Intentional Parents

It was Sunday morning. A few minutes before we left for church we performed the weekly ritual. Four-year-old Sarah came into our room and asked, “May I have my allowance?”

“Yes, you may,” we replied. “Just a minute.”

We went to the coin jar and dug around until we found three dimes. These we carried to her room and handed to her one at a time. One went into the purple and pink ceramic turtle bank for savings. One went into a little Tupperware container that had a handwritten label taped on the top: Spending. The last one went into a little plastic coin purse that was sitting on top of her Bible. This dime would accompany her to church because it was for giving.

From ceramic turtle banks and plastic coin purses grow great lessons. It doesn’t matter how much money a person has; if he doesn’t know how to handle it wisely, he’ll soon be in trouble. Intentional parents must give their children the gift of financial know-how, and it’s best to learn money principles at a young age so those principles can become habits.

One of the easiest ways to start is with an allowance — an amount of money that you regularly allow the child to have as part of his or her training process. Allowances are not mad money to be spent as the child indulges a whim. An allowance is a tool for financial training. This tool can help you teach you children at least four financial principles.

1. Do not live beyond your income.

   Having a set allowance limits the amount of money your child has to spend on things he wants. He learns that there are alternatives to running to the store every time he thinks he needs something. He can exercise his creativity and make something comparable, or he can embrace the Biblical principle of contentment.

   And by the way, one huge way you can help your child practice contentment is to throw away those pesky catalogs that come in the mail. I vividly recall one year asking the children what they wanted for Christmas and watching them pull out a huge department store catalog, leaf through its pages, and say, “I want that and that and that . . . ” The next year I intercepted that catalog when it arrived and threw it in the trash. When I asked the children what they wanted for Christmas that year, they had to think a long time before they gave me a couple of possibilities.

   Creativity and contentment can help you live within your income.

2. Plan ahead for upcoming expenses.

   Allowances can also teach children to plan ahead financially. Help the children think through any upcoming expenses, such as gifts or financial responsibilities you have given them. (For example, when the girls grew older we gave them the responsibility of buying fish food for their pet fish.) Work out the figures with the child, taking into account how much spending money she receives each week and how many weeks will go by before the expense happens. Help her calculate how much money she will have when the day arrives and how much — if any — extra money she will have left or need to earn by doing extra jobs around the house.

3. Impulsive buying can lead to problems.

   Another important financial principle your child will learn is the perils that come from impulsive buying. You might consider the two-week-wait rule of thumb: when the child thinks he must buy a certain item, tell him to wait two weeks first. At the end of those two weeks ask the child whether he still thinks he must buy the item. Some times he will say yes; many times he will have lost interest in that impulse buy. This simple exercise can nip impulsive buying in the bud.

   As the child learns to make intentional, rather than impulsive, purchases, he will also be ready to learn about comparison pricing. Set the example of knowing what you’re planning to purchase before you leave home and doing your homework to find the best price. Then talk your child through your reasoning as you consider what would be the best value.

   And if the child yields to impulsive buying, then discovers he doesn’t have enough money left for what he had planned or for an unexpected expense, don’t bail him out. Better that he learns this lesson now than when he has a family to support.

4. Budgeting can help you handle your money wisely.

   We all have to manage the tug on our money from various directions: necessities, gifts, savings, sales, mail offers, giving opportunities, not-so-necessities. An allowance can be a great tool for teaching your child the principles of budgeting. We started our children with a simple three-category budget: Saving, Giving, Spending. Whenever we gave them their allowances, they divided that money into the three containers that represented those three categories. Then as they grew, we could introduce sub-categories to further detail their budgets. We’ll talk more in a future e-letter about budgeting and how teaching financial principles can develop as the children grow older.

For now, keep in mind that a thirty-cent allowance may seem trivial, but it can be used to teach tremendously important financial principles. After all, the same principles apply whether it’s thirty cents or thirty-thousand dollars.

Q & A

Q: Do you give allowances based on completed chores?

A: Yes and no — allow me to explain. Each child receives a set amount of money weekly that is not tied to completion of chores. Chores are simply one way of serving fellow family members; they will always be around and should become a habit, not a motivation for money. (I don’t remember getting paid for the thousands of meals I’ve cooked, truckloads of dishes I’ve washed, mountains of laundry I’ve folded, and miles of carpet I’ve vacuumed. Do you?) However, we do post a list of extra chores that the children can choose to complete for extra money. These are chores that need to be done only once in a while, not every week — for example, cleaning the refrigerator or vacuuming the inside of the van.

So to summarize, the children have chores that they are required to do simply because they are part of the family. They do not get paid for those chores. They receive an allowance each week independent of those chores. They may, however, earn extra money by completing incidental chores that we have listed along with the amounts we will pay for a job well done. Those extra chores are not required; they are simply available if the child wants some way to earn extra money.

Q: How much money should an allowance be and at what ages?

A: First, let’s talk about "at what ages." That decision is based on when the child can comprehend the value and use of money. My seven-year-old, who has autism, doesn’t yet comprehend the concept of money. With the other children, I think we started around age four or five. So don’t get caught up in any particular age, watch for readiness.

Now, for the "how much." When we started, we gave the child three dimes each week. One went into a savings container, one went to church for giving, and one went into a spending container. We would increase to three quarters at around age seven or eight. We just found it easier to accomplish the visual budgeting with three similar coins instead of trying to teach a preschooler about percentages.

Once they reached age ten and up, we started teaching them to use budgeting software on the computer, introduced percentages, and stopped giving them the actual cash. At that point, we simply supervised their entering the weekly amounts into the correct ledgers (Spending, Giving, Saving) and oversaw the "keeping of accounts."

Don’t get hung up on the amounts we used. The amount of allowance you give your child depends on your financial situation as a family and what you expect the child to use the allowance for. Some families give their children larger allowances but expect them to use part of it to pay for their own clothes. We usually keep the amount small but are ready to partner with the children in purchasing significant gifts (or supplies to make significant gifts) so as not to frustrate or embarrass them.

This entry was posted on Saturday, October 1st, 2005 at 6:44 pm and is filed under Home Skills, The Five Gifts of Intentional Parents. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.