My daughter is turning 3 in July, and we’ve decided that along with her third birthday will come her first allowance.
We’ve been slowly working up to this point–my friend bought her a magnet chart to graph her “good deeds” and she earns money for helping around the house. So far this has meant pennies and other random change for helping pick up her little brother’s toys, etc. Basically, she earns money for doing “extra” work. She loves it.
This all came about because one night she was taking a bath with her brother and decided to dump his entire bottle of shampoo into the tub to get attention. I told her she’d need to start doing work around the house to make $2.39 to buy him a new bottle of shampoo. If you haven’t seen her in a while, the first thing she’ll ask you is if you have “any princess work” for her to do, and that she needs to earn “$2.” We’ve been collecting the change she’s earned in a jar, and she’ll pay the cashier at the drugstore directly when she’s earned enough to pay for the shampoo. This has proven to be a really good lesson in responsibility for her, and although she’s young, we figured it was a good opportunity to start teaching her about working hard, saving, and using her money to help others in need.
As a result, we’ve decided that her allowance will be $3 per week (one dollar per year of age–it’ll go up each year), and that she’ll need to complete various tasks on her responsbility chart to earn that (i.e., feeding her fish, getting herself dressed in the morning, putting her dirty clothes in the hamper, helping change her sheets, etc.).
Of the $3.00, 20% ($.60 per week or $31.20 per year) will go into a savings account we’ll set up in her name for long term savings (i.e., college, down payment on a house, etc.). I’ll set this up with ING since she’ll earn interest on her savings–and it’s easy to set up an automatic weekly transfer directly from my bank account.
10% ($.30 per week or $15.60 per year) will go toward charitable contributions. Since Amelie is from Ethiopia, we’ve decided her contributions will go towards EOR’s SOS EE Fund, which supports the orphanage where we she lived. I’ll set up an automatic monthly transfer directly from my bank account to EOR’s Toukoul Fund via Network for Good.
50% ($1.50 per week or $78 per year) will go towards short term savings, and will be kept in a piggy bank in her room. This money can be used to purchase larger priced items she may want (i.e., doll house, etc.).
20% ($.60 per week or $31.20 per year) will be used for discretionary spending, and will be kept in her wallet in her purse. This money can be used if she’d like to buy candy, ice cream, etc.
Hopefully this plan will put her on the path to financial responsibility. When I was a kid, my parents gave me a set amount of money to buy school clothes each year (a whopping $100!), and taught me to walk through the entire mall with a notebook and a calculator–I had to write down everything I liked, the store and the price, then review it all over lunch. I wasn’t allowed to buy anything until we walked back through the entire mall a second time. It taught me a great deal about money management, and I’m hoping this plan–which I’ve worked on over the last couple years by reading various financial expert’s plans for raising money smart kids–helps my kids even more. Our country is in a recession, and hopefully our kids can learn from that and do better for themselves–and learn the value of helping the less fortunate at the same time.
What do you do to help your kid’s learn about money?