Anyone tried giving kids their own 'salary'?

[Logan]

I read an article when my first was little about teaching your kids about money from the very beginning. It said you should give them a salary based on your income and how many family members you have etc. Out of that they pay their portion of the mortgage, food, bills, savings etc. And the rest that is left over is their money. This way they can see the value of money and how it works in the real world. It really resonated with me, and I am about to start implementing it with my kids and wondering if anyone has tried it? Any advice? What did/didn't work for you with it?

Thanks 

[Ygle]

I have to admit I'm very strongly opposed to 'allowances' in general, however this idea actually makes sense to me!  My only issue with it is that it might become overly complicated and there may even be arguments down the road over usage of various things (but then maybe that would be a good learning experience for dealing with future roommates or other shared living situations?)   We sort of do this to a certain extent in that we all go over the budget together and make decisions together including what to do with any 'extra'... it really does help with the kids having a much better understanding about all the choices they make (like whether to turn up the heat or put on extra clothes, or whether to get a new car or go on vacation, or to help out around the house to get a project done versus paying someone else to do it and have more play time, or if a more expensive pair of pants is really worth it, etc.) since they get to help make them.  I could be wrong, but I really feel this is why my kids almost never ask for anything and have a great appreciation for or make the best use of what they do have (they also give mom and dad grief when we try to splurge on anything, heh, that wouldn't be a problem with this idea of splitting the money though). 
 

Oh, one issue I just thought of... I know in our family some people cost more... whether it's due to health or being an odd size, having a bigger appetite, or just different needs, etc.... and I would hate for someone to feel like they get a smaller share for things outside their control which is why I guess I like having it all pooled together because then the one person with the high cost for whatever reason knows they have all our support, we are making this decision to spend together and they don't have to ask or borrow for help.  Not sure how others feel about this in general but I know for me I've rarely found equal to be fair so that would be one hesitation I would have with just splitting the money. 

[Logan]

Thanks for your reply. I also don't think allowances are a good idea. 

You bring up a great point for me to think about with the equality thing. At the moment we are all pretty much equal in our needs, a lot for one person is made up for a little by them in other areas, but Im sure it wont always be that way. The good part is we can sort of make it up as we go along and change what is not working.

I just planned that each family member would just pay their percentage- so if there are four people each person pays 1/4 of the weekly groceries, for example. That way the person who eats more wouldn't be losing out. As I feel food is a family expense and part of living in that family. Same with bills etc. Hopefully things would tend to even out, but if things weren't working we could adjust the way we do things. How do you make things even among your family members? Is it a group discussion and agreement?

And how would you recommend keeping it more simple? (I dont like complicated :)).  

[Poddi]

I'll never do that.  I want my kids to enjoy being kids and not worry about money and expenses when they're little.  Maybe when they're 14 or 15 they can learn about money management.  If my parents did that we'd be arguing all the time.  My brother and I already argued about everything when we were little. 

I don't really understand the need to teach kids money management so early.  They don't really need to know until they're teenagers, and it's not so complicated that a few books and a class or two can't cover most of it.  I took two personal finances courses in school and by the end of it I already knew more than my parents ever learned about financial stuff.  It feels like, I don't know, like learning to cook, or learning to sew.  It's very useful to learn them, but it's not such hard work to learn them that you need to devote many years.  If your kids have proper self-control and can do math, they'd master money management easily.

[MeepyCat]

I absolutely would not do this.  I have a bunch of problems with it.

1.  A salary isn't money for nothing, it's money given *in exchange for work.*  This thing where you just give them money isn't a salary and shouldn't be described that way.

2.  Sorry to be all dictatorial, but in my family, the parents are in charge.  We listen to our children, we cherish them and teach them and want them to think for themselves and become strong adults, but while we're all on the way there, it is our job to make certain decisions and to lay down certain kinds of law.  For example, my DH and I decide where we live.  We decide where the kids go to school (public or private, which school within the district).  We take input, but we have final say.  We say what jobs we have.  We say how much money can be reasonably spent on vacation, and what has to go into retirement and educational savings.  If my kids came to me and said, hey, we've talked this over, and we want more spending money, so we're enrolling ourselves in the closest public school, and we think we should consider moving to a lower cost of living area, and by the way, we don't think you're making the most advantageous use of your business degree, I'd be setting them straight in a hurry.  I refuse to set up any kind of arrangement that implies that my kids have more control of our household than I am actually willing to give them.

3.  I don't want to encourage accounting between family members.  I don't want one kid to be bugging the other to eat less to keep the grocery bills down, for example.  

