Raising financially savvy children is important to me and I’ve found that the best way for my kids to learn about money is to give them an allowance. One of the first questions my wife and I asked each other – after determining how much to give and how often – was whether the allowance should be tied to household chores, or given freely as a way for our children to learn about money with no strings attached.
Allowance tied to chores?
A survey conducted by the American Institute of Certified Public Accountants found that 89 percent of parents tied allowance to work around the house – the idea being that paying for chores is good training for the real world, where your compensation depends on completing assigned tasks in a timely manner.
Related: How to put your kids to work
Parents worry that if they hand out an allowance without asking for anything in return, their kids will become lazy and entitled. On the other hand, chores are something that everyone does to keep a household running. Parents don’t get paid for the regular work they do around the house, so why should the kids?
In his book, The Opposite of Spoiled, author Ron Lieber says that allowance money should be a tool for learning and nothing more. He says when parents tie allowance to the completion of chores, they make work the primary focus, not money. Parents can certainly help their kids build a strong work ethic by having them do all kinds of chores around the house. But they should do them for the same reason we do – because the chores need to be done, and not with the expectation of compensation.
“It’s a fine idea for children to learn a proper work ethic, but parents can teach it by paying for larger, once-in-a-while tasks that they might otherwise hire someone else to so.”
Lieber also brings up the point that if chores are tied to money, what happens when the child doesn’t want or need the money, and then decides to sit out his or her chore duty? You’re probably going to make them do the chores anyway, and then you’ve broken the connection between the chores and the cash.
Ok, so what happens when the chores aren’t completed or are done poorly? Lieber says there are plenty of valuable privileges that parents can take away aside from withholding money (screen time, play dates, cell phone use, driving the new car, going out).
As Gail Vaz Oxlade said in this Financial Post article, “I don’t believe an allowance teaches children entitlement: I think that comes from bad parenting.”
How much and how often?
When our oldest daughter turned six we decided to start her on an allowance of $5 per week. We found three large, clear plastic jars and labeled them Spend, Save, Give. Every Saturday morning we hand out five loonies and instruct her to put $2 into her spend jar, $2 into her Save jar, and $1 into her Give jar.
Our youngest daughter was more curious about money at age five and so we started her on an allowance then (without the jars). She turns six next week and I’d like to introduce her to the jar method.
It has been interesting to see how they each use their money. The older sister is a saver and has over $100 in her Save jar. Her younger sister started out as a saver but has quickly blown through the money in her piggy bank. I think the jar method will help her prioritize.
Next up for our oldest, who turned nine last month, is a bank account. Time to put that $100 into an account and teach her the value of interest.
Lieber says that with children under 10 you want them to watch the money grow and strive for a goal, so they should have just enough to buy some of what they want but not so much that they don’t have to make plenty of tough choices.
We want our children to be grounded and understand the value of hard work, and we also want to raise children who are smart with money. We consider these two separate qualities and that’s why we decided not to tie an allowance with chores.
Having a bit of an entrepreneurial spirit wouldn’t be bad, either. Consider the lesson Jake Johnson taught his 7-year-old son Liam about trading time for money.
“In our house, you get paid for recognizing a problem and proposing a solution. I’ve taught Liam that if he wants to make money, he has to pay attention to the world around him, identify a problem that needs fixing, and propose a solution. We then negotiate a payment.”
After noticing the lawn was full of dead leaves, Liam offered to clean up the leaves and negotiated a $10 payment. Then he noticed his grandparent’s car was dirty and he proposed to clean it for $5. He then leveraged that deal into cleaning his aunt’s car, too. Soon he was working on a business plan to take his car washing business to the rest of the neighbourhood.
What’s your take? Should an allowance be tied to chores?