Kids & Money

    That Age-Old Allowance Question

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    Allowance is often defined as a share or portion allotted or granted.Interestingly, the next definition you see is an imposed handicap. Funny how these two meanings interact, because giving your child an allowance purely as a function of the first definition may impose the second – a handicap that affects your child’s ability to manage money in the future. The reality is that labor produces fruit. No labor, no fruit. When an allowance is given based on a child simply existing, an attitude of entitlement develops with little concern for money or how it’s handled.

    In my household, which I sometimes call Fritterville, my daughter has certain chores assigned to her just because she is blessed to have a roof over her head. This creates in her a sense of belonging because she is a contributor to a smooth-running household. She cares how tidy it is and feels good knowing that she’s helped. The hidden lesson involves developing a sense of ownership as she cares for her belongings and learns responsibility.

    Allowance comes into play when she does chores beyond the scope of her standard household assignments. We have a list of extra chores that she can choose from and each has a monetary value attributed to it. Just as in life where different career choices pay different salaries, so do chores. For instance, folding laundry has less compensation than pulling weeds. She gets to choose what interests her, or not, and is compensated for her choice. Mind you, sometimes she goes weeks without selecting anything. Later, when we are out shopping, I hear, “Momma, can I have such and such?” My reply is, “How much money do you have?” Typically she replies, “None.” To which I say, “Oh…” End of conversation. Usually her chore list gets revisited and work quickly begins anew.the experience – as well as the consequence or reward for past choices – gives her a financial reality-check without me being perceived as the adversary.

    When extra work earns extra allowance, four things follow in Fritterville.My daughter must tithe, save, save to spend, and designate the remainder as her wallet money. Save and save to spend are different. While a savings is set aside for undetermined things that the future may hold, saving to spend is accumulating money for specific items that she wants but needs additional money to buy. We have established percentages now, but when she was younger we talked about how much to put in each category. I kept the learning process fun and tried to be creative as allotments were determined.I also let her pick from her heart, and she surprised me on several occasions when she gave much larger portions to campaigns at church than I expected.

    Another good practice is to pay your children in small bills so they can practice separating money into different categories.Don’t complicate the savings piece with a bank account until your child is older.And when they are younger than ten, I suggest holding their money in your desk so you can police their desires and make them think before succumbing to impulse spending.

    You’ll be pleasantly surprised how many great life lessons develop from something as simple as an allowance.Children are thirsty to learn about everything, and at an early age you can nurture them to respect and manage money in ways that last a lifetime.

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    Angie Shay
    Angie Z. Shay has worked in the financial services industry for more than 22 years. She is president of THE PATH Financial Strategies, LLC. Angie Shay is a financial adviser with Eagle Strategies LLC, a Registered Investment Adviser and an indirect wholly owned subsidiary of New York Life Insurance Company. THE PATH Financial Strategies, LLC is not owned or operated by Eagle Strategies or its affiliates. Neither THE PATH Financial Strategies, LLC or Angie Z. Shay provide tax or legal advice.