When to Start Allowance

I received a question from a reader in a comment that seemed worthy of its own blog post.

What a great blog Darcy! My son is just getting an interest in money and saving. When did you start a weekly allowance w/ the kids and how much do the kids earn? We are trying to figure out when and how much to start our son out at, and what parameters to tie it to....there are only so many chores a 4 year old can do! :)

Obviously you have to do what works in your family, but here's what we do with our kids: We started the allowance when our kids turned 4 years old, and they get $1 per week for each year old they are. So my 8-year old gets $8 per week. We don't explicitly tie the allowance to chores, although they do have chores and we add more each year. So I guess it's more like a salary for them, they get it as long as there aren't serious deficits in getting their chores done.

I don't like to tie allowance directly to chores because I don't want to send the message that the kids will get paid for doing things that are a part of their job in the family (and no one pays me when I do the dinner dishes or the laundry!) But we have docked their allowance in the past if the kids didn't do their chores in a particular week.

Our kids are expected to keep their rooms picked up, including making the bed every day. They have to get their clothes into the hamper and their dinner dishes into the sink every evening. The 8-year old also has to sweep under the table after dinner and clean the toilets once per week.

I think 4 years old is a great time to start allowance for the exact reason listed above, they start to get interested. In my humble opinion, one of the best things we can teach our kids about money is that you have to earn and save money before you can buy the things that you want.

Good luck implementing the allowance, let me know how it goes!

"Going American"

My family recently hosted a wonderful young man from France through a foreign exchange program. Although we don't speak any French so we occasionally had to try more than once to understand each other, we made it work; and the cultural exchange of information along with a new friendship were well worth the effort.

One day he and my husband were discussing debt and he told my husband that in France the only debt people take on is for big items like cars and houses. (Sounds awfully familiar.) He said that it would never cross his mind to take out a loan for something small like a TV. He actually said that if someone ever talks about taking out a loan for a small item they call it "Going American." I don't know that it's such a great thing to have our country associated with frivolous debt. I can only hope that over time if more and more people are smart about debt that phrase will lose it's meaning and go out of vogue.

Where We Do Need To Spend Money

I realize that I'm a bit behind the times, but I recently watched An Inconvenient Truth and was pleasantly surprised by the movie. Although the information about global warming was depressing; Al Gore did a good job of leaving you with hope that if we make some changes we can reverse the effects of global warming. I live in Colorado and every time we go into the mountains we see the effects of global warming first hand. The pine trees are all turning brown and dying because our winters no longer get cold enough to kill off the larvae. This is a problem that all of North America is experiencing according to a recent article by the BBC.

As much as I preach money management, there are things that we must spend money on. I firmly believe that spending money on alternative energy, more fuel-efficient cars, recycling, and other items that will help stop and perhaps reverse global warming is very necessary. We don't all have the money to make the changes immediately, but if we start making small changes now, eventually they'll all add up. This is just another reason why it's important to manage our money; so that we have money to spend on the important things.

Responsible Spending Habits Slow Economic Recovery

Sarah Lockyer recently penned an article in Nations Restaurant News about decreased spending by consumers due to fears of unemployment. The article is based on research by Technomic Inc. which indicates that an economic turnaround will take longer because consumer spending is slower. From the article:

"The current broad unemployment rate, which includes not only those who have lost their jobs, but also workers who are underemployed or discouraged, has reached 15.8 percent and is rising, according to a July Technomic report from the firm’s consulting economist, Arjun Chakravarti. The prolonged climb of unemployment in the United States has not only affected the spending habits of those without jobs, but also has changed the spending habits of those who remain employed “by spreading psychological uncertainty across all workers in the economy,” Chakravarti said".

Although it would be nice if the economy would recover quicker, it will come back stronger and more stable if everyone increases their savings rate. I know that economists would be happy with a quick turnaround, but I for one am pleased to hear that people are developing more responsible spending habits.

Debt Load

There was an interesting article in this week's edition of Time Magazine about what our economic recovery will look like. One of the sections in particular caught my attention.


[Frugality] is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post-World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65%in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.

Huh, over 100% debt-to-income was too much to handle, does this seriously surprise anyone? I’m definitely not the first person to ever say “live within your means.” How do you prepare for retirement if you’re not only not saving, but spending more money than you’re making? I hope that the cultural observers are right in that we all move away from all that consumption and start trying to build on our wealth by saving some of the money that we earn, and that we’re all in it for the long-term.

Money Isn't The Only Thing You Have To Budget

It's imperative to budget your money if you want to properly manage it, and it's equally important to budget your time if you want to have enough. Most of us have very busy schedules. If you work full-time, have a house to maintain, kids to raise and spend time with, a significant other who you'd like to be more than just a roommate, and exercise to remain healthy to do all of that; it can be hard to fit everything in.

My husband and I got a rare date night tonight, and while we were walking together, we talked about things we'd like to do with our time (like post on this blog on a more regular basis), and how hard it is to find the time for everything. But then we starting talking about how if we actually sat down and looked at how we were spending our time every day, we might be surprised at how we could fit in a few more of the important things. I started thinking about how our time is much like our money, most of us don't have enough for everything we need or want, and we have to decide when and how we're going to use it, and prioritize and make sacrifices when necessary. Wouldn't it be great if we all won the lottery and had clocks that could stop time? Since that's not reality, I guess the Money Maiden will have to be as diligent with her time as she is with her money.

Another Benefit of Delayed Gratification

Practicing delayed gratification is one of the most important tools to assist you with successful money management. By saving up in advance so that you have the money for the things you need before you purchase them, you keep yourself out of bad (unnecessary and providing no long-term gain) debt. The other thing that delayed gratification does for you is to allow you time to cool off. I’ve found that there are times that I’ve decided I really want something, but by the time I’ve saved up for it I realize that I’ve gotten along this far without it and don’t really need it.

So now not only did I avoid going into debt, but I’ve also managed to increase my savings rate. Two for the price of one, always good in money management!