Our current allowance system is broken. My kids aren’t seeming to grasp the basics of money management around budgeting, saving and investing.

Looking back, I was better with money as a kid than I am today. I still remember the lessons that my parents taught me in a time where layaway plans were more popular than credit cards.

I must have been around 6 years-of-age and the toy I coveted was a my little pony baby buggy.   I saw it at my favourite local toy store in a time where independent toy stores still dominated the consumer market.   It was the most beautiful thing I had ever seen and the only thing standing between me and it was a $29.95 price tag.   I had something like $5 bucks in my pocket.

This was the first big ticket item I had ever wanted. I wanted this a pretty expensive toy soooooo badly.   I was willing to save up all my allowance, accumulated at the rate of $2 per week, to have this toy.     The only thing I feared was that there would be none left to purchase by the time I had the necessary funds, as again, this was at a time where parents used to get in fist fights over the elusive cabbage patch doll.

Somehow I convinced my parents that I would save the money to buy this baby buggy on my very own.   To do this, they agreed that it would be put on a layaway plan.   It wasn’t bought for me.   My parents didn’t loan me the money.   I had to painstakingly wait week after week to pay for the baby buggy before I could acquire and enjoy the good.

In part, I think my parents weren’t convinced of my long-term interest in a single toy.   After we left the store, I’m sure they thought I would forget about all about it.     But I didn’t.   I was obsessive. Every Friday I would beg my parents to take me to the toy store so I could put my allowance towards the payment plan.

I was getting more excited week after week as I saw the balance outstanding grow smaller.   I was proud of myself.   I was saving my allowance and earning extra money to pay for something I really wanted.   I was doing this on my own, I was earning the money and I was immensely satisfied by the process.   This was about as empowered as a 6 year-old could be.

My parents were astounded at my commitment and after about 5 weeks they opted to reward my efforts by paying the outstanding balance.   I was over the moon to finally bring my baby buggy home.   The satisfaction level was only slightly diminished by not paying for the whole thing on my own.

Today, as an adult, I still remember that lesson and that feeling that I cannot do justice to in words. This is what I want to pass on to my kids.

The allowance system currently works like this in our house.   Each Friday, our kids who are 11 and 13, get $10.   Of this, $5 can be spent on whatever they wish and the other $5 must be split however they see fit between their saving and charity jars.

Allowance is as much about financial management as it is about imparting values. By allocating $5 to savings and charity, we trying to set up some good habits and get our kids to believe that giving back financially is important.   Every two months or so we go to the bank so they can deposit their savings and watch their bank accounts grow.   They like to sponsor themselves in the annual bowl-a-thon our family participates in, and from time to time, they find other great charities that they’d like to donate to as well.

What the kids receive in allowance isn’t tied to chores as contributing to the household is an expectation of all family members.   Should the kids wish to earn more than what their allowance provides, they may ask for ways to earn money by doing one of our adult chores like mowing the lawn or weeding the garden or cleaning up the basement.

Our problem isn’t so much with the savings/charity portion of their allowance, but with the $5 they can spend however they like. When there is money, they need to spend it immediately.   It’s URGENT.   I now know where the expression ‘œburning a hole in your pocket’ came from.

On the one hand, we have issues with budgeting the expendable portion of the allowance.   What we give them isn’t always enough to get exactly what they want.   So they adjust their wants by downsizing.   This isn’t always necessarily a bad thing.   It’s just that we have not yet been able to get the kids to think about how they can, over time, accumulate the money to get exactly what they want.

For example, our son loves water guns.   The bigger the super soaker, and more expensive, the better.   If he only has $5 dollars in his pocket, he’s not likely to have enough to afford the toy he wants.   So instead of waiting a week or two to save the required money, he will beg and whine to be taken to the dollar store, where he will blow all his money on water guns that inevitably break less than 24 hours later.   We’re also then left to deal with the ensuing meltdown about how unfair it is that the thing he bought broke.

We’ve tried to teach them both to save their money.   We’ve tried not taking them to the dollar store.   We’ve tried loans.   Still our kids are not getting the a) it’s a good thing to save to get exactly what you want so you don’t have to settle; b) delayed gratification is okay; and, c) sometimes it’s worth investing more money in something of better quality. What’s a parent to do!

What does your allowance system look like?   What do you want it to teach your kids?   Is it working?

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