DLTK's Crafts for Kids
Raising Financially Savvy Kids

by Darren Guenther, CPA

One of our primary goals as parents is to raise responsible, independent, and financially savvy children. And guess what? Introducing chores and allowances can help our kids develop these crucial life skills. In this blog post, I'll explore the benefits of assigning chores, how to implement an effective allowance system, and ways to make the process enjoyable for the whole family.

The Benefits of Chores for Young Children:

Assigning manageable, age appropriate chores to our little ones can do wonders in their lives, including:

• Building a strong work ethic: Chores teach children the importance of hard work and consistency.
• Developing a sense of responsibility: Completing tasks regularly helps kids understand that their actions have consequences and that they need to be accountable.
• Teaching time management and organization: Chores show children how to prioritize and use their time effectively.
• Fostering teamwork and family cooperation: Sharing household duties brings the family together and teaches kids the value of working as a team. Make sure that the list of chores include at least one that is done as part of a team, such as taking the dog for a walk. Emphasize the importance of working together effectively as the key to earning allowance.

Choosing Age-Appropriate Chores:

To keep our kids engaged, let's make sure we assign tasks suitable for their age:

• Toddlers (2-3 years): picking up toys, helping with laundry, wiping spills
• Preschoolers (4-5 years): setting the table, feeding pets, helping with gardening
• School-age children (6-9 years): making their bed, sweeping floors, taking out the trash
• Tweens (10-12 years): doing dishes, folding laundry, cleaning their room

Establishing an Allowance System:

Let's empower our kids with some financial know-how by setting up an allowance system:

Deciding on a method:

• Chore-based Allowance: In a chore-based allowance system, children receive payment specifically for completing household chores. Their allowance is directly linked to the tasks they complete. For example, if they do the dishes, they might receive a set amount for that chore. This method teaches children the value of work and helps them understand that money is earned through effort.
• Age-based Allowance: An age-based allowance system provides children with a predetermined amount of money based on their age, rather than the chores they complete. For example, a 7-year-old might receive $7 per week, while a 10-year-old would receive $10 per week. This method can help children learn about budgeting and managing their finances without tying their allowance directly to chores. Instead, chores are seen as a shared family responsibility.
• Hybrid System: A hybrid allowance system combines elements of both chore-based and age-based systems. In this method, children receive a base allowance based on their age, but they also have the opportunity to earn extra money by completing additional chores or tasks. This approach encourages children to contribute to household duties while also teaching them about budgeting and the value of hard work.

Each method has its advantages and drawbacks, and the best choice depends on your family's values and preferences. Some parents prefer to emphasize the connection between work and money, while others may want to focus on teaching budgeting skills without directly linking chores to allowance. A hybrid system offers a balance between the two. The most important thing is to choose a method that aligns with your parenting style and goals for your child's financial education.

Setting the amount:

Take into account research, family budget, and personal preferences when deciding on the allowance amount. Especially at a young age, the exercise is more about setting up consistent habits than it is paying out large sums.

Payment frequency: Decide whether to pay weekly, bi-weekly, or monthly.

When establishing an allowance system for your children, deciding on the payment frequency is a key factor. The most common options are weekly, bi-weekly, or monthly payments. Each option has its pros and cons, and the best choice depends on your family's preferences and your child's ability to manage money. Let's take a closer look at the pros and cons of each payment frequency:

Weekly Allowance Pros:

• Easier for young children to grasp: Weekly payments are more manageable for young kids who are still learning the basics of money management.
• Reinforces the connection between chores and rewards: With a weekly allowance, children can quickly see the relationship between their efforts and their earnings.
• Helps develop budgeting skills: Receiving money weekly encourages kids to plan their spending and saving habits more regularly.

Weekly Allowance Cons:

• Requires more parental involvement: Keeping track of weekly payments can be time-consuming and may require more effort from parents.
• Less flexibility for larger purchases: For kids saving up for bigger items, weekly payments may require more patience and self-discipline.

Bi-weekly Allowance Pros:

• More manageable for parents: Paying an allowance every two weeks can be easier for parents to remember and track.
• Encourages better planning: A bi-weekly allowance can help children think more long-term and plan their spending and saving accordingly.
• More closely mirrors adult pay schedules: Introducing a bi-weekly payment schedule can help prepare children for the way many adults receive their paychecks.

Bi-weekly Allowance Cons:

• Less frequent reinforcement: Bi-weekly payments may not be as effective in reinforcing the connection between chores and rewards, especially for younger children.
• Requires better budgeting skills: Kids need to learn how to manage their money over a longer period, which can be challenging for those new to budgeting.

Monthly Allowance Pros:

• Teaches long-term planning: A monthly allowance can help children learn to budget and plan for the entire month, fostering more advanced financial skills.
• Easiest for parents to manage: Paying an allowance once a month requires the least amount of parental involvement in terms of tracking and distribution.
• Simulates adult budgeting: A monthly payment schedule can prepare children for managing their finances when they become adults.

Monthly Allowance Cons:

• Difficult for younger children: Monthly payments may be too infrequent for young children who are still learning the basics of money management.
• Weaker connection between chores and rewards: With a longer time between payments, it may be harder for children to associate their allowance with the chores they've completed.
• Greater potential for impulse spending: Receiving a larger sum once a month may tempt some children to splurge, leaving them with little money for the rest of the month.

