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This week we’re starting to give our three-year old daughter a weekly allowance. Our long-term goal is to help her manage money better than we have, so we’ve spent a fair bit of time reading, thinking and talking about this. Here are some of the questions we’ve wrestled with, and our answers to them (for now).
Should she earn her allowance?
We’ve decided that yes, she should understand the connection between work and payment and earn her allowance. Having said that, we are in no way expecting her to start fending for herself now! Just for the record, we still plan to provide for all of her needs and will continue to give her occasional gifts.
I’ve created a chore chart for her, with six easy chores for her to complete daily (Mondays to Fridays). Her chores are:
- help set the table for lunch
- take her own lunch dishes to the kitchen
- pick up her toys before quiet time
- help set the table for supper
- take her own supper dishes to the kitchen
- pick up her toys before bedtime
For each chore that she does, we will put a sticker in the appropriate box on the Chore Chart.
(By the way, Simple Mom created a nifty chore chart for preschoolers, complete with graphics. It’s worth checking out, along with her own thoughts on handling a preschool allowance.)
How much should she earn?
We’re going to start with a flat weekly allowance of one dollar. We prefer the weekly rate as opposed to the per-job rate, as we don’t want her to begin thinking that every single little job deserves a payment. She’ll get paid for her whole contribution to the household.
I realize that this might get a bit complicated for us at the end of the week. What if she missed a chore? Do we dock 5 cents? I think that for now, if she has completed the chores with reasonable consistency, the allowance is hers. We’ll monitor this, and are willing to change if this approach isn’t helping us teach her about money management.
How will she handle savings?
We’ve agreed that we want her to form the habit of saving 10%, giving 10%, and using the remaining 80% of her allowance on discretionary spending. Her aunt and uncle gave her an adorable plush piggy bank for her birthday, so the weekly 10 cents of savings are going to go there. I’m going to find a couple of jars for her and label them “give” and “spend,” and we’ll help her allocate her money to those jars each week.
Sometime down the road, perhaps for a milestone birthday like her fifth or seventh, we’ll help her open her own savings account, and we’ll make a big deal about emptying her piggy bank, adding up the contents, and putting them in a bank account. I think we’ll make this a semi-annual or annual event after that.
How can we help her learn about spending well?
We want our daughters to learn to use money consciously, growing more aware of the implications of their spending choices . We plan to help our eldest identify small purchases that she would like to make and calculate how many weeks’ spending money she would need to have to purchase them. We’ll create charts for her to track her progress and help her make the purchase when she’s ready. (This is going to be fun … finally those university calculus courses are going to come in handy!) We suspect that her first big item will be a pack of stickers, which will take her about 2 weeks to save for. That feels about right for a 3 year old who is just starting out.
I have my children save more than 10%. I figure that at their age, they don’t really need 80% of what they earn for discretionary spending given that they have zero actual needs. And while it’s gratifying for them to learn that they can be rewarded with fun purchases for their work, I also want them to have enough in savings that it’s exciting to open and maintain a bank account and so they have a realistic chance of saving enough long-term for college or a car or whatever.
Two weeks into our preschool allowance-giving and I’ve been wondering about the 10% for saving ratio myself. My daughter just doesn’t want much stuff, so the putting money spending jar isn’t nearly as much fun for her as her savings piggy bank. Which is just fine by me. We’re thinking of adjusting the ratio of saving / spending. Out of curiosity, how much do you have your children set aside for savings?