4.  Some of the items on the list are things that directly benefit me and not my kids.  Savings is the big one.  We put money in savings for emergencies, education, and retirement.  And for things like new cars, roof repairs, etc.  The house doesn't belong to the kids, they aren't getting a return when we sell it, so what's their rational incentive to repaint and reshingle?  Why should my kids be paying into *my* retirement fund, or helping to save for *my* eventual new car?

[zebra15]

I agree with Meepy.

Salary is money earned for a job. DS does not have a job. With a salary comes taxes, withholding and a whole mess of other things.  Im also not willing to share my income numbers (or lack thereof) with my kid(or anyone else).  I could totally see my kid shutting down and saying well "I just wont eat, don't drive me anywhere, don't use the electric" etc so he could 'save' his share of the salary.

What happens with medical stuff?? who does co-pays for moms meds? dads er visit? timmys urgent care trip? stuff like that?? 

I really dont think its a good idea. 

Showing a household budget on paper is one thing, trying to run it 6 ways is something totally different!

[PreggieUBA2C]

Why not instead, help your children to monetize their interests? Then, they gain the experience of economic understanding and freedom without the potential for a disaster they cannot handle.

My eldest son is relying on us all to assist in building a small forge this summer. He wants to make and sell fantasy-styled swords, knives, daggers, shields and armour. He has been on about this for three years, and dp and I are on board with setting this up. His brothers are all thrilled with the idea, but it's ds1's passion, so they likely will learn too (we're going to be self-taught), but may not continue. Maybe they will; that would be fabulous too. Dp and I plan to make extensive use of the forge and tools, as well. Ds1's passion is what brought us to looking into it further and gaining an interest in it too. :)

In any case, it seems to make more sense to me to learn economics through necessity rather than a (high stakes) game of sorts. If they do their own work and learn to trade it for things they want and value, then they'll have learned more than most people. Children desire to see their own work, ime, so assisting them in producing it, supports this desire and need.

The divided salary idea seems cold and potentially destructive, whereas what I'm suggesting seems to me to be more in line with how people learn and mature. I don't mean to insult, but children do not have the life experience necessary to be held so fully responsible for the well-being of their families, imo. That's not to disparage the capacity and abilities of children, by any means! I think children are enormously capable, but if they are going to pay for the cart (or a portion thereof), they should have some organic understanding of how to shoe a horse: the salary has no context to a child.

[Logan]

Well, the idea of it is not to teach them anything- if that happens in the process then that's great, but its not the reason I want to do it. The whole point is that we are equal members of this family and I feel we deserve equal rights. I understand that that isn't how all families feel about their children's place in the home.

Setting meaningless allowances seems arbitrary. Whereas if they can see what is coming in and going out and have the choice to decide what to do with what is left over after all necessities they are getting a much more realistic view of money. I feel it would eliminate a lot of the battles between parent and child over wanting more and more allowances/money for things, since they are working with real amounts of money and can see where it is going each week. But obviously I haven't tried it yet 

Sorry if the word salary offended, I was just trying to be clear I wasn't talking about a regular type of allowance. Stay at home moms dont 'work'  yet I would hope they would still have access to the family finances as equally as their working partner. I'm just talking about extending the same respect to my kids....maybe that's too radical 

imo, money management is as much about self-discipline as anything. It takes a lot of wrong choices until we learn to make the right ones. I would rather my kids make the mistakes with money now when the stakes aren't so high. I dont see how knowing about finances is something our kids need to be sheltered from. It's the reason most teenagers don't have clue about money and they have to learn it the hard way in their twenties. 

[MeepyCat]

Originally Posted by Logan 

Well, the idea of it is not to teach them anything- if that happens in the process then that's great, but its not the reason I want to do it. The whole point is that we are equal members of this family and I feel we deserve equal rights. I understand that that isn't how all families feel about their children's place in the home.

Setting meaningless allowances seems arbitrary. Whereas if they can see what is coming in and going out and have the choice to decide what to do with what is left over after all necessities they are getting a much more realistic view of money. I feel it would eliminate a lot of the battles between parent and child over wanting more and more allowances/money for things, since they are working with real amounts of money and can see where it is going each week. But obviously I haven't tried it yet 

Sorry if the word salary offended, I was just trying to be clear I wasn't talking about a regular type of allowance. Stay at home moms dont 'work'  yet I would hope they would still have access to the family finances as equally as their working partner. I'm just talking about extending the same respect to my kids....maybe that's too radical 

imo, money management is as much about self-discipline as anything. It takes a lot of wrong choices until we learn to make the right ones. I would rather my kids make the mistakes with money now when the stakes aren't so high. I dont see how knowing about finances is something our kids need to be sheltered from. It's the reason most teenagers don't have clue about money and they have to learn it the hard way in their twenties. 

