Monday, May 4, 2015

Money 201: Intermediate Allowance

The purpose of an allowance, so the experts say, is to teach our children lessons about handling money.  This purpose I approve of, it goes without saying.

In fact, as a professor at heart, I have come to construct a sort of allowance syllabus (in my own head), complete with learning goals and feedback mechanisms.  I loved Mommy Dollars as a kind of "Intro Allowance" course; it gave my students children a low-stakes way to play with money.  They got lots of practice with simple arithmetic, for one thing.  They also developed a vocabulary of commerce: for example learning the difference between "deposit"and "rent", or between "deposit" and "balance".  And it taught them a few lessons a bit higher in Bloom's taxonomy of knowledge, too, when they discovered for themselves that winning an auction can actually kind of suck.

But pink, purple, and yellow dollars are valuable for only so long.  As the boys have gotten older, they have graduated from Mommy Dollars and are finally ready to matriculate into "Intermediate Allowance".

The amount of allowance I give the boys is designed to keep them as close as I can to the critical point (they actually have to think about what they spend) without dipping down into the "Dad throws random money at them" level of deprivation.

For, my husband is not a disciple of the "allowance as life lesson" school.  He throws money at the boys because of silly reasons like "well, they didn't have any money".  Or because "well, they were going  out with their friends, and I thought they ought to have money".  Or because, "well, they did some chores [picked up sticks from the front yard], so I gave them $4."  And how the heck are the boys going to learn to deal with the future reality of a scheduled pay day if money just rains down on them randomly now?

For this reason, I set the level of their allowance at $5/week.  Each.  These boys, as far as I'm concerned, are beyond wealthy at this level, and usually (but not always) this means that I can convince my husband not to subvert the lesson plan.

Because here's the lesson plan that goes with Miser-Mom-University's Money 201: Intermediate Allowance.  It's the "know thyself" portion of allowance, a crucial aspect of financial management that many adults miss out on.  Every week, before the boys get their next allowance, they have to  write these three things in their Allowance Journal:

  1. Where their past money actually went in the previous week.
  2. What they plan to do with their next allowance for the upcoming week.
  3. Their current savings balance.
That's all they have to do:  reflect, plan, and tally.  Then they get their money.

N-son's Allowance Journal

I don't have any restrictions on what the boys spend (or plan to spend) their money on, but I will make gentle suggestions.  For example, I always encourage them to think about "give, save, and spend" categories, but I don't mandate that they do any of those.  I'll also remind them about upcoming events, like a carnival coming to town, that they might want to save up for.    And I try to get them to be specific about their plans ("what are you saving for?"  or "you said you're going to spend $4.50.  What do you think you're going to spend it on?")

The clincher comes the next week, when they compare what actually happened with what they thought would happen.  They have discovered (surprise, surprise) that they often can't remember where their money went.  I think that's a great thing to learn early in life, don't you?

Both boys have figured out on their own that if they truly want to save money, they need to give it to me for safe-keeping instead of hanging onto it themselves.  N-son has gone further; he also hands over the money he wants to give to church so he's not tempted to blow it elsewhere.

J-son, the more impulsive of the two boys, impressed the heck out of me with his resolve to save.  He decided that he needed a Lacrosse jacket so he could be truly a member of his team.  His dad and I agreed we'd pay for half of it, but only if he could save up the other half himself first.  And by the time that the order forms for the jackets came out, J-son had saved up an impressive $50, denying himself every single penny of spending for several months just to make sure he could afford his heart's desire.  His half of the jacket's cost came to $37; as soon as he paid it, he blew the other $13 on convenience store snacks.  Back to normal!

Learning to actually save money long-term: that lesson's not there yet.  (After many months, the boys' accumulated savings amount to less than $15 combined).  But they are practicing the dual habits of planning forward and of looking backward, and maybe that helpful habit will someday take hold.


  1. Impressive system. We didn't see the real fruits of our labors with our children until they left home and were on their own. Then they actually put into practice some of the things we had drilled into them. Also, it's been very interesting to see changes in their spending and saving habits as the realities of life come at them. Keep up the good work Mom.We have three out of the nest and two more to go.

    1. Well, and your grown children invite you on lovely trips to *Japan*! Wow! What a wonderful time you've been having. Those are some wonderful fruits you and your have harvested. -MM

  2. My son recently had to explain to a peer what was happening when she paid the minimum credit card payment on her bill. And another friend complained to him that he can't manage on the $1200/week his parents provide as spending money (cut down from 2000/week). Financial illiteracy is horrendous, I don't understand why it isn't taught in schools.

    1. Oohg, don't get me started on financial illiteracy. I had a calculus class last semester full of potential business majors. I decided to do an exercise on preparing for retirement. None of them had heard the phrase "safe withdrawal rate". When I asked them about savings accounts -- specifically, I asked, "If you put your money in a savings account nowadays, what's a good interest rate?", they all looked at each other, and then guessed, "Um, 10%??" (Well, yes, that *would* be a good rate . . . )

      I was glad that I could venture into the territory late -- better than never. But of course, there's a lot for students to learn in my class that's not financial. It's so helpful if kids can start learning this hands-on, at home. -MM

  3. I absolutely love this idea, thank you!