figure out what each of those things costs. To those Planned Spending items you’ll need to add some mad money (hey, they’re kids), some money for establishing a regular savings habit and perhaps also some money for sharing.
I have long recommended that people use the age of the child as a guide, giving a dollar a week for each year of age. So a five-year old gets five dollars; a seven-year old gets seven dollars. You’re the best judge of the amount that will be most appropriate for your child. Just remember that it needs to be enough so that your child can save, share and spend (mad money and planned spending included.)
As your child gets older, review and adjust the amount he receives. Pick a specific time of year – the beginning of the year, your child’s birthday week, the beginning of a new school year – and make the review routine. Ask your child to list the five most important things he wants to do with his money. If he is an avid reader and wishes to buy his own books, he’ll need more than a child who is only interested in candy. Listen carefully to what your youngster has to say.
If your son is looking for a hefty increase, ask him to give you a written proposal or a formal presentation explaining how much he wants and why. If you were asking for a raise at work, you’d have to justify your request. Perhaps he feels it is time he started buying his own clothes. You can negotiate the initial amount and attached responsibilities, and implement the plan slowly. Moving from no clothing allowance to a year’s clothing allowance in one fell swoop is a recipe for disaster. Let your child assume responsibility in small increments.
Before you do your allowance review, think about what you want to accomplish over the next year in teaching your child about money. Talk with your partner about how much responsibility you feel your child can now take on. Perhaps you wish to start your daughter on an investment program. If so, you’ll need to do a fair amount of teaching, and you’ll need to up her allowance to take the money for investing into account. You’ll also have to carefully monitor her progress to ensure the funds are being directed to the appropriate new category in her budget.
The Logistics
- Younger children find it easier to handle money if they are given a small amount every week. Consider what time of week is best. If your experience says that giving an allowance at the beginning of the weekend means it’s all gone by Monday, then give it on Monday or Wednesday. While you want your child to accept responsibility, young children need some help in developing the skills. The timing of the allowance may make all the difference.
- Children who are older and have established many of the habits of budgeting should be asked when and how often they prefer to receive their allowance. While some kids like getting a little money each week, others may prefer a lump sum once a month, allowing them to plan spending for the month.
- Whatever allowance schedule you establish with your children, make sure you stick to it. It’s demeaning for anyone to have to constantly ask for money. And providing the allowance on time will send a subtle message about the value of honoring commitments.
- Also think about the denominations in which you’ll give the allowance. If you give your ten year old all her money a single bill, she’ll have trouble implementing her budgeting plan without hitting a store to make change. On the other hand, if she gets smaller denominations she may find it easier to set aside the money for the various parts of her budget.
Next Week: Setting Expectations
Funny Money Answer: It derives from the game of chess. Putting the king in check means his choices are limited. A cheque or check is designed to limit opportunities for forgery and alteration.
Gail Club News
As I mentioned a short while back, lots of people have been showing interest in establishing Gail Clubs in their areas. It seems people really like the idea of meeting to share information and experiences and learn from each other. I think it’s great. People helping people. What a concept!
I have set up a discussion board (if you look down the right hand side of the blog you’ll find the link for Gail Club and there will be a link from the home page too) that y’all can use to communicate with each other about your Gail Clubs.
For those of you who have already contacted me, I’ve created a forum for your region and you can get busy sharing news. If you want to join an existing Gail Club, get in touch with a member and figure out how to meet up. If you are concerned about email privacy, I recommend you set up a new email at gmail or hotmail that you can use on this forum.
I need one person from each Gail Club to take on the job of that forum’s/club administrator. You would be the person new members would contact for information, and you’d make sure there were no inappropriate posts to your forum. Email me at getgvo@gmail.com. Once you become the administrator of your Gail Club forum, you’ll be given permission to make the edits and deletions to keep your forum neat and tidy.
If you decide your group is big enough, you can send me an email and I’ll open another forum for anyone else in the region who wants to connect with like-minded souls.
Those of you who want to establish a club and get members interested in joining with you should drop me a line at the above email address with the words “Gail Club” in the subject line so I can set up your forum. Doing it this way is one way we’re going to avoid spammers.
Since I’m going to start shooting again in the next couple of weeks (first for the pilot for Princess, and then for the last season of TDDUP), this forum gives you a way to connect with each other without having to wait for me (other than to set up the forum.)
These forums will only be for Gail Clubs, and so if other postings appear, they will be deleted.
We’ll try this for a while and if there’s enough interest and things are moving along smoothly we can see where it takes us. If the discussion board is misused or not used at all, I’ll dump it and chalk it up to experience.
For more information on setting up a Gail Club, read this blog.
February 26, 2009 at 8:18 am
Hi Gail,
any chance there could be a thread where we could have online Gail clubs?? i know the point is to get together in person and connect, but i know for me, timing is hard but i would like a forum to discuss personal finance with others online. just a thought!
thanks
February 26, 2009 at 8:36 am
there’s no reason why you can’t start an online club for people who want to share online. Do you want to be the moderator? I’ll set up a forum for you called Lori’s Online Gail Club now.
February 26, 2009 at 8:51 am
Last season of TDDUP?!?
My day is shot now…
February 26, 2009 at 9:22 am
WHAT DO YOU MEAN LAST SEASON OF TDDUP????? Gail, please say it isn’t so…we need you, we love you!
Did I miss something – what is Princess?
PS Love the Campbells Soup commercials – you go girl!
February 26, 2009 at 9:34 am
Hi Gail, we have an only child. Can you explain the “sharing” portion of the kid’s budget. Who are they sharing with? Other siblings, charity, mom & dad on occasion when the paper boy arrives and we have no change? (oops, did I say that outloud?). Thanks.