Logan, if what you want is for your kids to see how much money there is and what it gets spent on, so that they can see how their spending and expenses fit into the household budget, there's no need to divvy up the earnings and then charge them for the mortgage.  Just sit down once or twice a month and have a family discussion in which you lay out the budget.  Or just have you and your partner sit down, but do it where the kids can see and hear and participate in the discussion if they want to, and where you can call for their opinions on those things they reasonably have opinions on.  That's what I plan to do when my kids are a bit older.

[texmati]

I wouldn't have my kid paying for mortgage and food etc. That seems redicuous-- and what would you do when they couldn't pay? evict them? force them into bankruptcy?

I also feel strongly that kids require security and feeling part of the family unit. I don't think they are equal, in fact, I think they should feel taken care of. Talking about how they cost 1/4 of the food expenses I think would put too much pressure on them. I was the kind of kid that would literally try not to eat if I felt the family finances were in trouble.

I do agree with having an allowance that they work for, and having them 'save up' for a certain toy etc. When they are older(teens-tweens), I think it might be smart to have them be responsible for their own clothing expenses. That would require budgeting, and it's painful but not catastrophic when they screw up.

[treeoflife3]

I would absolutely not make a younger child have to pay for expenses that aren't relevant to their currently life/age.  Yes, a child may live in the home but paying a portion of the mortgage makes no sense.  As children, they are guaranteed a home and the parent is meant to provide it.  Same with food.  It is the child's job to eat and the parent's job to make sure they have something to eat.

Of course, children are part of the family and of course children need to learn something about finances prior to it being a necessity, but there is such thing as too much information for some ages.  I don't think childhood is the age to feel stress about having enough to pay for food or the house.  I don't think childhood is the time where they need to be responsible for themselves financially (even if it is technically the parent.)  I also think a lot of kids in that kind of environment would grow up to be resentful for not having a normal childhood.  I know I would have been.

I'm a young 20 something woman who married very young.  I wasn't expected to know a single thing about mortgages or budgeting for food when I was little.  I was however taught that the money my mom had wasn't unlimited.  In fact, for a portion of my childhood I didn't understand that we could buy food without a coupon because my mom only bought with them.  I even got an allowance which stopped once I got a job.  My husband and I are doing well for ourselves and were able to buy a house at the age of 20.  We have no debt other than the mortgage and our car.  We have a decent savings.  We both are probably equally knowledgeable about money... but we never had to even get close to stressing about having enough to pay for our own food or mortgage at the age of 5.

Childhood shouldn't include bills.  Learning how to make smart choices with money.. sure.  but you can learn that without bills.

[TiredX2]

We hope to slowly increase the costs our children are responsible for as well as their allowance over time.  By the time they are seniors in high school, we hope they will be responsible for budgeting their own clothes, school supplies, gifts they give others, entertainment (outside of the family), etc...  This year DD is starting to use her own money to buy gifts for friends.  We (DP & I) are spending the same amount, she is just responsible for budgeting it and taking care of it.  The idea is that by the time she (and then DS) is an adult, they will be use to having to budget over the course of a year, break their money into categories and plan ahead.  BUT, I would not have them pay for anything I cannot deal with the consequences of.  If DD is given a clothing allowance and spends it all, she'll have to deal with not having $ when she needs/wants it later.  But I'm not going to let her learning activity being spending $5K on clothing and not being able to  pay the mortgage for the rest of the year, kwim? 

[PreggieUBA2C]

You could also read The Richest Man in Babylon, or Rich Dad, Poor Dad, play Cashflow for kids, or just talk to your children about money. Money is representative of productivity (hopefully), so I want my dc to first experience trading the products of their work for the representation of or actual products of someone else's work. I think that money is misunderstood by most because they do not consider or understand its function. It's a sort of social shorthand so that we don't have to lug around carts of lettuce and beets to trade for bags of sweaters and engine parts.

Without a direct connection to the principles of human trade, children are left to figure out what money is as though it were a mystery with subjective meaning. It isn't: it has objective value derived of the physical/mental work and time spent, understood as a quantifiable human economy. Without this understanding, how does one determine whether a price is fair for the time/effort expended to obtain the money to buy it?

