Allowances: What Are They For? Are They Good or Bad for Kids? Family Finance Picks #58

This week’s picks are all about allowances. What are they for? Do allowances make your kids lazy, dependent, and entitled? Or, do they teach your kids good money habits?

Read on...

What’s an Allowance For?

by KJ Dell’Antonia on Motherlode — The New York Times Parenting Blog

What purchases should an allowance be used for? That’s the question KJ tackles this week with her readers on this Motherload blog post.

My 2 cents:

I like KJ’s characterization: an allowance is a “very tiny piece of the family budget to manage.” I also think that tiny piece (i.e., the categories) should expand over time as the child matures. Modest pocket money for small discretionary wants (toys, munchies, etc) for youngsters is a fine start. Kids learn to delay gratification, make trade-off decisions, and generally appreciate that money isn’t a magical infinite resource. Clothing, entertainment, sporting expenses are all great categories to add as kids grow into the tween/teen phases — not to mention long term savings and philanthropy. Also, kids can start contributing their own income to those budget categories as they get old enough to earn outside-the-family money from odd jobs, summer jobs, mini-businesses, etc. Whether the allowance income that comes from you the parent is tied to chores or not — well, that’s a whole ’nother raging debate!

If more parents thought “budget” or “constraint” when they heard “allowance,” it would be less of a dirty word!

Related FamZoo Activity: Teach your child how to make and manage a budget.
Discuss on FaceBook.

If You Love Your Children, Don’t Give Them Allowances

a letter from Lawrence Chrietzberg on TCPalm

Do you love your children? Then don’t give them an allowance! Or so argues Lawrence Chrietzberg in this letter to a Florida newspaper.

While I think some of the points are fair, I think there are quite a few flaws and leaps in Lawrence’s letter. How about you? I think age is an important consideration. I also don’t think allowance has to mean entitlement. If used properly, it can be an excellent tool for teaching personal finance basics. For example, how about taking one of those necessities that Lawrence describes his father taking care of (like clothing), making a budget for it, setting an allowance to that budget, and handing over the spending decisions to the child? That wouldn’t be a hand-out teaching “laziness” and “dependency” — more like a personal finance education teaching constraints and discipline.

Related FamZoo Activity: Teach your teen how to make a clothing budget.
Discuss on FaceBook.

Giving Your Kids an Allowance Can Save You Money in the Long Run

by Katherine Snow Smith on Tampa Bay Times

Allowance? Earned through chores? Which chores? How much? How often? Interesting questions, but they may not be terribly crucial. The most important thing is that kids have some form of modest income from somewhere — some money to call their own with which they can make regular spending decisions (and mistakes!). Kids will learn to spend more wisely if we let them practice spending their own limited supply, not yours which in your kid’s eyes is boundless.

I always think real family stories illustrate this point most effectively. Katherine’s personal stories at the end of this article are a perfect example. Read them here.

Related FamZoo Activity: Teach your child to save up for a purchase.
Discuss on FaceBook.

Still can’t get enough of the allowance debate? Join this lively allowance discussion on BabyCenter — 93 comments so far!

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit our ever growing list of family finance bookmarks here. We’re up to 2,900 now!

Make Your Own Mom Dollars and Dad Dollars

Who doesn’t want to print their own money?

Lots of parents like to use point systems instead of money to reward younger kids for certain tasks or achievements. Those points can typically be redeemed for some fun activity with Mom or Dad — like an outing to the movies — or extra computer or gaming time.

If you like that approach, you might like this fun site I stumbled upon while reading the comments in an article about chores. It helps you create fake money with your picture on it — instant Mom/Dad dollars! Hand out Mom/Dad dollars for completed tasks or achievements or just as a random act of parental kindness. You might want to create a rewards chart with your kids indicating how they can be redeemed.

Here’s how you do it:

1. Visit http://www.festisite.com/money.
2. Make sure “Money” is selected in the upper left.
3. Select your desired currency in the upper right.
4. Click the “Photo” button in the lower left to upload your favorite mug shot.
5. Click the “Download” button in the lower left to download an image of your custom money that you can then print from your computer.

Tween Tip: if your kid is getting to the far edge of that precious Mom-And-Dad-Are-Still-Cool stage, try Justin Bieber’s photo instead of your own.

Pricey Hot Toys, Crushed iPhones, Bodnar vs Ramsey: Family Finance Picks #57

This week, the family finance picks include hot holiday toy prices (already?!), damaged iPhones, and one of the classic kids & money debates: should parents tie allowance to chores?

Ouch! Majority of ‘Hot’ Holiday Toys Cost $50 or More

by Brad Tuttle on Time MoneyLand

Which is worse?

1. Toys R Us released its Holiday Hot Toy list over a month before Halloween.
2. The average price of a toy on the hot list rose 34% from $62 last year to $83 this year.

Both seem crazy and out of step with our current economic realities.

To see whether Walmart’s top toy list promotes similar escalation in consumption, read Brad’s story here.

Related FamZoo Activity: Teach your child to save.
Discuss on FaceBook.

Many iPhone 5 Buyers Own a Damaged iPhone 4S

by Quentin Fottrell on Smart Money

Does your teen share responsibility for a damaged phone? Did you know that a whopping 30% of iPhone users damaged their devices within the past 12 months? Yow!

So apparently my teen, who cracked his iPhone screen just last week, is in good company. With a replacement iPhone costing $600 without a contract, this might be a good time to teach your smart-phone toting kids about the concept of insurance. We give our teens the option of paying for insurance each month or bearing the full replacement cost of their phones.

Read Quentin’s iPhone story here.

P.S. Before you rush out and replace your old iPhone, be forewarned that the maps in the new one may leave you feeling lost.

Related FamZoo Activity: Share costs with your child for recurring fees using automatic debits.
Discuss on FaceBook.

Don’t Tie Allowance to Chores

by Janet Bodnar on Kiplinger’s Money Smart Kids

Personal finance editor Janet Bodnar writes Kiplinger’s Money Smart Kids column. As you might surmise from the article title, she has very definitive opinions on allowance and chores. She admonishes parents: don’t “use money to motivate kids to help out around the house.” Somebody should arrange a debate between her and Dave Ramsey who champions the opposing “commission chart” approach.

Even if you’re a fan of linking allowance and chores (we’re cool with either approach at FamZoo), this article is worth reading. It raises some good discussion about matching your system to age, distinguishing between expected chores vs paid jobs, and delegating spending responsibility to your kids. She calls this last one “financial chores.” I love the idea of delegating spending responsibility to your kids as they mature, but I think her label for it is awkward. Spending responsibility doesn’t feel like a “chore.” In fact, tweens and teens crave independence, and I suspect they’ll view the opportunity to manage their spending in an area like clothing as a welcome new privilege, not a chore.

Anyway, I like where the article ends up despite the link-bait title. Read it here.

Related FamZoo Activity: Teach your kids how to track expenses.
Discuss on FaceBook.

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit our ever growing list of family finance bookmarks here. We’re up to 2,883 now!