I am still on a kick about the book: “All the Money in the World: What the Happiest People Know About Getting and Spending” by Laura Vanderkam. This is the topic that I have been mulling over: Kids and Allowance. On page 210, Laura says:
“For instance, should kids get an allowance? It seems like a straightforward way to teach them how to manage money. Give them $5-$10 a week, and let them handle their small purchases out of that. Likewise, financial education for high schoolers sounds smart. Given the proportion of adults who live paycheck to paycheck and don’t understand what the interest rates on their credit card mean in terms of payments, it can’t hurt to teach kids about money.”
I take it one step further and ask: Should kids have to work for an allowance? I think growing up, my sister, brother, and I occasionally received an allowance. We definitely had to work for it. I can remember often my father would check our work and if it was not done well, we would not get paid. Honestly I do not think they had the money to truly pay us an allowance, so finding our work not perfect was maybe a way out of paying us. Other times he would find things around the house to give us in payment for the chores we had done. Once I remember receiving a caramel/chocolate candy bar that we were selling for school. So I guess in my house growing up it was more of the barter system. Even with the odd and inconsistent payment system I experienced, I do believe there is a purpose and educational aspect of receiving an allowance for chores or tasks. It starts kids out at a young age to know what it means to work and get paid for it. It teaches the value of money. It could be that if a child was willing to do more, they could get paid more (like overtime for adults, if the parents have the funds to do so). Parents could also institute a bonus system for excellent quality of work or attitude just as some adults may receive a bonus based on performance depending on their company.
If parents give an allowance without having to work for it, what life skills are the kids learning? When they become adults do they receive money without having to work for it? Maybe if they have a trust fund, but for the rest of us, we have to work hard for the money we are paid. I believe that hard work makes us think differently about our money, what we purchase, and how we spend or save. Does working for an allowance teach kids the beginning value of money in their lives? One could make the point that kids can learn the value of money and saving without having to work for it. I agree that it can be taught, however, those kids that have the opportunity to learn about the basics of money and how to manage it, in addition to having to work for it is an even better educational life experience.
I wonder what would financial education look like for high schoolers? I had an economics course in high school where we learned about stocks and bonds. I remember the simulation of our “made up companies” and how well our stocks did, but I never learned about the basics: balancing a checkbook, my credit report, credit score, credit card debt, etc. It was almost as though we went straight to Economics 3.0 but skipped 1.0 and 2.0. If we allow teenagers to drive cars at 16 (in many states), and allow them to be in control of expensive, heavy machinery, then why do we not ever teach them about their financial future? Did you learn what you know now from your parents, or from trial and error as an adult?
What do you think? Should kids have to work for their allowance?