We are trading the products of our human industry. That's the first lesson. Then how we determine relative value is the next. Then how we wisely leverage our human industry to create wealth, which creates wealth is the next, and on and on. If you want to teach your children about money, it's imperative that you decide what you want to teach them, and that you have a grasp on the subject beyond money in >> money out and savings are good- oh and invest.

Obviously, do what you prefer, but like pps, I think the unequal weight of responsibility (life experience is what qualifies one for increasing responsibility), with the greater weight being on your inexperienced children, is not likely to bring about peace. I don't see how doling out equal portions of the parents' paycheques is any less arbitrary than an allowance. The children did not trade their time/effort/products for it, and worse, they'll be expected to give it right back under pressure! At least an allowance can be blown and then re-saved over time, and eventually used wisely, but it's also a dole. Certainly they won't have household bills in their names, so they'll just have to hand the money back to you anyway. I think this can only discourage them from having reasonable optimism about how they might make their own lives as adults, including how they will use money to their own benefits.

Why don't people encourage their children to come up with creative ways to spend their time and energies so that they can trade for things they enjoy from the time and energies of others? It's so simple. And as long as they keep doing it, they'll learn for real how money works and not have to be subject to synthetic lessons about it. I wish that money had been demystified for me as a child; it would have been so much easier for me to have had real experience with it then, than having to begin my life of money management with student loans, and therefore, debt.

[heatherdeg]

Another great book is Raising Financially Fit Kids.

Let me add another perspective.  I was adamantly opposed to the idea of an allowance, too.  I had taught high school and saw a very disturbing "pay for play" mentality in everything the kids did.  Very "what do I get for doing this?"  Ummm... a GRADE!?!?!    So the idea of paying kids to do chores really did NOT sit well with me.  You do chores because you are part of a family that works together to make the house hold run, tyvm!     I also (personally) have a hard time with laying out too much responsibility on a child at too young of an age.  The paying into the household shares seems like a bit too much for me (although I have no problem with people that can embrace that concept).  BUT, having been someone who counseled on budgets for many years and having helped people get out of debt (just friends and family), then following the economy, and being a Business teacher and seeing the absolute lack of financial skills (and I taught in a relatively affluent community where kids had access to money as well as a smaller portion that had to be very careful about it) among ALL of my students with extremely rare exception--even in my classes restricted to seniors... the whole thing was disturbing.  I didn't want my kids to learn the hard way.  I wanted them to grow up with a healthy attitude towards money and a clear understanding of how it worked without inducing mindsets that I didn't agree with or overwhelming them with more responsibility than I felt was age appropriate.  I'm also a huge fan of Robert Kiyosaki (author of most of the Rich Dad, Poor Dad series) and agreed that these mindsets about money are things that you grow up with and grow into.  My parents did this with me when it came to economics and the real estate industry: they put it in terms I could understand and it was dinner conversation my whole life.  So I knew it was possible.

When I read Raising Financially Fit Kids, it truly pieced it all together for me.  In short, you give kids an allowance to teach them how to manage money.  Period.  They don't "earn" the allowance.  If you want to give them the opportunity to earn more money, great; but allowance is given.

The whole book was really, really great.  I finished it right before my oldest's 5th birthday and for his 5th birthday, we got him a KidsWealth money kit.  We don't allocate the money the way the kit recommends (in how much to giver nor in frequency--we do weekly), but we're finishing our 2nd year of using it and it's really been working wonderfully.  He gets $1 per year of age and it was split evenly among the categories the first year (we used all 5 of them--some people eliminate one or two).  The second year, he had to advocate for where to put the extra dollar (otherwise it would've gone into "Wealth" as that is the first one in the order of the accounts).  He opted to put it in the Plan account because he uses that account to buy things that are over $20 and so he wants the wallet to fill quicker.  Fair enough.  He will have to do the same thing this coming year (he turns 7yo in 2 weeks) and if he opts to put $3 in Plan going forward, then really--I can't say "no".  It's a logical thought process.  ANY MONEY HE RECEIVES is split evenly among the accounts.  My MIL once gave him $5 because he was $5 shy from a goal and was upset that it had to be split among the accounts.  I've since let them in on the secret that he can't split up gift cards--so if they want to give those instead, they can.  But otherwise, all money is split between the accounts.

