Teaching Them To Understand Work

Catherine has three young children, and she thinks they should have to save up if they want a new toy, but she doesn't think she should tie allowances to household chores.

QUESTION: Catherine in Raleigh has three young children, and she’s struggling with the concept of allowances. She thinks they should have to save up if they want a new toy, but she doesn’t think she should tie allowances to household chores. Dave loves this discussion and explains how he handled it in his house.

ANSWER: It’s a great discussion, and I’m really glad you brought it up. The reason it’s a great discussion is what you choose to do here is not about the money or the chores. It’s about what you want your children to become. What you teach them to do, they will become. What we’ve discovered in teaching kids about money is that there are four things that it is your job as their mom and your husband’s job as their dad to teach them about money. It’s your job just like it’s your job to teach them about grades and brushing their teeth and taking a bath and not hitting your brother. It’s a life skill, and if they leave without that life skill, you have not been a good parent.

This is really important, but it’s really four basic things we want to teach them. We want to teach them to work because they need to know that skill. We need to teach them to save because they need to know that skill. We need to teach them to be givers because people who give are the only ones who ever really enjoy life and money. We need to teach them to spend wisely. And we could add to that, in your part of the discussion, that we want to teach them to be a valid family member loving family members well. How do we do all of that?

We had three kinds of chores around our house. We had chores you do because you love your mom and you’re scared of your dad. You’re a member of the family and you do acts of love called service. We just labeled some chores acts of love. But if that’s all we teach them, then we’ve taught them communism. We don’t want to do that—as economic thought. We also had chores we called special projects. Sometimes, those had money. Sometimes, they were under the heading of “family project.” The third kind was chores we created and attached money to because we wanted to create teachable moments, and we wanted to build their little saving, giving, working, and spending muscles. If they don’t do exercises, they don’t build those muscles.

We didn’t have an allowance at our house. Allowance sounds like welfare to me. I don’t like the word. I like the word commission, so our kids were on commission. Work, get paid. Don’t work, don’t get paid. You have five chores, and any one of these chores you don’t do, you don’t get the money. These other chores over here you don’t do, you get punished. Ultimately, these chores you’re going to do because you’re going to learn this skill. This is optional—sort of. In other words, you’re going to do some work that has money attached to it because I want you to make the emotional connection that work creates money. I meet 54-year-olds who haven’t made that connection. I’m going to teach you that when you’re six. That’s the blessing of your mom and dad.

What the chore is doesn’t matter. You don’t have to make a big philosophical statement about feeding the dog is a family thing. You can just say we’re paying you for feeding the dog. If the dog gets skinny, you’re not going to get paid. We had a dry-erase board for the refrigerator that said “Commission Worksheet” across the top. And then there are three little envelopes in the Financial Peace Jr. kit. One says, “Save” on it, one says, “Give” on it, and one says, “Spend” on it. When we had payday in cash, we would then break the money up in a predetermined amount. Some goes into giving, so when you do your giving at church or for this or that, then it’s you who is giving because you worked and you earned the money. When we go down to buy the Star Wars action figure, you can save up. We can learn to do a little bit of math and set goals. You’re saving $3 a week, the thing is $16, so it’s going to take you about seven weeks. This is the process. “By the way, did you know Legos are cheap at the garage sale, darling?” That kind of thing.

You teach them how to spend wisely, and then we teach them how to save for big goals. We started our kids at six, five, 10, right in there, saving for their car, and we agreed to match them for their car. Every time they put $100 aside, that’s $200 because we’re going to match you, and you’re going to save up and buy your car. If you don’t, then you’re going to be riding a bike because I’m not buying you a car. We started talking about that when they were your kids’ ages, and all three of them paid cash for their first cars with a match. I will tell you to put a limit on the match, by the way. I didn’t do that, but you should.

I agree with you. They need to do some things just because they’re in the family, but I want to have little workers, little savers, little givers, and little wise spenders who are my little children, then become my grown adults and don’t live in my basement because I taught them these skills. When they went off to college, by the way, they never called home for money. They learned to live on a budget while they were at home and learned that money was finite. They learned where money came from. It comes from really hard work. If you start that stuff as young as your kids are, you’re going to have them on the run. That’s a great time to ask this question.