Our oldest daughter is ten years old.
She gets a weekly allowance for doing specific chores around the house as well as for helping out in general.
Payday for her allowance is Sunday.
Want to teach a child how to remember a day? Have them remember their allowance pay date! Not a week goes by that our daughter doesn’t remind us on Sunday that it’s pay day.
I’m not complaining, mind you. I think it’s pretty cool that she remembers and keeps track.
Anyway, we give her the allowance in cash. Over time she has built up a tidy little sum, adding to it the occasional birthday or holiday money she has received. The money is hers to do with as she wants, though we help guide her and advise her in her spending.
She’s really quite good with her money.
Her savings have never gone to zero and most times her allowance goes right into her savings. She’ll occasionally take some out for a school trip or if she’s going to visit a friend (like may $20, and she comes back with change). On top of that, she’s generous with her money. If she goes out she’ll think of her little brother and pick something up for him. Cool stuff.
A while back we set up an ING Direct savings sub-account for on our account (now 360 Savings). This money was mostly birthday and holiday gifts that we put away for her (checks usually). We always show her what’s in there and make sure she knows about her money. When I show her the account I tell her about the extra little amounts that are added as interest every month and try to explain to her what compounding is. I let her know that when she puts money into the bank, the money earns interest and is added to her account. She seems to understand but isn’t that impressed. Perhaps it’s because interest rates have been low for a while.
A couple of weeks ago it was time to give the little princess her allowance (which she reminded me, of course).
When she put the money with her savings I saw that she had quite bankroll for a ten-year-old! Being the personal finance guy I try to be, I explained to her that she had a good amount of money if she ever needed some spending money and that a bank would be a safer place to put any more. I also reminded her of compounding again.
She was a little concerned about being able to get the money out if she ever wanted it. I explained to her that I could always get it from an ATM (I have an ING Electric Orange checking account (now 360 Checking)so I can always transfer savings over to take out). Some thing clicked this time because she told me I should put her allowance right into her savings account!
I opened up ING and showed her the money I was transferring and then showed her the new account balance. She was happy to see it growing. See, she wants to save up to buy her own computer. Seems dad is always online doing computer stuff (can’t imagine what that would be 😉 ).
Pretty cool goal for a ten-year-old, huh?
So now instead of giving her cash for an allowance we transfer the money into her account (sub-account really). I always show her the new balance so she knows it’s there.
We’re pretty proud of how well she handles money!
How do you handle your child’s allowance?
P.S. Another option besides a sub-account is to open up a Kids Savings Account with Capital One which is an account for the child that you have control of while she’s young.
When did you first start giving her an allowance? My kids are younger and we haven’t started that yet but I think it’s a good idea to start teaching them about money early.
I agree about teaching them about money. You sometimes don’t realize what kids are picking up from you about money.
We started the allowance when she was 9 (I think).
I find it’s really not that hard to get the kids to remember the date of their allowance. My eldest, since she was 7 or 8 could remember exactly how many weeks it has been since we last got around to paying hers. lol
Amazing what they can remember when they want to, huh?
I don’t have children (yet) but if I did then I would do something similar with mine. I did not get a regular allowance as a child but I had a savings account from a very early age (because I wanted to be like mommy and have a pass book). I put all my money into the bank and although I did not understand compound interest I knew that the more money you put in and the longer you kept it the more the bank would pay you. Great idea on using a sub account in ING to keep her money separate so that she can see her money growing.
Thanks Lulu. I didn’t get a bank account of my own until I was 18. My Grandparents took me to the bank and helped me open it up (and put money into it).
We don’t have kids but my husband and I each have our own fun money sub-account with ING as well, lol. Around the 15th of every month, I transfer $125 to each of those accounts. At the end of our financial month, I transfer whatever amount each of us spent on our own fun stuff from our fun money account to our checking account. It’s worked wonders for keeping me feeling secure, which makes my husband happy since I nag him way less. 🙂
Sounds like a great way to spend without it hurting.
I don’t have kids yet, but I love this post. I hope that I have kids this great about savings sometime in the future!
I’m sure you will Eric!
That’s pretty cool. Our daughters are about the same age. I am still trying to get mine to complete her chores. Its tough. LOL. But when she does have money, she is good at saving it. I might also add that it would be a good time to open a separate account to put 10% aside in a savings account for long-term growth.
Check out his 10 year old. Start em young!
I won’t say our daughter always does her chores but she’s pretty good (though there have been weeks where she got less).
I was thinking of possible opening up something like a ShareBuilder account where she could buy Disney stock (yes, she can own the Jonas Brothers!).
I didn’t get much of an allowance growing up. But what ever I did get I had to save half and tithe. Pretty simple stuff and it set a good grounding for me and money. If you are only ever getting a percentage of what you actually got.
It certainly sets you for the “real world” where taxes are taken out.
Wow look at you raising the responsible daughter! FANTASTIC! I love ING for the exact same reasons! Naming Subaccounts is a huge plus that hasn’t been copied just yet by other banks
Thanks Evan. Better get that sub-account ready for your little one!
The sub-accounts are an awesome way to track different savings goals.
Awe! You sound like a really good dad and your daughter sounds like she’s learning lots about money!
I love ING direct and their sub accounts. It helps you know which “pot” you’re putting your money in/ and saving up for.
Thanks!
I’ve been meaning to set up ING accounts for our kids to “roll-over” their cash savings from their “virtual” accounts at the Bank of Mom & Dad. I like your setup. I happened to have built a “Virtual Family Bank” that is somewhere between a piggy bank and a real bank as a way to teach kids good personal finance habits through hands-on practice. It tends to be more flexible for the parents and accessible to the kids than a real bank, but I definitely think the two can be used in a complimentary way.
Looks interesting Bill.
That is such a great idea!!!
I hate to fumble around trying to make change for my son and daughter’s allowance. Most days I have it, but every one in a while…
Sounds like you got a pretty smart daughter! 🙂
Thanks. When I don’t have change my daughter usually can break something easy from her personal bankroll. Transferring the allowance does eliminate that though.
Some good stuff here.
One technique that can help demonstrate the power of investing or saving or compounding is to have your child actually spend some portion of their interest, dividends, etc. one time on something small – maybe an ice cream or candy bar or some other kind of treat.
The concept of their money making more money becomes less abstract when they actually have something in hand that they paid for without having to work to get it (or without their parents having to work to get it).
we have ing kid accounts set up as well and pay their allowance directly into these accounts. since interest rates are so low, they don’t really learn the power of savings and compounding. i suggested to ing that they allow the parent account to pay out “interest” to their kid’s accounts – really just an auto-transfer to subaccounts based on an average balance. unfortunately, just a canned reply. I’d like to pay the kids 10% to get them more excited about savings
That would be an awesome idea. You could always add it in yourself though. Or just tell them that you will match a certain % of what they save?