The concept of giving my kids an allowance bothers me.
“You exist therefore you get money.” That concept doesn’t work in the real world. Why would I want to teach that to my kids?
My children are only 5 and 3 (or “5 ¾” and “free” as they would say) so there’s still quite a bit of time to cement our parenting strategy around chores, rewards and helping around the house.
My 5-year old, Zoey, has been doing small chores around the house for the last year. Instead of an allowance, we give her a dollar for each chore she completes. Three chores per week nets her $3. Not bad for a 5-year old!
The chores aren’t too difficult and she’s really starting to grasp the concept that hard work equals reward. I’m new to this whole “fatherhood” thing, but using the term “Chore Money” instead of “Allowance” just seems right to me.
To further convince myself I’m headed down the right path, here are 5 reasons I dig the term “Chore Money” over “Allowance”:
1. Understanding where money ACTUALLY comes from
Throughout my career, I’ve found the more effort I put in, the more rewards I receive. The same goes with Zoey’s chores. We tie her contribution around the house to a monetary reward so that she starts to understand the correlation.
If she helps with the chores, she's get paid.
If she doesn't help, she doesn't get paid. Quite simple really.
As we're trying to teach our daughter the rules of life, we've found “the simpler, the better” rule of thumb works best. That goes for brushing her teeth, the amount of time she gets with the iPad and the amount of “treats” she can have. Our daughter craves rules and boundaries. When there is a vagueness to a situation, she kinda freaks out.
I do agree with Joseph Hogue, CFA from Peer Finance 101 that there are some chores that should be done without compensation. “Kids need to learn that there are some things you do around the house just because they need to get done,” said Hogue. “A family works together even if the rewards aren’t as tangible as getting paid.”
2. Comprehending that money is a finite resource that should be carefully spent
A few weeks ago, we went to a kid play place where they had bounce houses and video games. Zoey brought $5 of her own money and she was able to use it for games until she ran out of money. We definitely warned her of this rule before letting her run wild.
30 minutes later, Zoey came up to us and asked for more money because she was all out. We stuck to our guns and told her, “If you’re all out of money for video games, you can play on the bounce houses. Those don’t cost any money.”
She wasn’t thrilled with our response, but after some moping and whining she got over it.
We’re confident that over time, this concept will sink in. She’s only 5 right now, but we’re hoping that she’ll recall moments like this and remember that money is finite. There is no money tree that will give you cash when you want it.
She’ll always be clothed, fed, loved and have more privileges than most children in the world, but she won’t be getting a new toy whenever she demands one.
We’re hoping these hard lessons will help her to become a successful young woman and help her to remain debt free in the future.
3. Providing MORE value gets you more money
If Zoey is hard pressed for more cash, she always has the option of doing additional chores around the house to earn another dollar.
Some of our standing 5-year old appropriate household chores are as follows:
- Picking up toys in the basement
- Wiping down the kitchen counters
- Vacuuming the kitchen
- Putting away her laundry
- Vacuuming our cars
- Putting away the silverware
For each of these chores, my wife and I are right there alongside her as she’s completing them. It's something we do as a family (nearly) every Saturday morning.
4. Sparking an entrepreneurial flame at a young age
I have no issue with Zoey wanting the newest toy, an upgraded bike or even some candy at 5-years old. That desire to get what you want out of life could help her become a successful entrepreneur.
It all starts with providing value. If Zoey is able to provide value through her chores at 5-years old, I’m very hopeful that she’ll carry that same spirit into her teenage years and adulthood.
By connecting a reward with the value she’s providing, we’re setting her on a smart path toward entrepreneurship. We want her to think, “How can I provide the most value right now?” With that mindset, she’ll not only be monetarily rewarded, but she'll be emotionally and spiritually rewarded as well.
5. Saving becomes a habit early
I wrote a letter to my 20-year old nephew recommending that he start saving 50% today so he could reach financial independence by his 37th birthday. My goal is to get my daughter started with saving and investing much earlier than 20-years old.
When you’re a saver, you have options. You can more easily pursue your passions and live your life on your terms.
Each time Zoey completes her three chores, we place one of the dollars in her Save Jar. Right now at 5-years old, we’re using this jar for larger savings goals like a new Disney Lego Set.
I’m thinking that I may need to add another jar called “Investing”. After speaking with Cameron Hendricks, CFP on the options available for investing for our children, I’m excited about the possibilities of building an incredible life for my daughter with a UTMA and a 529 account.
And of course, I'm thrilled about building a great life for my 3-year old son Calvin too. We don't have chores for this guy yet, but he is definitely watching his sister work hard for the family and eagerly wants to join in.