It’s Called Currency

Most of us grew up in households and were educated in schools where we didn’t learn about money. We were never taught how to budget, how to balance a checkbook, how to save for the future, how to invest for retirement, or any of the other “money basics” that help us to get along in the world. For the most part, we have stumbled through those lessons ourselves, making our own mistakes and hopefully learning something along the way. Fortunately, we have the opportunity to break that cycle with our children.

If you currently give your children an allowance, I want you to think about why you give them allowance. Many people do it simply because it is expected of them as parents. Our social conditioning says “kids get allowances” so that’s what we do. But don’t miss a tremendous opportunity for educating your children about money.

Are allowances tied to chores or grades or good behavior in your household? Then you’re not really “making an allowance” for them, are you? Like your paycheck, there is work that has to be done to earn that money. Dave Ramsey suggests that you pay your children “commissions” rather than allowances. This can become one of their first lessons in how to increase the cashflow in their lives. These early lessons tend to stick, so make sure you’re teaching the right ones.

Children should not be paid for every single chore they do around the house. As members of the household, there is basic work they have to do because they live there. Period. If they don’t do it, then they don’t get extra privileges. They aren’t allowed to talk on the phone or play on the game console or surf the internet when they don’t do their basic chores. Commissions are completely separate from these chores. By basic chores, I’m talking about things like putting their dirty dishes in the sink or dishwasher after they eat, or picking up the stuff they dropped by the front door when they came in from school, or bringing their dirty clothes to the laundry room on wash day. Most basic maintenance things are not commissionable.

Commissionable chores include washing the dishes, cleaning their room, mowing the yard. You’ll need to look at your household, the number of people in it, and the daily and weekly work that can be shared, assigned, or delegated. Do you expect your child to return the trash can from the curb every week? Do they have to clean their room and to what standard? Can they take on extra chores to earn extra commissions?

Be reasonable in your expectations. A six year old won’t be able to remember all the steps in a complex duty, nor will they have the strength for heavy lifting. But they understand getting a quarter for helping you put away the groceries. A teenager. on the other hand, should be able to remember to mow the yard every week and handle the associated duties, including telling you that the gas can is empty. You can choose to pay them for daily maintenance items when they’re younger so they have ample opportunities to learn about money. As they grow and mature, pay higher amounts for more complex work and simply expect the basics. After all, when they live on their own, no one will pay them for putting their dishes away.

My main point here is that you should teach your children about earning money with an eye to their future. If you make allowances for them when they’re young, you’ll set up the expectation that the world will make allowances for them, which simply doesn’t happen. Help them to learn that work results in cashflow. With any luck, they’ll figure out a smarter way, invent and patent a tool for it, and reap the rewards for the rest of their lives.

What kinds of experiences have you had with receiving or paying allowances in your life?

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