Ultimately, the best payment frequency for your family will depend on your child's age, maturity, and financial skills. You may need to experiment with different payment schedules to find the one that works best for your child and your family's lifestyle.

 

Encouraging saving, spending, and giving:

Teaching your children about budgeting, saving, and charitable giving is essential in helping them develop strong financial habits that will serve them well throughout their lives. Here's a more detailed explanation of each concept and how to teach it to your kids:

1. Budgeting: Budgeting is the process of planning how to spend money wisely. Teaching your kids about budgeting helps them understand the importance of making informed choices when it comes to spending their allowance.
   • Start by discussing needs vs. wants: Teach your child to differentiate between things they need (e.g., school supplies) and things they want (e.g., toys or games). This will help them prioritize their spending.
   • Encourage goal-setting: Help your child set both short-term and long-term financial goals, such as saving for a toy or a special outing. This will teach them the value of planning and delayed gratification.
   • Track spending: Encourage your child to keep a record of their spending, either on paper or using a simple budgeting app. This will help them see where their money is going and make more informed decisions.
2. Saving: Saving involves setting aside money for future expenses, emergencies, or long-term goals. Teaching your child to save helps them learn about delayed gratification, patience, and financial security.
   • For younger children, make or buy a Piggy Bank to start their savings.
   • As children get older, open a savings account: Set up a savings account in your child's name and encourage them to deposit a portion of their allowance regularly.
   • Discuss the concept of interest: Teach your child about how interest works, and how saving money in an account can help it grow over time.
   • Set savings goals: Help your child set specific savings goals and celebrate when they achieve them. This will instill a sense of accomplishment and reinforce the importance of saving.
3. Charitable Giving: Charitable giving involves donating money, time, or resources to support causes or organizations that help others. Teaching your children about charitable giving helps them develop empathy, compassion, and social responsibility.
   • Talk about the importance of giving: Discuss the reasons for giving and the impact it can have on others. Share your own experiences and values around charitable giving.
   • Research charities together: Help your child research and choose a charity or cause that aligns with their interests and values. This will encourage them to take ownership of their giving.
   • Make giving a habit: Encourage your child to set aside a portion of their allowance for charitable giving. This can be a fixed percentage or a specific dollar amount. By making it a regular part of their budget, they will develop a lifelong habit of giving back.

By teaching your kids about budgeting, saving, and charitable giving, you're equipping them with essential financial skills that will serve them well throughout their lives. The earlier you start, the more time they will have to practice and refine these skills, setting them up for a successful financial future.

Making Chores Fun and Engaging:

Let's make chores something our kids look forward to:

• Chore charts: Use visual aids to track progress and keep kids motivated.
• Rotating chores: Keep tasks fresh and engaging by switching them up regularly.
• Positive reinforcement: Praise your child's effort and celebrate their accomplishments.
• Making it a game: Use timers or friendly competitions to make chores fun.

Here are some game ideas to make chores more enjoyable and engaging for your children:

1. Beat the Clock: Set a timer for a specific amount of time (e.g., 5 or 10 minutes) and challenge your child to complete a chore before the timer runs out. This can create a sense of urgency and excitement around the task. You can also turn this into a friendly competition by having multiple children race against the clock or each other.
2. Chore Bingo: Create a "Chore Bingo" card with various chores listed in each square. As your child completes a chore, they can mark off the corresponding square. When they achieve a full row or column, they win a small prize or a special privilege.
3. Chore Scavenger Hunt: Hide small rewards or tokens throughout the house and assign a point value to each. As your child completes chores like tidying up, they can search for these hidden items and collect points. Set a goal for the number of points they need to earn a prize or special privilege.
4. Chore Relay: Divide chores into smaller tasks and create a relay race where your child (or multiple children) completes each task in sequence. The goal is to finish the relay as quickly as possible. This can be particularly effective for tasks like cleaning a room or folding laundry.
5. Chore Dance Party: Turn on some upbeat music and challenge your child to dance while completing their chores. This can make tasks like sweeping, dusting, or tidying up more fun and enjoyable. This works for adults too!
6. Chore Olympics: Organize a "Chore Olympics" with a series of chore-related challenges, such as folding clothes, making beds, or picking up toys. Assign point values to each event, and at the end of the competition, award medals or certificates to celebrate your child's achievements.
7. Chore Sticker Chart: Create a sticker chart for each child and award stickers for every chore completed. Once they accumulate a certain number of stickers, they can trade them in for a prize or special privilege.

Remember to keep the games age-appropriate and tailor them to your child's interests and abilities. The key is to make chores enjoyable and fun while still teaching responsibility and good habits.

 

Tips for Success:

Here are some tips to help us raise responsible and financially savvy kids:

• Start early: Introduce chores as soon as your child shows interest.
• Be consistent: Establish routines and maintain expectations.
• Be patient: Allow for mistakes and learning opportunities.
• Involve your child: Let them have a say in their chores and allowance.

Conclusion:

Introducing chores and allowances to young children is a valuable way to teach them responsibility, work ethic, and financial skills. By choosing age-appropriate tasks, creating an effective allowance system, and making the process enjoyable, we parents can set our children on the path to success. Remember, it's never too early to start teaching these essential life skills and cultivating a strong foundation for your child's future. Happy parenting!