February 26, 2009 at 10:06 am
Okay, people, don’t panic. So far you have only seen the first 5 seasons of TDDUP. Season six starts to air Friday March 13th at 8pm! Season 7 will air next fall, and the season I’m about to shoot will air in 2010… com’on… that’s got to be enough! And, if all goes well, Princess, will be hot on TDDUP’s heels… focusing on singles who need to learn how to have a fabulous life while living within their means, Princess is all about growing up and getting with reality! I think it’s going to be a hoot.
February 26, 2009 at 10:25 am
Diane, sharing is “charity” so they can use it to help with a food bank drive, to do stuff at school like walk-a-thons or the Terry Fox run, or support Christmas Gift drives… whomever they want to share with.
February 26, 2009 at 10:30 am
I love the sound of Princess… there definitely needs to be more shows out there for us single girls!
February 26, 2009 at 10:38 am
Thanks Gail. I thought it was charity. So far she’s been using it for “get out wearing uniform day” at school. They have to pay $2.00 and money goes to school in Africa. Take care.
February 26, 2009 at 11:30 am
Looking forward to watching season 6 and 7 this year. But, I have a question.
Given the economic climate and the disappearing jobs, will your final season that you are getting ready to film be taking that into account?
Often you instruct couples to earn more money. Of course. Makes sense. But I don’t know how easy that would be these days.
February 26, 2009 at 11:39 am
I hope Princess doesn’t focus exclusively on females.
Sounds promising though and can’t wait to check it out. Is it slotted for Slice?
February 26, 2009 at 1:44 pm
Yayy, i’m excited for the new seasons of TDDUP – i’ve been in withdrawal since i’ve watched each existing episode about 100 times on slice.ca. I can’t wait to see the new Princess show. Gail will be slapping people back into reality left, right and centre. Erran – good question. i hope the show includes both genders too.
February 26, 2009 at 1:45 pm
PS what Campbell’s soup commercial?
Gail did a Campbell’s soup ad?
Where can I see this?
February 26, 2009 at 2:19 pm
Saver Queen… it has been airing on Slice.
February 26, 2009 at 5:38 pm
Hi Gail,
One point that I don’t think you stressed much with the child allowance – this is my opinion so take it or leave it…I think children should realize that they’re not getting an allowance just because they’re alive and therefore deserve money. The allowance should be tied to chores. Everyone has to work for money. That’s the way I was brought up and that’s the way I have remained as an adult. As a working professional, I see a lot of very smart people think they “need” or “deserve” something (eg. a new car, expensive clothes, etc.) because they are who they are – just because. So, they use a credit card to pay for things and then complain that they have no money. Well, it’s because they didn’t really “work” for what they bought. I’m wondering if this stems from their relationship with money as a child? Just my thoughts.
February 26, 2009 at 8:07 pm
Jade, I couldn’t disagree with you more. When you tie chores to an allowance, you’re teaching a different lesson. I’ll be covering this in a future post. But an allowance isn’t for “nothing”, it’s to learn how to handle money. Paid chores is to learn how to work for money. They are two separate things. Stay tuned.
February 26, 2009 at 9:24 pm
Gail,
Love, love, love the fact the fact that you are doing a show for singles!!! Can’t stress that enough. Most of the stuff I find is for couples and this will just be great!!! I think I was probably living much like a “Princess” myself and thank goodness, with your help, I saw the light!
BTW I will be credit card debt free TOMORROW!!!
February 27, 2009 at 6:29 am
[...] Vaz Oxlade talks about an important topic for me Starting an Allowance for kids, something kids need to learn [...]
February 27, 2009 at 12:42 pm
Gail, you’re brilliant!
Jade, just to add to Gail’s response: No matter what, you end up giving the kids money – for movies, birthday party gifts, special events at school, whatever. It is unavoidable. With an allowance, you get to set a limit on how much you dole out and the child learns to choose what is important.
This actually fosters more personal responsibility (and less of a sense of entitlement) than pure “work for money” types of allowances. Trusting them to make decisions (and mistakes) fosters a sense that they can trust you. This becomes extremely important through the teen years and beyond and not just for monetary reasons.
Parenting side note- sooner or later, the kids will decide the money is not worth it and they won’t do the chores. “No chores, no money” implies that they have a choice about chores – this may not be what you want.
March 1, 2009 at 12:04 pm
Lexi: Well said.
Jade: I understand your point of view, but I do think chores should be a responsibility as part of the family. Perhaps extra chores can earn some extra cash?
As a child who did not get an allowance, I didn’t learn how to handle my money. It didn’t help that I had a parent who didn’t/still doesn’t know how to handle money.
When I was old enough to babysit, I earned money – but I spent it faster than I made it because I didn’t understand the importance of budgeting my money to last more than a day, but also because I didn’t have a regular cash flow to allow me to get what I needed/wanted.
Even when I started working thru high school, I was broke before my next pay day. I hope I can break that cycle with my son.
I did chores around the house because I had to. It helped me a lot as I matured. If I had a dollar for every teenager I worked with who had no clue how to sweep or mop a floor , I’d have a maxed TFSA! lol!
Parents do not do their kids any favours by doing everything for them.
March 2, 2009 at 1:46 pm
I think that one think that Gail hints at (but should be spelled out) is that the allowance should be towards fulfilling BOTH some needs and wants as the child grows in order for the child to learn the difference while managing money. Grantedm it will be moslty wants for a 5yo, but a pre-teen an teenager can learn a lot if faced with a choice.
This makes an allowance tha TEACHES something.
March 2, 2009 at 5:12 pm
I desperately want the recipe from the Campbell’s commercial! Anyone have it?! I have searched online for 2 hours to no avail….
Thanks!
March 2, 2009 at 6:48 pm
Jackie, have you tried searching this site:
http://www.campbellkitchen.com/
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