I already talked about how an allowance can be an important tool for raising a child. An allowance is the best way to get started on financial education and decisions.
First, it provides an avenue for your kids to learn money management in a controlled way. Second, it provides an avenue for you to begin discussing money matters with your kids. And third, it provides an avenue for your kids to learn the value of hard work through “extra allowance”.
Fixed Allowance vs. Chore-by-Chore Allowance
One dilemma that parents face is whether to give your kids a fixed allowance or a chore-by-chore allowance. Some parents want to instil the value of working hard for money at an early age. So what they do is that they put a corresponding amount per chore and then kids will only get an allowance depending on the chores they do.
It can be a clever way to make sure kids do their chores, but it can also be a way to create a bad impression for chores for them. How? If kids realise that all chores have a price tag connected to them, then they will begin to see chores as optional. They can begin to cherry-pick doing which chores they want to do and which ones they don’t want to do.
Also, putting a value on every chore makes housework a transactional experience for the kids. This should not be the case. Kids should realise that being part of a family means that they also have to contribute to the household. Financial education will complement kids learning proper household responsibility.
Use both as tools for financial education
With this in mind, what you can do is this: you can have a fixed allowance and a chore-by-chore allowance.
The fixed allowance is dependent on the expected chores your kids will need to do. These chores can be as simple as: doing their bed, washing the dishes, taking out the trash.
The chore-by-chore allowance is where you can assign a monetary value for selected chores. These chores are that are a bit tedious or something that requires a bit more effort to do. These chores can be: mowing the lawn, giving the dog a bath, doing the laundry and folding the clothes (not just their own clothes!).
We want our kids to learn the value of hard work while still being able to contribute to the household. They will realise that they have the capacity to earn more if they work more. The ability to earn more (albeit in a controlled environment) will allow them to feel more control over their money. This will allow them to take more responsibility for their finances.
They will also have the chance to negotiate their pay for the chore-by-chore allowance.
Raise smart negotiators
When you bring up the topic of chore-by-chore allowance to your kids, let them know that the money is open to discussion.
“If you mow the lawn very well and properly tidy and park the mower afterwards, I’ll give you $7 instead of $5.”
“If you also fold all the laundry neatly after washing, I’ll give you $15 instead of just $7!”
Letting them know that they can get more if they go above and beyond what is expected of them. This opens up the opportunity for them to start asking and negotiating. Let them ask and let them haggle. They have to realise that their extra effort deserves more compensation.
We have to let our kids (especially our girls) realise that they cannot cheapen themselves – and to know that domestic chores have value, too. Teaching them to negotiate as early as now will prepare them in the future when they are negotiating for their pay. We need to make sure that we are allowing our kids to develop good and savvy habits as they grow up.