Of course, we've struggled with the Fun money burning a very serious hole in his pocket.  But he appears to just now be understanding that he needs to REALLY want something to blow all of his money on it.  I'm not sure he's fully there yet, but I see it starting to spark with him.  We just started tracking the money on paper in early December at HIS insistance.  :D  And he had so much money in his Angel (charity) account this year that he was able to buy--completely with his own money--two Lego racers, a pack of Pokemon cards, a shirt, a pair of pants and a pair of pajamas for each of two boys on our Y's "Tree of Giving" (he always picks kids that want Legos).

Almost all of his Plan money is spent on Legos.  He is allowed to use his "Learn" money on junk in museum stores when we go to museums, and books (he has to buy 2 educational books in order to be allowed to use his Learn money to buy 1 "fun" book).

I have to say that it's really working well.  I see us doing $1/year of age until we get to about 13-ish (or whenever he seems to be mature enough to handle truly managing more--maybe 11yo, maybe 15yo) and then we'll really tally up what we buy for him and give him an allowance to allow him to pay for these things himself like the kit recommends.  But to be honest, we don't buy MUCH for him anymore.  And when he wants us to buy something, we explain to him that Mommy & Daddy have a "grocery wallet" that only has so much money in it, etc.  If I buy him something "extra" because I cave, it comes with an explanation that I used my own "Fun" money to buy something for HIM.  Which is helping a bit on the appreciation side of things (although I have it on tap to read a different book about that  ).  He understands that Daddy works to put money in the "rent", "food", "car gasoline", etc. accounts and that if Daddy doesn't work, then there are no money in those accounts.  Since Daddy works at home full-time, this has helped ds understand the need to not knock on Daddy's office door too often.  He DOES have the opportunity to earn a quarter each for maybe 4-6 different chores he CAN do each day.  We write them on tongue depressors and move them from the "Stuff I Can Do" cup to the "Stuff I Did" cup (where we deposit the quarters each night).  Mine is lazy and just opts not to do these things.  They're not hard: feed the dogs, take his laundry to the basement... easy enough.  But they're on top of the things he's required to do (make his bed, set the table, etc.).  It's not worth it to him at the moment.  That option will always exist for him, though.  When he complains about not having money to do something, we gently remind him that he has the option to earn more.

And he never gets to borrow.  If we don't have the wallet and the money isn't there--he can't buy it.  There's no "borrowing" from Mommy.  If I have to order something online, he is standing there with me and paying me the money.  So he has a very real idea of how HIS money works.

[OkiMom]

Im 50/50 about giving the kids an allowance. Part of me says why give them money for things they are required to do (help around the house, do their school work etc). The other part says my husband and I get "fun" money that we can do with what we want. So, why should the girls also get some "fun" money in relation to their age. For example depending on budget DH and I get between 50-100 a month, so why can't the girls learn to save and handle money by giving them 5-10 a month starting at an age where they will understand. Obviously I don't mean giving my 2 year old a 5 dollar bill, she would eat it but my almost 4 year old is starting to understand that things cost money. I could see in a year or so her understanding that you need to save and budget if you really want something.

My husband has the idea of allowing them to do extra around the house and paying them for the extra. For example tending to their younger siblings while Im making dinner or doing something else. I could see that working around 7-8 when they understand that jobs typically come with salaries. At the same time I don't want them to argue that they should get paid for every little thing or become obsessed with getting "their fair share" like my brothers did when we were growing up and my parents tried that. I want them to help because they want to be an active part of the family and help their siblings/parents.

[SilverFish]

Originally Posted by texmati 

I also feel strongly that kids require security and feeling part of the family unit. I don't think they are equal, in fact, I think they should feel taken care of. Talking about how they cost 1/4 of the food expenses I think would put too much pressure on them. I was the kind of kid that would literally try not to eat if I felt the family finances were in trouble.

i really agree. children shouldn't be responsible for major financial decisions. my parents were very financially responsible and stable people, but i still remember the sense of panic and worry over expenses i felt when i overheard a conversation between my parents about some budgeting thing (it wasn't even anything too major, just an unexpected expense that my mom was worried about). it was just too much for me to think about how much money was coming in and how we were spending it as a family. any learning about finances should be on a much smaller scale for children and slowly expand as they get older. whether or not you believe in allowances (i'm torn on them myself), that's why you wouldn't give a 5 year old more than a dollar or two, and a 13 year old might get $20 or something, whereas a teenager would be actively involved in budgeting personal expenses and saving for the future. either way, it needs to be separated from cold hard reality in some way... children really do need a sense of security and an intimate knowledge of how much money goes into the mortgage and the savings account isn't helpful.