Seeking savvy input on structuring allowances for kids: first experience did not work!

[Anonymous]

Would love input from those of you who have had success structuring allowances that teach real money management. I've given my eldest allowance for a few years, but I'm not happy with how it's worked out because I feel like he has too much money to throw around. I think it's because I didn't require him to pay for enough things out of his allowance. It could also be because things are tight for the family and so I'm super sensitive to his spending which I perceive as wasteful.

What do your kids pay for out of their allowances? Their friends' birthday presents? Movies out with friends? School yearbooks? Anything they want?

Here's what I did in the past: $ per year of age, with a % to savings account and another % to charitable giving. At age 9, he received $6 spending and $1.50 for saving and charity. At age 10, things were tight for us financially due to diminished income, so I kept his spending allotment the same with $6 to spend, $2 for charity and $2 for savings. I paid for friends' birthday gifts up to $30, but with about 10 birthday parties a year, that adds up! I also paid tax on his purchases.

Now I need to start his little brother on an allowance too and I don't want to make the same mistakes.

Here's what I'm thinking. Would love any tips from those who've made it work!

Age 11: $6.75 spending (I had told him last year he would have a raise) with $2.00 charity and $2.25 to savings.
He will pay for: any miscellaneous toys he wants (as always), TAX on purchases (this will be new), BIRTHDAY gifts for his friends (also new), movies or Dave n Busters, etc. out with his friends, souvenirs at museums, amusement parks, etc. He also sometimes chooses to use his money to buy a snack I would not normally buy. For family vacations (2 per year), we will give $15 extra in spending money to both him and his brother...so this is another $60 out of our pocket on top of allowance which will be $11 x $52 or $572 per year, even though under the plan $221 of that money will go to savings and/or charity, leaving him with $351 to spend on birthday presents for friends, movies, etc. He also gets gifts of money from his aunt and uncle once or twice a year, and he usually works at raking leaves, shoveling, etc, to earn extra money.

We pay for: sports-related expenses, extracurriculars, usual school trips, clothing, lunch money, food (of course!), etc.

For the younger brother, we'll do the same split between savings/spending/charity but as it will be much less money, I'm wondering if it is reasonable to have him pay for birthday presents, when he'll only be getting $4 per week. I could perhaps subsidize some of the birthday presents, but then the older boy will no doubt make comparisons. I'll also pay tax on his purchases until he is 11.

Thoughts? Links? Thanks so much!

[Anonymous]

Is the allowance tied to anything?

We do 1/3 to each of: spending, saving, and charity.

However, if monthly chores (we have a chart) aren't accomplished, there is NO allowance. We don't pay partial amounts. I consider it like a salary. If I didn't do my job for the month, I don't get paid, so neither does DC.

I don't make DC pay for birthday gifts for other children. But I do make DC pay for items at the store, tax included.

Monetary gifts from family go directly to savings. No questions, no discussion. We give a bonus for vacations if all chores have been up to date prior to that in order to allow for extra spending for crap from gift shops.

[Anonymous]

Anonymous wrote:Is the allowance tied to anything?

We do 1/3 to each of: spending, saving, and charity.

However, if monthly chores (we have a chart) aren't accomplished, there is NO allowance. We don't pay partial amounts. I consider it like a salary. If I didn't do my job for the month, I don't get paid, so neither does DC.

I don't make DC pay for birthday gifts for other children. But I do make DC pay for items at the store, tax included.

Monetary gifts from family go directly to savings. No questions, no discussion. We give a bonus for vacations if all chores have been up to date prior to that in order to allow for extra spending for crap from gift shops.

This is OP. Before giving allowance, I took an allowance management class at PEP --they really stressed NOT linking allowance to chores. My kids have chores and they get fined a taxi fee if they miss the school bus and we have to drive them.

[Anonymous]

OP, my DD is 10, and she gets 75 cents per week. I believe a dollar per age is way too much, because I do not believe that a five year old truly understands the value of one dollar (or how many dimes or quarters make up one dollar, let alone five).

I pay for everything, basically. Being that we GET charity, I don't worry about her donating money to charity but am not sure how I'd feel if we were rich enough to not receive it. Also, being that I pay for everything, she saves her allowance all the time so differentiating between spending money and savings is useless for us.

