Requiring Kids To Earn Their Allowance

When it comes to allowances, there are those who say you should just give kids some money since they’re part of the family. Others say they should earn it. Dave Briggs is in the earn it camp.

“I do not believe just giving kids money prepares them for the real world,” he explained. “When you get to be an adult, no one is going to swoop in and just give you money unless you count welfare.”

Briggs is the author of a new DVD resource that’s getting rave reviews, “Raising Financially Freed-Up Kids.”  I spoke with him recently about his views on allowances.

Briggs says there are two reasons for allowances. “One is to help your kids connect working and money at an early age. The other is to create a vehicle for kids to get money so they can learn to manage it.”

Briggs recommends that parents develop three different lists of jobs for their kids.

Mandatory Jobs for no Pay. These are jobs kids must do just because they’re part of the family. Examples may include making their bed, cleaning their room, setting the table, and feeding the dog.

Mandatory Jobs for Fair Pay. These are also jobs the kids must do, but they receive fair pay when the jobs are completed and completed well. Examples may include mowing the lawn, washing the car, and shoveling snow.

Voluntary Jobs for Fair Pay. If the kids choose to do any of these jobs, and if they complete them well, they get fair pay. However, there is no penalty for not doing these jobs. They are strictly optional. Examples may include washing windows or weeding the garden.

Briggs and his wife have two sons, both of whom are now adults. The biggest challenge they faced in implementing their system was coming up with the appropriate lists of jobs. Briggs acknowledged that this does require an investment of effort and time, but he emphasizes that you don’t have to have an overwhelming number of jobs in each category. Plus, as your kids get older, Briggs strongly recommends that they become responsible for keeping track of which chores they have completed.

Penalties for Poor Performance

What happens if the kids do not complete the jobs in categories one or two, or if they don’t complete them well, or if they complete them but complain about them? Briggs recommends finding something your kid really cares about and make the penalty connected to that. If the kids loves to play baseball, the penalty may be no baseball for a day or two.

Why not withhold payment if the kid doesn’t complete a category two job? For one thing, Briggs explained that not completing the job is not an option; these are mandatory jobs. Plus, some kids are not motivated by money, so withholding their pay won’t come across as much of a penalty.

Briggs advises giving kids some latitude as to when a mandatory job must be done. For example, require that the lawn be mowed sometime Wednesday, Thursday, or Friday.

Different Approaches for Different Kids

Briggs also recommends that parents experiment with paying kids their full weekly allowance at a fixed time every week (“the paycheck method”) or paying a portion of their weekly allowance right when each job is completed (“the commission method”). He says some kids are more motivated by one system over the other.

As for when to start kids on an allowance, again, not all kids are alike. Briggs suggested starting as soon as a child is old enough to understand the rules. For many kids, but not all, that could be as young as age four.

Directing Their Use of Money

Briggs feels it’s appropriate to direct how your kids use their allowance money. Initially, he and his wife required their sons to give 10 percent and save 20 percent, leaving 70 percent for spending. They had their kids put each amount into separate jars.

Some people believe kids should be required to save a higher percentage of their allowance, but Briggs advises against that, especially when kids are very young. “You don’t want to de-motivate them by giving them so little that’s under their control.”

Eventually, Briggs started matching any amount that his kids gave away beyond 10 percent. As his kids got older he also taught them to distinguish between short-term and long-term savings goals. A short-term goal might be saving for tickets to a baseball game in four months. Long-term savings were for larger purchases set further into the future.

“We matched long-term savings if they were willing to engage in a conversation about how they were going to spend the money. They could turn down the match, but if they took the match I got some veto power. If they insisted on buying something ridiculous, they had to do so without our match.”

Briggs and his wife did not require their kids to save for college until they started earning money outside the home. “I just didn’t feel that a nine year old should be saving for college. At too young an age it seemed too nebulous.”

Setting The Amount

As for how much should you give your kids, Briggs says, “The biggest single determinant is what demands you are going to make on your kids as to what they have to pay for. One reason why we paid our kids $20 to mow our lawn is because they had to pay for their own clothes.”

