We were very sporadic about allowances but our kids are both quite frugal but OK with splurging to spend time together (they live in different states from each other & from us). S has saved a LOT for his retirement in tax protected accounts. D has basically no tax protected accounts.
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Relevant to talk on these forums, also the ability to afford to support kids from infancy to college…
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My kid never got an allowance and also never asked for or expected to be given money. She started working at 15. She is fairly frugal, very independent, and always has savings though she also spends money where appropriate.
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And if there are any disabled people in your clan, you will likely have to save money to support said disabled person for their lifetime as well.
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Here is another survey of mostly personal finance related matters:
This was us too, though I think we paid them for chores when they were really little (pre-school-second grade?) A whole $0.50 for hand scrubbing my kitchen floor!
I can’t ever remember them asking for money for anything. They knew our life was tight, but we were doing better than some of their friends. They also started soccer refing at 12, so they had their own money.
Both are good with money and savings.
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Before college…we did something a little different regarding allowances. First, we didn’t pay our kids to do chores around the house. Everyone who lived here was expected to chip in where appropriate.
What we did…each kid had a ledger. Their allowance amount was entered at the beginning of each month. If there were things they wanted paid for, or they needed cash, that amount was subtracted on the ledger. So…for example…if we were out at the mall and DS or DD wanted to buy something, we would pay, and the amount was then subtracted on their ledger. They understood this process by the time they were at least 10 years old.
Once they went to college, they earned their own spending money. We encouraged them to work up to ten or so hours a week. Since this was their earned money, we have no idea what they spent that money on. But neither of them asked us for extra money ever while in college. We did give them cash or gift card gifts when we saw them, or for occasions.
This worked for our family.
Both of our kids know how to budget and live within their means. And our two kids have very different levels of income, but both are able to do this.
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My daughter had one of those divided piggy banks with spend/save/invest/donate slots. She started getting an allowance in first grade for above and beyond chores and was taught to divide everything into 1/4ths. H did the investing part but showed her the monthly balances so she watched that money grow from a young age. As she got older she opted to put more and more into invest and less and less in spend. She lives that way now as an adult.
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We didn’t give our son an allowance, and he didn’t have a job until he joined the Army, but we included him in our financial planning from the time he was small. We taught him to count using money, and we introduced him to our financial planner when he was eight to start learning about how to build wealth. I also taught him what my banker dad taught me: For any amount of money that lands in your hands (birthdays, Christmas, grandma/grandpa, etc.), you put one penny in your piggy bank (pay your future self first) and the other in your pocket to spend as you wish.
During the 2008 meltdown, my brother gifted our son some Ford stock when it was at an all-time low. When it started to rise, kiddo talked to our FP/broker about putting more money into that investment. She had taught him about diversity and why putting all his eggs into one basket was not a sound strategy, but he felt that, among the car companies, Ford was a good bet and asked her to put half of his lifetime savings into Ford stock. She reluctantly did, but then taught him about floors and ceilings and when to sell. He picked a ceiling and sold it all much later at a high and then had her create a more diversified portfolio. By the time he went off to boarding school, we didn’t need to give him an allowance. We told him he was on his own to manage that money and use it as needed. His financial life was modeled by us first and then guided by our FP until recently.
He will be a high earner in his new civilian job but considers the excess a fantastic way to invest for early retirement which, for him, simply means that he will completely control his later work life when a paycheck becomes irrelevant. That is his goal.
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Kid hasn’t hit adulthood, so no telling how he will eventually end up. But from the beginning of getting an allowance (early elementary) the kid was told 10% for giving, 20% for saving, and 70% for spending. In the beginning it was a cash allowance with glass jars, but switched to a bank as he got older. If he doesn’t have enough in “spend” then he can’t buy it, unless it’s a necessity at which point he can go into savings (or debt to the family). (Necessity is paying for a pair of glasses when we’ve bought 3 pairs in less than a month.)
But the kid definitely understands the concept of saving, as he saved up significant $$ to go towards a new gaming computer.
The other restriction on spending was candy…if he wasn’t practicing good dental hygiene then purchasing extra candy wasn’t allowed.
Other things we found useful: 1) discussing family finances somewhat openly with the kids when they are young — here is the cost structure of the family —taxes, mortgages, school, vacation etc, and , 2) discussing the financial implications of various career choices starting middle school — i.e., what creates value and who gets paid what and why amongst people in various professions that we know — eg this guy who is a banker is a sales guy (difficult job), that woman in the family has specialized skills that took 15 years to train, and are scarce right now, that other third person takes risk in a systematic manner on a daily basis, that fourth person, my cousin, makes long term bets with borrowed money etc. These other professions don’t make money for these reasons etc. Covering both the revenue side and the cost side of finances.
While parents can influence future financial habits of their children, there are countless other factors influencing whether the children will have responsible financial habits as adults – personality traits (including primarily biological), education and intelligence, emotional/psychological health and related reasons for spending, financial education, SES and related financial situation (as both children and adults), influence from spouse/partner, influence from peers (as adults), etc.
As an example of the latter a person making $500k/year might feel like he has a low income if his finance peers at work mostly make $1M+/year, and might imitate many of his/her higher income peers’ spending habits. It’s a similar idea for neighbors or persons you regularly hang out with.
One can list anecdotal examples with many combinations of above leading to many different outcomes. For example, my father grew up in a challenging financial situations where most of the people around him earned more than his family. He believed others saw him as poor when growing up. I expect this contributed to being particularly sensitive to not wanting to be being perceived as poor in the eyes of peers as an adult, so there was a good amount of “keeping up with the Joneses” type spending. I got the impression that the locations of our vacations had as much or more to do with wanting to keep up with or impress others in the neighborhood/family/friends than actually wanting to go to those locations.
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Saw this the other day in my local paper. Why middle class doesn’t feel wealthy despite having nice increase in net worth:
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