She wants to be allowed to sign herself out of school with her best friend and stop at a nearby cafe for a snack before heading home, and I am thinking of telling her she'd have to pay for that snack out of allowance.

[Anonymous]

If he gets $6.75/wk for spending, would birthday presents come out of savings?

Birthday presents run $20-$30 for us, so that would be 3-5 weeks of his spending money for a present. If you are part of a culture where home made presents are appreciated (as my child has gotten older, that has become more of a "thing" and the kids regularly exchange little home made presents rather than store bought stuff) then that's not such a bad thing. Otherwise, I could see your son's entire spending budget going to buying store bought birthday presents.

Maybe split the cost half-half initially?

[Anonymous]

Anonymous wrote:If he gets $6.75/wk for spending, would birthday presents come out of savings?

Birthday presents run $20-$30 for us, so that would be 3-5 weeks of his spending money for a present. If you are part of a culture where home made presents are appreciated (as my child has gotten older, that has become more of a "thing" and the kids regularly exchange little home made presents rather than store bought stuff) then that's not such a bad thing. Otherwise, I could see your son's entire spending budget going to buying store bought birthday presents.

Maybe split the cost half-half initially?

This is OP. I like the idea of splitting half-half, then he has some skin in the game too.

[Anonymous]

My kids get commission not an allowance. They have set chores that they must do regardless. If they want to earn money then we have a set of things they can do in addition to their choice to earn some money. Each item has a set amount. Often my oldest child finds additional things to do to earn more commission because she has an eye on an item. Whatever they earn they must save a portion and give a portion. If they do not work they do not get commission. And like I said, regardless, chores are done each week.

I do not give them money just because. I want them to learn how to earn money.

[Anonymous]

Anonymous wrote:Is the allowance tied to anything?

We do 1/3 to each of: spending, saving, and charity.

However, if monthly chores (we have a chart) aren't accomplished, there is NO allowance. We don't pay partial amounts. I consider it like a salary. If I didn't do my job for the month, I don't get paid, so neither does DC.

I don't make DC pay for birthday gifts for other children. But I do make DC pay for items at the store, tax included.

Monetary gifts from family go directly to savings. No questions, no discussion. We give a bonus for vacations if all chores have been up to date prior to that in order to allow for extra spending for crap from gift shops.

We do something similar. We don't pay for the kids to do standard weekly chores, that is an obligation for being part of the family -- failure to do chores can result in parental stares of guilt, loss of computer etc. Allowance is a benefit of being part of the family. We try not to tie the two together directly, because they have to do the chores whether they get paid or not. Unusual tasks, annual garage cleaning, raking leaves, shoveling the snow usually results in extra money and we come up with ways to earn extra money before vacations so that they can have some walking around money. Gifts from family are to be used at their discretion, unless the gift giver adds a proviso that this is for college or savings. We don't require savings, but we encourage it by paying interes on savings at the parental savings and loan.

Budgets are set for clothes, birthday gifts for other children and, while we have not done this in the past, I think we will set one for charitable giving.

[Anonymous]

My kids get commission not an allowance. They have set chores that they must do regardless. If they want to earn money then we have a set of things they can do in addition to their choice to earn some money. Each item has a set amount. Often my oldest child finds additional things to do to earn more commission because she has an eye on an item. Whatever they earn they must save a portion and give a portion. If they do not work they do not get commission. And like I said, regardless, chores are done each week.

[Anonymous]

Anonymous wrote:My kids get commission not an allowance. They have set chores that they must do regardless. If they want to earn money then we have a set of things they can do in addition to their choice to earn some money. Each item has a set amount. Often my oldest child finds additional things to do to earn more commission because she has an eye on an item. Whatever they earn they must save a portion and give a portion. If they do not work they do not get commission. And like I said, regardless, chores are done each week.

Chores are done and they are not paid for doing them. They are to be done regardless of what is going on.

[Anonymous]

Anonymous wrote:Would love input from those of you who have had success structuring allowances that teach real money management. I've given my eldest allowance for a few years, but I'm not happy with how it's worked out because I feel like he has too much money to throw around. I think it's because I didn't require him to pay for enough things out of his allowance. It could also be because things are tight for the family and so I'm super sensitive to his spending which I perceive as wasteful.

What do your kids pay for out of their allowances? Their friends' birthday presents? Movies out with friends? School yearbooks? Anything they want?

