We are trying to teach our kids to be entrepreneurial.

So far, they have done things like collect beer and wine bottles from blue boxes, re-sell farm eggs to our neighbours and dog-sit.

We also encourage them to sort any money they have into three piles: first is for giving away, second is for saving and the last one if for spending.

I also make a point of letting my kids know about the organizations/people that we support, showing them our banking statements and letting them about the opportunity costs of our purchasing decisions(we don’t go out to the restaurant every week so that we can enjoy a camping trip in the summer).

Both boys had to complete their weekly chores to get their allowances. Once they were ten they were to complete without nagging or no allowance. FAIL. Neither would so they were nagged, had to do the chores anyways and lost the allowance.

Fast forward a couple years and oldest gets a job at McDonald’s and is great with his money and categories. Adding some, removing some once he had a girlfriend etc.

A couple more years and son number 2 who has been constantly bailed out by daddy has a job. Mommy has to create the categories including one to pay off debt! It’s been three years, debt is gone, he is saving for a car but has been known to ‘steal’ from himself! He sells things people have given him and buys ‘junk food’. groan… Each child has their own personality and it doesn’t always ‘catch’ when you are teaching. My hope is that as he gets older he will finally get it!

Now he has 5 chores and earns $5 per week. His chores are not too time consuming and are more about good habits then work: Make bed, clean room, brush teeth, brush hair and get himself dressed. As he gets older we will add harder chores.
I loved introducing the allowance b/c it gave me an immediate response to him when he woould ask for aomething in a store.
“Mommy I want this.”
“Did you bring your money.”
“No.”
“Then next time you can bring some money and buy it for yourself.”

This is almost always the end of the conversation, and he usually forgets by the time we get home that he even wanted something, lol.

Randalynn

In his case it was a huge success. It took 5 weeks for him to save up and he only ever wanted to go to the mall once every 5 weeks – we paid the rest. He was never in doubt as to what he wanted to do with his allowance, only which train to buy each time.

When he turned 6 we switched to a dollar per year of life, but now the money had to be divided up into three equal buckets. One third for saving for university, (he learned in JK that this was necessary to become a palaeontologist) one third for charity which was for our local church, and one third for spending which at that time still meant Thomas the Train. We have kept with that dollar per year of life ever since.

His 14 year old sister has gone through a similar allowance process. In both cases we have emphasized that they each have chores that must be done. There used to be lists on the fridge that had to be checked off, but now everyone knows their chores and that they are not paid by chore, but that chores must be done.

Several years ago at Christmas my daughter was very disappointed that she did not have the money she had hoped for to buy presents for her older brother and for my wife and myself. I casually suggested that if she saved a dollar a week, she would have $52 for Christmas next year. The following week when I doled out the allowance she had a new tin for her money. I asked what it was for and she proudly announced that it was for next Christmas. Even since then she has faithfully put that dollar a week aside, and recently she has even topped it up with a percentage of the birthday cash that comes her way. (As she is a June baby, I am impressed that she could look that far ahead and realize that money saved now will be useful 6 months away.)

In closing, give your kids allowance, discuss money openly and add more detail as time passes. My parents did it with my brother and I and we have both been very successful in managing our finances. My son had his first job last summer and saved every single penny for university so I am fairly confident that it is working with my children too.

What they see us do is perhaps more important than what we tell them they should do.

We tied allowance in with what we termed a “Responsibility Encouragement Program”. In essence, we focussed on some interests the kids were motivated by (money is only one component) and then setup what became an increasing complex game to encourage them to develop in these areas. You can check out the details on an old blog post at http://howjo-gang.blogspot.com/2004/07/responsibility-encouragement-program.html. Basically it consisted of using a base allowance, merit and demerit points, and computer and video time to encourage the kids to participate in a variety of family activities and promote a healthy life balance.

Of course, we started simple and added complexity as the kids grew older.

Currently their all teenagers or older. Now they manage their own little business ventures, and participate in managing the family investments.

Key learning for us. Know your kids, be flexible to adapt and experiment, be clear about your values.

As for the amount of allowance, we feel that the rule-of-thumb of $1/year of age/week is too much. We give our kids (ages 15 & 12) about half that amount per week. We’ve created a couple of tight-wads in our kids but they are both surprisingly generous to charities and both of those characteristics make us proud.

I’m finding it difficult to find a ballance between teaching that work equals money but also teaching to make your money to work for you so you don’t have to work into your old age while at the same time teaching that there is work that has to be done on a regular basis just so you are carrying your own weight.

I think that what we are going to do is have a set group of tasks that must be done just because everyone needs to be a contributing member of the family, then other things that are extras they can choose to do and depending on what they do in a given week the allowance will vary.

Beyond that I think we will let them choose how much to “invest” and I will give them maybe 10% on the money they invest and build a plan with them that shows the benifits of investing and how it will change based on how much they choose to invest.

The worry obviously is that it may all be too much for a five year old to take in. We will give it a try and if is all fails then we will have to revisit it.

I’d love to hear some opinions and other ideas.

Steve

Good points. I will likely make adjustments as a go with respect to what chores should be paid, while others are just expected. I understand what you are getting at, but I do like the idea of teaching kids about doing work equals money.

I tend to primarily think of allowance as a means to teaching. It’s all in the lessons you want to give, so each family is going to find what works for them.

Tim