Kids and Money

This post was prompted by a facebook discussion (maybe facebook isn’t all bad!) so if you found this via the link on that facebook page and want to post comments, consider posting them both here and there, so as not to steal the discussion away from where it started.

The original question: “What is your children and money philosophy? Do you believe in wages or allowance? How about that first car.. do you buy it for them? What if you were rich.. how much is too much?”

Originally I was for a small allowance, probably called a wage, since it would be docked if chores weren’t completed on time. (But the chores would still have to be done, regardless) I also might allow kids to complete extra chores to earn more money if they wanted, provided they hadn’t slacked on their regular chores. But someone pointed out that they wouldn’t want their kid asking them how much they’d get paid every time they asked them to do an extra job, and I think that’s a great point. Now I don’t think I’d want to give any option of earning extra money for extra chores. Kids need to do what they’re told and to understand that as part of the family they have responsibilities. The same person suggested that in their experience allowances “don’t work” -- that parents don’t follow through, that kids don’t do their chores, but still expect money, etc. She doesn’t think parents should give their kids any money at all.. that kids should earn their all their money outside the home, just as they’ll have to later in life.

I agree that once kids are old enough to get a job outside the home, whether it’s a “real” job or babysitting/ mowing lawns, they should work for money if they want it. A nominal allowance given to a small child should not grow to meet the wants of a pre-teen/ teenager. But the opposing viewpoint focuses mainly on younger kids. Little kids really can’t mow lawns or baby-sit or any of the standard kid jobs, and that the neighbors shouldn’t be bombarded by kids knocking on the door looking for work every time they want money for something. And some of the people commenting on the original discussion focused on the goal of using an allowance to teach their children to tithe, budget and save. I think that’s a nice idea, but I wonder how realistic it is.

Here’s the thing - little kids don’t need money.

There just aren’t enough demands on a kid’s bank account for the concept of budgeting to sink in. A kid can save up for something he/ she wants, (I remember saving forever for a Nintendo) but when the weekly income doesn’t HAVE to pay the electric bill and the mortgage and the car insurance and buy groceries, it’s just a whole different mindset. I think you can teach a kid the theory with or without real money but they’re never going to really understand it, deep down in their gut, until they actually have a car that needs gas, and probably an apartment and bills to boot, and it becomes a lesson in being able to eat, rather than a choice between instant and delayed gratification.

I think that in the area of money management, as in most other areas of life, kids are probably going to get more out of how they see their parents behaving than out of what they hear their parents telling them.

I think that if parents manage their money well and carefully, if kids are allowed to see that their parents have a budget and are conscious of the cost of things, and that they don’t make impulsive purchases; if they can see their parents tithing, and they are aware that a certain amount of each paycheck goes into a savings account, etc. then that leading by example will be far more effective than all the “teaching” parents may do by giving the kids their own money.

I personally got an allowance (it was actually referred to as “wages”) only for a few short periods during my childhood. Most of my life I was not given a regular income by my parents. But I did watch how my mother handled the money/ budget and it had a lasting impression. I never had a budget as a kid, yet I am (if I do say so myself) a very good budgeter and saver now that I’m an adult. I don’t think that having a small allowance as a child would have hurt me in this regard, and I also doubt that I would be a better financial manager today if I’d had one. I think as long as parents are careful not to spoil their kids and to be consistent, it probably doesn’t matter whether they give their kids an allowance or not.


Cars will be tackled in another post. If you actually got through tis one, congratulations, I’m impressed.