“Working to help parents raise money-smart kids.”
Hello, friends!
I have a lot of useful information for you today, so let’s dive right into this week’s “3 Ideas to Share & Save.”
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Allowance Amounts: So just how much allowance should you pay? I address this question in my book, The Art of Allowance. I also tackle it in this short essay for those of you with younger children and in this blog post for those of you with older kids. What’s more, I compiled some useful data from a selection of fairly recent articles and surveys to help you formulate an answer that works best for your family.
This piece from The Balance confirms that most parents use the ODAWPA (“One-Dollar-Per-Week-Per-the-Age-of-Your-Child”) method I discuss in this feature about our school-age Starter Allowance, which is for kids between 5 and 10 years old. (Eight bucks for an 8-year-old, for example.)
So what we’re really after here is, “How much we should be paying our tweens and teens?”
This article on Investopedia cites a T. Rowe Price survey that notes the average allowance is $19.30 per week. Also, Ann Carrns of The New York Times, referencing a study conducted by The American Institute of CPAs, identifies the average allowance as $30.00 in this piece (which also happens to feature yours truly 😉).
Another important question you want to ask yourself is, “For what will my kids be responsible?” Our Breakthrough Allowance, which follows the Starter Allowance, aligns with the amount cited in Carrns’ piece and exceeds the amount mentioned in the Investopedia piece. I suggest you identify the responsibilities for which you’re willing to pay, for doing so will help you generate a weekly number. From the The Balance article:
“As they get older, you might want to raise this amount, especially if you expect them to pay for more things with the funds. For a teenager, this could be $25 per week or more if you want them to buy their own clothes or pay for most of their activities.”
-Mike Hunsberger, owner of Next Mission Financial Planning
I go into great detail in my book about how to settle on a figure using amounts tied to responsibilities. You can also check out this short essay to help get you started. Just remember: The numbers help, of course, but all of this is just a guide to aid you and your family along your money-smart journey. Your approach, your “art” of allowance, will almost certainly vary slightly from someone else’s.
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Time Over Money: There’s a deathbed cliché we’ve all heard. When people in their final moments are asked what they wished they’d done differently, almost no one responds, “Acquire more money.” Instead, most everyone wishes for more time with other humans:
“Money plays an important role in life, but it can’t be the only filter for how you decide to spend your time. Nobody will ever pay you to go on a date with your spouse or take your kids to the park or grab coffee with your parents.”
-James Clear, Atomic Habits
During each episode of my podcast, I ask the featured guest several “Fast & Fun Round” questions. I always enjoy, and am often enlightened by, the responses. For instance, the question “What’s the best investment you’ve ever spent on your kids?” almost always yields a time or money-for-time (e.g. travel) answer, like this one from Mr. Metaverse, Brett Wooden.
My wife and I are about to become empty nesters, and while I’m excited for my kids to blossom and for us to have more time to ourselves, I now often find myself struck by pictures around the house of our daughters when they were young.
And recently, my soon-to-be-eighteen-year-old and I came to a stop at one of those red octagons that most Californians interpret as a “roll right on through” intersection. There a dad was pushing across his two daughters in a small covered wagon. We had a similar model when my girls were younger, and it dawned on me that I don’t recall the last time I pulled them around. 😢
This is one reason I was purposefully mindful of my younger daughter’s final soccer games. And it’s also why I tell young parents to journal if they can, so as to keep a record of all those little moments spent together. Those times are gone, but the memories aren’t. And as our memories fade, it might be nice to reflect on those moments later.
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Willpower Is Overrated: Our goal is to help our kids establish good money habits and heuristics, or rules of thumb, early so that they’re not forced to try to tap into willpower. The ability to leverage willpower is overrated, and research tells us we only have so much available during the day. So who knows if we’ve depleted our reservoirs when it comes time to make a money choice! 😬
Below are some examples of how to win over willpower:
- Sleep on a decision. Whether it’s buying something small or choosing an investment portfolio, getting some shut eye can offer you a new perspective.
- Don’t shop when you’re hungry. Sometimes the simplest rules are the most helpful.
- Pay yourself first. This is such an essential concept for our kids to learn that we made it a core component of our first ”Good Money Habits” video.
- Have a “mad money” account. Follow Your Money & Your Brain author Jason Zweig’s advice to allocate 10% or less of your total funds to speculating on individual stocks. I talk to my kids about this strategy often, as I want this “mind virus” in their heads when they make adult investing decisions.
- Remember your why.
That last point is for us. We tell our kids we’re giving them an allowance to help them learn to be money-smart. Once we establish our why, just as Viktor Frankl talks about in his wonderful book, Man’s Search for Meaning, and in this video, we can figure out the hows.
Frankl attributes his ability to survive the hellish camps of the Holocaust to his having a why. And while our own situations are almost certainly not as dire as Frankl’s, we can still learn much from his outlook, as I wrote about in this post.
Our why matters because it allows us to discover our hows. Like how much allowance we should pay. And what habits and heuristics we want our kids to learn and take with them into adulthood.
As always, enjoy the journey!
John, Chief Mammal
P.S. Please consult with a financial or investment professional before engaging in any decisions that might affect your own financial well-being.
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