Teaching kids about money is a controversial, but important topic.
Whether we like it or not, money management is a key element of our modern society. Few would suggest that it should be a central part of a child’s life, but even fewer would suggest completely ignoring it as the alternative.
Although there are many methodologies for how to approach the subject, nearly all include some sort of system for providing an allowance. When this happens there are two broad schools of thought:
- Providing kids with an base, flat allowance.
- Taking a commission-based approach of tying money to specific chores.
As with any age-old argument, both sides have their advantages.
Giving kids a flat and age-appropriate allowance provides a consistent framework to teach money management skills. The selected payday each week is predictable for children and a routine is more easily established with this consistency.
For example, if they always receive $9 on allowance day, they can quickly pick up that each week they need to set aside $3 to save, $3 to spend, and $3 to give (or similar system).
In addition to the ease of establishing habits, many parents expect the children to help with chores regardless of any monetary compensation. They don’t want to manipulate money as a wedge or as a punishment for not helping. They point out that in the ‘real’ world you don’t get paid to wash your clothes or do the dishes, yet certain chores will always be part of daily life.
On the flip side, many parents are nervous about instilling an entitlement attitude in their kids. They point out that a commission-based system helps reinforce the true value of money. A child can obtain a want faster if they are willing to work harder or take on more chores.
This system also has the benefit of encouraging entrepreneurship. Kids will naturally gravitate towards the jobs and chores that provide the biggest benefit for their effort. They are encouraged to look for additional/creative ways to make money when saving for a purchase they really want.
But what happens when the child doesn’t have an immediate want? Often times this can cause them to neglect certain undesirable chores or even cease working altogether until the next want comes along. In other words, they might learn to only work when they want something tangible, rather than develop a consistent work ethic.
Some fear this mercenary attitude more than the entitlement mentality. When asked to help out, the child might respond with ‘how much money?’ or ‘what’s in it for me?’ In this case, we’ve failed to instill the importance of helping and giving without expecting anything in return.
Courtney and I are considering a combination of the two systems for our own solution.
A system which declares an amount of base chores that are expected whether or not money is paid or not. And in return, a portion of allowance is paid out whether or not the chores are completed.
But extra opportunities are provided on the side if a child is interested in earning more money for a specific goal. These are paid on a case-by-case commission basis, but aren’t expected week in and week out.
As our daughter approaches two years old, we know we still have some time to figure out how we want to deal with this dilemma in our own lives. But, I’m interested what those of you with older children have found works for you?
Do you provide your kids with an allowance or pay them a commission?