Ok, so one of the Great Parent Debates that has raged for eons is this: Allowance Vs. Earning Money.
We fall firmly into the Earn Your Own Money category.
Hear me out: In life, most of us get paid for actually doing work. There are a lot of people who would sign up for the job that involves texting and perusing their social media all day, but as it turns out there aren’t jobs like that, and people who do that turn out to be pretty crappy employees. The employees who get ahead and move up the ranks work hard while they are at work and continuously strive to improve themselves and grow their skill set. Shocker, huh?
With an allowance, your child gets paid whether they do work or not. If they go out into the workplace expecting the same treatment, they will be in for a rude awakening. The principle of work, working hard, and that money comes from work are crucial lessons in the path towards becoming a functional adult. Yes, with an allowance children can learn about spending money wisely, but they do not get the concept of where money actually comes from. With an allowance the concept taught is that 1) Money comes from Mom and Dads pocket and 2) I don’t have to do anything except to ask in order to obtain money. Those concepts may be fine at 10 years old but it won’t work very well when your 38 year old is still coming to you asking for money.
The trap with this is that credit cards and other mechanisms of borrowing are equally as simple. How simple is it to swipe a card in a machine and get the item that you purchased in return? How hard is it to sign on the dotted line and get a student loan? Car loan? Mortgage? Payday loan? Pretty darn easy…..until you have to pay it back. Things like Apple Pay and online purchasing are even easier. Economists use the term “friction” to define the pain receptors in your brain that light up when you pay for items. Low friction paying are methods such as Apple Pay, credit cards, and online purchases. You don’t even feel those purchases. Paying with cold hard cash is a higher friction method of payment. Of course, retailers really are purchasing for lower friction options so that consumers spend more. When you are staring at Mr. Franklin or Mr. Lincoln, it is really much harder to part with them. You have a stronger pull and tend to rethink the expenditure and ask yourself, “Do I really need this? Is this the purchase that I want to make with this cash?”
When children spend your money that came from your pocket it is extremely low friction—for the child. How easy is it to spend someone else’s money?!? Soooooo easy to have a shopping spree on someone else’s dime. Can you just see the child jumping up and down in the toy aisle begging for the item that they just NEED? The conversation takes a sharp left turn at Albuquerque when the money comes from their own pocket.
Our children are given a metal piggy bank that is has dividers so that the money goes to three different areas—giving, saving, and spending. On our children we have applied percentages to these areas: 10% to giving, 45% for saving and 45% for spending.
Giving
As Christians, we follow the Bible in that our children tithe 10% to our local church. The concept is that the money is not really theirs—we are only stewards of the money on this Earth, as God created everything and we have an obligation to Him to both pay tithing and spend the money that we get wisely.
If you are not part of a church, then it is not a 10% tithe but rather giving 10% to a charity of their choice. This can actually quite fun. With modeling and teaching early on, children grasp the concept of giving quite well. They can pick a charity along with your help that is important to them. Help them to pick a charity that works for causes close to their heart. This can be anything from the giving tree at Christmas time, the Salvation Army, anything. When your children identify causes that bother them such as the homeless person standing on the corner, the polluted beach, or world hunger, engage in a conversation with them. It is easy for these problems to be overwhelming so obviously speak on their level, but the message should be one of hope that they have the power to exert change by giving, whether it is through time or money.
Saving
Learning to save looks different as children age. When they are little, the first dollar earned is literally burning a hole through the piggy bank, just itching to be spent.
Saving for a desired toy is a great learning tool for a young spender. While they are saving, help them to do research so that they can purchase the exact thing that they want. When they are little this is simple—what color of hair do you want on your doll? What color of car do you want? Learning to delay gratification is a concept that a lot of adults still can’t grasp. Trust me, you want to give your kids lots of opportunities to learn this lesson when they are young so they don’t grow up to be impulsive spenders.
As children get older, the conversation shifts to larger expenditures. What are they doing for their first car? Who pays for the insurance? Gas? Cell phone bill? This is when the muscles gained as a child start getting some exercise while still under the guidance of their parents.
Spending
This is the easy one, right? We shouldn’t have much to say on this one. Kids naturally know how to spend money.
We are huge fans of Love and Logic Parenting, and one of the principles of being a Love and Logic parent is to let children make mistakes when they are young. Spending at a young age teaches children so many lessons. First, how to identify quality. Some items are great to buy at a dollar store, other items well, you get what you pay for. That $1 toy might not last that long.
They also get to learn how to identify when you are just paying for a brand name instead of quality. Parents can help educate their spender to look at products to see what comes in the box versus what items require an additional purchase, and help them to compare product information so that they can make an informed purchase.
A Note on Work and Earning Money
We are not implying that all children should be sent to the salt mines to purchase all of their wants and needs. Parents are to provide their children with the needed food, clothes, shoes, shelter, items needed for school, etc. We are talking about extra items that the child wants---yet another princess doll/Lego/pair of sparkly shoes.
Parents have final veto on items that are bought with the money the child has earned. If you have rules about video games, then no they can not go purchase that video game that you deemed too violent. Likewise with clothes, jewelry, music, anything. Parents have the final word on what is allowed in the house.
Now how to encourage work and earning money? Stay tuned for next week’s entry on work, how to get them to actually like working, and a little advice on what should be tied to money and what shouldn’t.
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