Kids & Money: Tweaking our Allowance System
I’ve written previously about the allowance system that we implemented for our kids, and I just thought I’d post a quick update as to how it’s been working, as well as how we’ve tweaked the system since we started. First off, I’d have to say that the system that we created is working quite well. The kids are excited about managing their money, and they’ve done a pretty good job with it so far. Sweeping their long term savings into an ING Direct savings account at the end of each month has been a hit — in fact, they can’t wait to log in to see how much interest they’ve earned each month. It did not, however, take long to realize that the 30/30/30/10 scheme for dividing their money into pots for long term savings, short term savings, spending, and charity was a bit too inflexible.
In short, I’ve found that our original system imposed a bit too much order, and didn’t give our kids enough latitude to make (and learn from) mistakes. The main culprit here was the distinction between short term savings and spending money. We’ve now simplified the system by putting 60% of their allowance into the spending category and abolishing the short-term savings category entirely. It’s now up to the kids to decide whether (and how much) of this money to save for bigger ticket items, as opposed to frittering it away on smaller, more immediate purchases.
As it turns out, we’ve got a couple of savers on our hands — our seven year old has already saved enough to purchase a portable CD player (complete with MP3 capability) and our five year old is rapidly closing in on a Star Wars GameBoy game. Our three year old is too young to really ‘get it’ yet, and he doesn’t officially take part in the allowance ritual (nor does our baby). I do, however, give him a quarter on allowance day (which he promptly deposits in his piggy bank), and he’ll ultimately join the fun when he turns five.
To make a long story short, I’d have to say that the increased freedom to spend vs. save has been a change for the better, and it has led to some good dilemmas of the “if I buy item X right now, how much longer will I have to wait before I can afford item Y?” sort.
Modified on August 17th, 2005 - One Comment
Filed under: Family & Life
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
Related articles...
» One Year Ago This Week (August 6th – August 12th)» Tracking Allowance: Little Money Bags
» Our Allowance System: New and Improved
» Carnivals – Week of 06/05/06
» From the Archives (August 5th – August 11th)
» Guest Post: Using an Allowance to Teach Kids About Money
» Weekly Roundup – 07/21/06
» Should You Pay Your Kids for Good Grades?
Was this article useful? Please sign up to receive our content via e-mail:
One Response to “Kids & Money: Tweaking our Allowance System”
Leave a Reply
Top Cards by Category
Earn $100 cash back after spending $1,000 in eligible purchases in the first 3 months of Cardmembership. Get 3% cash back at supermarkets, 2% cash back at gas stations and department stores, and 1% cash back on all other purchases.
Turn purchases into free travel: Enjoy travel rewards with no travel restrictions or blackout dates - get points for flights on any airline, stays at any hotel, and car rentals with any company.
Turn purchases into free travel: Enjoy travel rewards with no travel restrictions or blackout dates - get points for flights on any airline, stays at any hotel, and car rentals with any company.
No Balance Transfer Fee!* 0% Intro APR for up to 15 months on purchases and balance transfers. This card offers Blueprint, free and customizable account features that help you avoid unnecessary interest and pay your balances down faster.
Earn up to 5% cash back* in categories that change and enjoy a 0% introductory rate for 15 months on Balance Transfers and 15 months on Purchases.
Enjoy a 0% introductory rate for 18 months on Balance Transfers and 6 months on Purchases. Earn up to 5% cash back in categories that change.
Get rewarded for what your business already spends. Unlimited rewards potential - Membership Rewards(R) points have no limit to the amount you can earn and no expiration date.
0% intro APR on purchases for 9 months, then the variable standard purchase APR of 12.99% - 18.99%*. 5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*. Up to 1% unlimited Cashback Bonus on everything else. No annual fee.
0% intro APR on purchases and balance transfers for 15 months, then the variable standard purchase APR of 10.99% - 19.99%.* Earn 2% cashback automatically at gas stations and restaurants. Great rewards with no annual fee, no rewards redemption fee, and no additional card fee.
This is a prepaid reloadable debit card with a rewards program. No credit check needed and no activation fee. There is a $4.95 monthly fee, reduced to $0.99 monthly if you load $500 each month.
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math
- Dish Network Customer Service SUCKS
- $8,000 Homebuyer Tax Credit
- Pay Off Mortgage Early or Invest?
- How to Claim the First-Time Homebuyer Tax Credit
- Reduced Credit Limits? Share Your Experience
- $15,000 Homebuyer Tax Credit
- Ethanol Blended Gas = Lower Mileage?
- Termite Control: Sentricon vs. Termidor
- How Much Should You Pay a Babysitter?
- Will Mac OS X Lion Kill Quicken 2007?
- Federal Income Tax Rates Went Down but Your Federal Tax Withholding Increased. Here's Why...
How to save money on insurance
- Being Too Frugal Can End Up Costing You Money
- Check Fraud: Use a Shredder -- and Hope Everyone Else Does, Too!
- HSA Contribution Limits for 2013
- How to Close an Ally CD Early
- Seven Ways to Make Big Bucks at Your Garage Sale
- What's the Lowest Possible Credit Score?
- $250 Signup Bonus from Citi ThankYou Preferred
- How to Help Your Family Financially - and Stay Sane
- Average Price of a New Car?
- Lending Club Recovered Funds from Defaulted Loans

September 13th, 2008 at 9:26 pm
I wish my parents had the forsight to start that early, i had to drag Mom to the bank to start a savings account myself at the age of 8… poor bank manager got to count out $100 in coins and one doller bills. my family never had a required amount for save/ spend, interesting difference to see for other famillies. you dont say how long the longterm saved money stays put or what its for, (could it be for a big purchase, or cant be tuched ’till college?) but I recomend letting your spender children “run out” of money one time, to teach that when the money is gone, it stays gone untill next week, if it hasnt happened already.