He recommends slowly increasing what your kids need to pay for out of their allowance money. “You feather in what they’re responsible for. At age eight, they could be required to use their money if they want a soft drink. Eventually, by around age 16, they’re buying all of their clothes.”

The Payoff

So, how did this system work out for Briggs’ sons? He says they know how to stretch a dollar, with both making it just fine on pastors’ salaries.

Briggs’ system may sound rigorous, but he’s given it a lot of thought and he has seen the fruit of the system in his sons’ lives. We are just getting set to implement an allowance system in our household, and we plan to use a lot of Briggs’ ideas.

What about you? What’s been your experience with allowances, either as the recipient of an allowance or as the one providing the allowance?

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9 Responses to Requiring Kids To Earn Their Allowance

  1. Matt Bell November 16, 2010 at 6:29 PM #

    Great points, Danny. I couldn’t agree more that practicing what we preach is huge. As someone told us just before our first child was born, more will be caught than taught.

  2. Danny @ Frugal Quack November 16, 2010 at 6:02 PM #

    As with just about everything else parents are the ultimate measure of how a kid ends up handling money, relationships, work, crisis, etc when they grow up.

    If parents instill good values in the kid and also practice what they preach. Their kids will be exactly the same way. I don’t ever remember my parents fighting over money, fighting over bills, etc. This doesn’t mean they didn’t have issues or that they didn’t have worries, because I’m sure they did. But they didn’t showcase it in front of us, and in turn didn’t instill this fear or dread about money in us.

    I love my parents and how they raised me (and my three siblings). I cherish the time and how they did right by us in many ways. They’re now divorced, so it didn’t have a fairy tale ending. But they were GREAT PARENTS and we all turned out pretty good people.

    My father always worked, always provided for 6 and did it honestly and honorably. My mom stayed home and took care of us, a warm meal and hug awaited us everyday when we got home from school.

    The way parents act, react and more is the biggest influence on how kids will turn out. The same is the case with money.

    We didn’t have an allowance when we were kids, but we didn’t lack for anything. I think we were just modest, plus this was before the gadget craze of today. No Xbox, iPod, laptops, etc.

    However I do remember my dad giving me money, whenever I asked for it. And my mom as well.

  3. Matt Bell November 16, 2010 at 4:09 PM #

    Karen – Great added points. It’s really instructive and encouraging to read your comments. One point of clarification about Dave’s mandatory chores. He says that not doing such chores is not an option since they are, after all, mandatory. So, one way or another, the chores are going to get done and therefore the child will be paid. There will simply be some other form of penalty. But I agree with your larger point that in the real world if you don’t do your work well, there will be a financial penalty, like losing your job!

    Thanks for taking the time to share so many details about how you did the whole allowance thing. You have so many good ideas, like adding a category of spending your daughter was responsible for with each birthday and increase in allowance. You should teach a workshop — it’s great stuff!

  4. Karen November 16, 2010 at 3:57 PM #

    One additional note – before our daughter went off to college, she handled our family budget for two months – paid all of the bills, reconciled the checkbook, etc. What a great learning experience that was for her! She learned what it actually costs to run a household — real life includes much more spending responsibility than just going to the movies and buying clothes. Naturally this put a little pressure on us to be sure that we were putting our money (literally!) where our mouth is, but it was worth it. It also led to some great family discussions about things like life insurance that probably would not have come up otherwise. I highly recommend it – and it’s a great way to force the parents to ‘get their house in order’ if it isn’t already!

  5. Karen November 16, 2010 at 3:47 PM #

    We used essentially the same system that Dave Briggs advocates with our now 18-year-old daughter. However, I don’t think this is a work-for-pay-like-in-the-real-world system as he says he advocates. Only his third category of chores falls into that category – the voluntary paid chores. The other two fall cleanly into a “your responsibility because you are part of the family and your money to spend because you are part of the family” system. For example, he has “mandatory” unpaid chores and “mandatory” paid chores, but if the mandatory paid chores don’t get done, the punishment is not a docking of the allowance (as would be appropriate under a true work-for-pay system) but rather some other punishment (loss of baseball privileges, for example).

