PF Blogger’s Allowance Policies
Nickel recently wrote about how he’s tweaking his allowance system for his two kids (seven and five) and I think it’s a very interesting read. All this was spurred on by JLP’s article on how he invested part of his children’s allowance in Microsoft. The point of all this is that you want to teach your kids about finances before they have to brave it out into the real world (and rack up thousands in debt). This is where I think folks can benefit the most from the Personal Finance Blogger community - getting an inside look at how other people do things, without having to ask! 
I don’t have any kids so I’ve never put too much thought into what the allowance policy would be but I know my first thought wouldn’t have had aspects in either of their plans and would’ve mirrored my own childhood plan - no set weekly allowance, you were paid for performance (chores, grades, awards, etc). This then opens the cans of worms where people say kids should want to perform well because it feels good, not because they are being paid… well, to that the relevant response is that people work hard primarily because they want to be paid (work satisfaction is still important).
Anyway, regardless… These are the two things I loved about their plans:
1) Tax - JLP has a 10% tithe, Nickel forces a 10% donation. This mimics how taxes work in real life and, in Nickel’s case, instills a sense of civic responsibility at an early age (very admirable).
2) Forced Savings - JLP forces 50%, Nickel readjusted his from 60% to 20%. With recent discussion (and not so recent discussion) about how folks aren’t saving enough money.
The forced savings means you can show them their bank accounts (adding an account on ING is really easy), they can see their interest accruing, they can decide they want to buy a CD or some stock, and they get to learn about personal finance (the ultimate goal of the allowance idea anyway).
All things being equal though, I’d rather be JLP’s kid (really though, I’d rather be Madonna’s kid…) though because the allowance calculation appears to be $1/yr while Nickel’s awfully stingy only giving out HALF of that! I’d suggest to Nickel’s kids that they should brush up their résumé’s and see if they can negotiate a raise or something.
Do you have kids or did you yourself have an innovative and educational allowance policy?
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There are 5 comments, add your thoughts now!
Actually, the amount that they’re saving hasn’t changed - it’s still 30% (not 20%) going into the bank for the long term. So 40% is effectively untouchable (30% long term savings + 10% charity). All we did when we revamped things was to combine their short term savings and their spending money into one pot (30% + 30% = 60%). The short term savings was essentially spending money in the first place, it’s just that it was meant to force them to save up for somewhat bigger items. Now they have to make the decision to spend vs. save for a bigger item on their own - to me the tradeoff between instant gratification and saving up for something that may be a little ways off in the future is an important thing for them to learn about. And yes, JLP pays more. BUT… I’ve got four kids. While only two are old enough for an allowance right now, I don’t want to end up in the poorhouse every allowance day when the youngest two join in. And don’t tell my kids this, but I’m open to well-reasoned re-negotiation of their contracts.
fivecentnickel.com
We have 2 kids, 2 year old and 5 year old. The both (and I mean this, seriously) LOVE to do their chores. I know, it’s crazy. They like to pick up their toys and the older one likes to make her bed, etc. So, we haven’t really gotten to the stage of “paying” them for their “jobs” around the house, but when we do, this will be the breakdown:
10% tithe (to our local church)
5 % optional offering
15 % savings
70 %…whatever they want
We will buy their necessities, and this will be money they can use for “wants”
ncnblog
I don’t have kids myself, but I think my parents had some ok ideas (of course at the time I thought they sucked!)
When I was little, I had a small allowance (10 or 25 cents a week) that was given to me to spend on whatever I wanted. But my father also kept an account of another 25 cents a week that could be spent on books.
As I got a little older, if I wanted something major like a bike, I had to save money from my allowance and odd jobs and babysitting for part of it, and they would match the amount I’d saved, or maybe double that amount.
I had a savings account, and any birthday gifts or other money I received went in there, and I was allowed to take it to the bank teller myself and see the interest they’d note in my bank book.
From my earliest memory, it was just understood that my savings were for college.
When I was a kid, I had 4 coffee cans that my mom had me decorate with shelf paper. They were split into charity, short term savings, long term savings, and free-to-spend. I don’t remember how much I was supposed to save. I typically would save up a lot but then buy relatively big ticket items after I had plenty of time to save. I did save a few thousand dollars in my savings account though, which I was allowed to touch after I went to college but almost never spent.
[...] The best takeaway from this all is an excerpt about John D. Rockefeller, oil magnate, and his allowance strategy with his kids. The kids worked for all they earned above a base salary of a quarter or so, then 10% went to charity, 10% went to themselves, and the remaining 80% was saved. This mimics some of the allowance strategies by some of my fellow bloggers. [...]
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