Years ago, I read a blog from a mom who was adamant that you should never pay your kids money. Never give them money, and never pay them an allowance. Her experience was that the kids go out and buy toys and candy and garbage and end up cluttering up the home with junk and rotting their teeth out. And, once they have what they want, they do not want to help out anymore. She also pointed out that the post-allowance spending spree was not in any way preparing her children to handle money responsibly in the real world. She concluded that allowances are a mistake, and paying kids for chores is a mistake.
And guess what? She is 100% right. Parents who give their kids an allowance or pay them for chores with NO FINANCIAL RESPONSIBILITIES are making a huge mistake.
The problem is, this mom blogger missed a key ingredient when it comes to paying kids money. You cannot just hand money to your kids and then send them off. It will not work. When you pay them money, you have to give them an equal share of financial responsibilities. That is the key.
Parents who give their kids an allowance with NO FINANCIAL RESPONSIBILITIES are making a huge mistake.
That is why Moneypants is fundamentally different and so much smarter than an allowance. With Moneypants, you assign your kids financial responsibilities that match their income. It is just like an adult when they get their paycheck. The adult cannot go out and spend that money on whatever they want. They have bills to pay and specific things to use their money for. It is not a free-for-all when they get paid. Moneypants works exactly the same way.
When paying kids money or giving them an allowance, you have to give them some financial responsibilities. The money has to have a purpose, a goal. It has to be structured. There must be boundaries and limits as to how your kids can spend their money.
Since this is so much easier to show than to tell, we created a quick video to demonstrate.
When you first start using Moneypants, you need to help your family members understand the concept. Get everyone together and tell them something like this:
“Everyone is going to be earning lots of money, but there are some rules to this game. Here they are: 10% of your money goes to tithing, 10% goes to savings, 10% is fun money, and 70% goes towards mandatory expenses. Yes, I said mandatory expenses. You have to spend your money on some specific things. Here are some examples. Everyone in our family has to play a music instrument and also play a team sport and also buy their own clothes and school supplies.
“There is good news: you get to decide which sport, which instrument, and what clothes. There are lots of options out there, and we (your parents) will be there to help you whenever you need it. And when you buy clothes, we still expect you to follow the family rules of modesty and appropriateness.”
People hate being told what to do, but if you let them make choices and develop their own style, they will be much happier.
We recommend creating a list of spending requirements for your family, kind of like college. In fact, you may want to think of yourself as the principal of a private college. In college, you have general education classes which are required, but there are choices within those categories. For your family’s general education classes, you tell your children that you expect them to take a musical instrument or learn a musical talent. This is a required course. Then within that requirement, you let them choose whether to pursue piano, guitar, singing, marching band, etc. That way they have a say in what they’re doing, and they’re more excited about it, and it’s their decision and their style and personality, not yours.
People (including children) hate being told what to do, but if you give them a simple choice and an opportunity to develop their own style, they’ll be much happier with their choice and more satisfied with the results. Directed spending is about allowing choices within certain boundaries. It is not a free-for-all allowance.
Imagine for a minute that your mother loved accordion music. With a passion. So, she insisted that you spend years of your life and much of the money you have earned learning to play the accordion. You, however, do not like how the accordion sounds. It hurts your ears. In fact, you really dislike accordion music. You’d much prefer to spend that time learning to play the piano, which is music you personally enjoy.
Would you have some resentment towards your mother and the accordion? Would you feel that your mother was controlling you? Probably at least a little, if not a lot. You may feel like you wasted your time, talents, and money on something you didn’t like or even care about. And you may wish you had been given the choice to choose a different instrument.
Many good parents want their children to learn appreciation for the arts and the discipline that comes from learning to develop musical talents. Developing any musical talent will accomplish that goal. Why not let your child choose something they are excited to learn and will be more willing to dedicate their time and money towards learning? The cost of music lessons for various instruments is usually within the same price range.
This is what you as the parent would say to your child: “So, dear daughter of mine, in our family everyone must learn a musical instrument. Music classes are one of your financial obligations. You can choose piano, guitar, or ukulele. Which one do you want to do? Which one do you want to earn?”
Then your daughter will make the choice and start paying for her classes. She will be infinitely more interested in the classes because she’s the one who chose them, and they are now her stewardship.
The same concept applies to sports, academics, or pretty much any extracurricular activity. “Which sport do you want to play? It’s a family requirement that you play at least one sport. Will it be basketball, football, soccer, baseball, swimming, etc.?” Or, “Which dance style do you want to learn? Ballet, hip hop, modern, jazz, ballroom, tap, clogging, folk dance, etc.” Let your children decide within the framework that you set up.