Here's what I did in the past: $ per year of age, with a % to savings account and another % to charitable giving. At age 9, he received $6 spending and $1.50 for saving and charity. At age 10, things were tight for us financially due to diminished income, so I kept his spending allotment the same with $6 to spend, $2 for charity and $2 for savings. I paid for friends' birthday gifts up to $30, but with about 10 birthday parties a year, that adds up! I also paid tax on his purchases.

Now I need to start his little brother on an allowance too and I don't want to make the same mistakes.

Here's what I'm thinking. Would love any tips from those who've made it work!

Age 11: $6.75 spending (I had told him last year he would have a raise) with $2.00 charity and $2.25 to savings.
He will pay for: any miscellaneous toys he wants (as always), TAX on purchases (this will be new), BIRTHDAY gifts for his friends (also new), movies or Dave n Busters, etc. out with his friends, souvenirs at museums, amusement parks, etc. He also sometimes chooses to use his money to buy a snack I would not normally buy. For family vacations (2 per year), we will give $15 extra in spending money to both him and his brother...so this is another $60 out of our pocket on top of allowance which will be $11 x $52 or $572 per year, even though under the plan $221 of that money will go to savings and/or charity, leaving him with $351 to spend on birthday presents for friends, movies, etc. He also gets gifts of money from his aunt and uncle once or twice a year, and he usually works at raking leaves, shoveling, etc, to earn extra money.

We pay for: sports-related expenses, extracurriculars, usual school trips, clothing, lunch money, food (of course!), etc.

For the younger brother, we'll do the same split between savings/spending/charity but as it will be much less money, I'm wondering if it is reasonable to have him pay for birthday presents, when he'll only be getting $4 per week. I could perhaps subsidize some of the birthday presents, but then the older boy will no doubt make comparisons. I'll also pay tax on his purchases until he is 11.

Thoughts? Links? Thanks so much!

Perhaps this is too compartmentalized? Paying the tax on purchases seems like a bit of a pain logistically, and perhaps takes away the sense of ownership that comes from paying for items from your own funds.

Allowance could be a good way to teach kids to save and budget, but the more control you retain, the less they are able to learn using their allowance. Growing up, saving was always emphasized, so my allowance mostly went into a savings account, though I did use it to buy myself some things my parents wouldn't otherwise pay for. I ended up having a good savings account that I used in college to pay for clothes and incidentals.

[Anonymous]

$1 per year seems awfully high! I pay .25 per year. I also don't require that they save or give to charity. While I model it, I don't require it because I believe giving should come from the heart. I don't believe in forcing someone to give their money to charity.

For birthday gifts from relatives such as grandparents, we decide on an amount they can keep. Usually one set gives $100 for a birthday, so I may let the child keep $20 to buy something while the rest goes in a savings acount.

With their money the kids are allowed to buy things I feel is beyond what I would buy them - toys or candy while we're out, for example. The purchases still have to be approved. Or they may use it to go to a movie with a friend or to save up for a big item. It's basically for "extra" things.

[Anonymous]

I think what you have been doing is fine - it's the same as we do. I think, when you give the kids an allowance, you have to back off on their decisions for spending it because that's how they learn. They learn that they can save for something really good.

My sister did the same thing with her 4 kids - 2 of which are over 17 now. At first, they spent it all on silly stuff. But then they saved up for big items (computer/ipad-type things).

I would definitely not make the kids buy birthday gifts for their friends. But I think you're spending too much on birthday gifts. I think it should be closer to $15-20.

[Anonymous]

By giving no allowance, your kids will come to you and say then need X amount because they need/want to buy Y. I think when they are younger than teenagers it just works better, and is much easier on the parents. Otherwise too many grey-areas

[Anonymous]

No money for chores.
We budget for other things. $20-30 for gifts. For clothes they have a set budget, and we do it on line. Athletic gear we pay for (budget blower!)
Summer camp they have a budget. This year they choose 2 weeks of day camp over one week of overnight. I found that giving them a dollar or two here and there every week did not work, and where they really needed to learn to budget was with the clothes and shoes. So if I gave them the clothes and shoes budget in cash, that would be much too tempting. We have girls.
Also, although they need to learn, the things they bought at the mall were so awfully low quality, and the sizes of the things you want are always sold out.