    I totally agree with his “feathering in” of payment responsibilities along with allowance increases. With our daughter, we started out with a small allowance ($1 per week at first, just to make it easy to divide into 10% increments!) nearly as soon as she was old enough to understand the concept of money and count it properly, and she had to give 10%, save 20%, and could spend the rest on things she wanted (gum, small toys, etc. at that age). We maintained the minimum 10% giving/20% savings rule right up through age 18–although she often chose to give above and beyond the 10% minimum–and taught her how to create and maintain a monthly budget, balance a checkbook, look for good interest rates for her savings, etc.

    Each year on her birthday we increased her allowance and added a category of spending that she was responsible for. When she entered middle school we started paying her allowance biweekly and in high school we paid it monthly so she could learn to make it last. By the time she graduated from high school, she was responsible for virtually all categories of her spending except groceries, rent, utilities, and car insurance (we have only 1 car, so she doesn’t get to use it regularly and therefore we didn’t feel that we needed to charge her for insurance). She was responsible for her clothing, entertainment (even when eating out with us, she paid her portion of the bill except on special occasions), toiletries (this really taught her whether the $20 bottle of shampoo was worth it compared to the one for $2.99!), haircuts, books and music, gifts for others, and her share of the cell phone bill, for example. Her allowance by age 18 was $300 per month, which she was quick to tell her friends didn’t go as far as they might think!

    It was great training for her and relieved us of a lot of spending pressure — when she wanted something, we could just say, “It’s your money. You can spend it that way if you want to.” or “Do you have enough left this month to go to the movies?” She is now a great comparison shopper and very patient – she rarely buys anything on impulse. She has learned the value of saving and was amazed at what the 20% savings added up to over the course of several years. She’ll have her first ‘real’ job next summer, and we’ve offered to match whatever portion of her pay she chooses to put into a Roth IRA for retirement, so now she is studying up on investing.

    Teaching your kids to truly manage money takes effort, but it is COMPLETELY worth it! The joy of raising responsible, money-smart kids is an unbelievable payoff.

  6. Matt Bell November 16, 2010 at 2:50 PM #

    Miriam – I’d say the fact that you haven’t had to bail out any of your kids since they were 18 is a great indicator that they got some solid financial teaching while they were still under your roof.

  7. Miriam Kearny November 16, 2010 at 11:43 AM #

    I agree with Dave that children are entitled to some of the family income simply because they are members of the family. That being said there are some mandatory chores that also belong to them because they are members of the family. I did many of the things that Biggs talked about with my kids (I had three). One of them has certainly done well financially in her life; the other two were slower to get started as adults but now they are all in their mid thirties and very responsible; I haven’t had to bail anyone out since they were 18.

  8. Matt Bell November 16, 2010 at 11:37 AM #

    Great thoughts, K. I especially like the idea of giving kids some responsibility in managing the family budget — if they find ways for the family to save, those savings can be put toward other things like vacations. Maybe if the kids agree to go without cable, they could see how that money is reallocated to a better vacation. You’ve stirred my thinking, especially since we’re just started with allowances. Thanks for writing.

  9. K Taylor November 16, 2010 at 10:22 AM #

    I agree a bit with Dave but feel that only providing money when it is earned does not reflect life either. Some people in a family will not be in a role of “earner” such as the parent who stays home to care for the kids. I have provided a small allocation of our family budget to each member. From this there are cetain expenses tagged along with a portion of money that can be saved, spent etc in any way each child desires. This helps train children to budget and also provides a means to feel a part of the family. This also encourages participation in helping with the budget – for instance if a child finds a means to reduce costs in one area sometimes it can increase their allocation, sometimes it increases the vacation allocation. This is combined with an earning opportunity as well as “just because you are part of the family” chores. I do feel it is important to approach finances form all these sides in order to help develop a healthy and mature financial focus.

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