This way children are excited about their choice, are much more willing to pay for it, and are much more willing to participate. Perhaps most importantly, you as the parent get to understand your child better. The choices they make demonstrate their personality. It also gives them the opportunity to make choices and exercise that part of their brain, which they will ultimately be doing as a parent and adult anyway. Why not start when they are young?
What if you are dead set on having your kid learn accordion? What if it is something you are not willing to give up?
There are lots of reasons why this scenario would exist. Sometimes parents want something for their kids that their kids do not necessarily want for themselves. Sometimes parents simply are not willing to bend. Maybe it is a family tradition to learn ballet. Other times it is a matter of convenience. For example, you may have four sons, and you do not want to have to play taxi for different sport practice schedules. So, you sign them all up for football because all the practices are at the same time and at the same location. The kids pay for it whether they like it or not.
Going back to the college analogy, we like to think of this type of spending as a “required class”. Learning a certain instrument or playing a specific sport is required.
If your kid gives pushback, there are a couple of ways to handle it.
First, you can use the tried and true: “Because I’m the dad, and I said so”. That may work, or it may not. Typically, when kids are not given a good enough motivation to do something, they will only do enough to not get in trouble. Yes, little Jeffrey will learn the accordion because “you said so”, but he will only give half-hearted efforts. He will be mediocre at best. And as soon as the threat of punishment is gone, he will stop practicing.
Learn and use your kids’ “Hot Buttons” to motivate them to develop their talents and try new things.
We suggest there is a better way.
If you are dead set on your children learning accordion (because it’s been a family tradition for generations) and not giving them the choice of which instrument to learn, you still need to give them an opportunity to choose. This is where knowing what your child’s “Hot Button” is. What is it your child wants more than anything? Is it TV time, or to play football, or to go to parties or friends’ houses?
Be open and honest with what you want. Offer them the deal like this: “I want you to learn accordion. I know you don’t want to. However, if you make it to level four in accordion lessons with Mrs. Studemeister within the next three years, I will give you my old Chevy Nova when you graduate from high school. It’s your choice. And, as a bonus, if you get to level five, I’ll pay for your insurance for one year.”
See how much different this is from a typical allowance?
“Okay, my boy, I know you want to play basketball this year. I want you to take piano this year. If you get through the first four lesson books in piano and practice daily, we will sign you up for basketball in June and I’ll buy you a new pair of basketball shoes up to $120 in price.”
And one more: “My dear daughter, if you practice violin every day and have good behavior for your teacher for three months, I’ll pay for your trip to Disneyland when we go as a family in August.”
What about family rules and standards?
For instance, we had one mother we worked with who refused to allow her daughter to buy any clothes related to “Hello, Kitty”. This mother insisted on dressing her daughter and would not let her daughter buy her own clothes. For that mother, clothes were a non-negotiable.
While we think that is a bit extreme, we recognize that every family has certain values and standards. We recommend being very picky about which battles you choose. Non-negotiables should be rare. Make sure your kids know what those standards and values are. For instance, in our family, we have standards of modesty. We do not allow our daughters to wear tube tops or short shorts. They are not allowed. If our kids buy them and bring them into our home, we confiscate them.
When shopping for clothing, the same rules apply. Let your kids know, it may be their clothes, but it is still your house. Once again, “directed spending” is not a free-for-all allowance.
So Much Smarter Than An Allowance
Most people pay their children an allowance because they want them to learn financial responsibility. How effective it is depends on the rules you set up. There is nothing wrong with paying your children money. In fact, it is a really good thing. But you have to do it right. A good idea is to think of yourself as the principal of a private school. You make the rules. You choose the curriculum. Your kids have leeway within that curriculum.
After all, you are the parent. You are the coach. You are the boss. This is not a free-for-all. The money your kids earn serves a specific purpose. Plus, with Moneypants, it was money you were going to spend anyway. If that money was meant for soccer before, then it should still be meant for soccer. Just because your kid earned that soccer money does not mean they can spend it on candy.
The goal of Moneypants is to help kids develop financial sense, but also to develop their potential and their talents, to have balanced healthy lives, and to become independent adults. When spending has no direction, that won’t happen. The opposite will happen. That is why Moneypants is so much smarter than an allowance.
So, when replacing an allowance with Moneypants, do this:
- get your team together
- tell everyone that they are going to start paying for things
- let them know it is not going to be a free for all
- here are rules to the game
- here are options within those rules
And that is it. Let the fun begin!
Do you pay your kids an allowance? Do you give them spending requirements? What non-negotiables do you have? Leave a comment below.