Teaching The Eight-Year-Old to be a savvy spender, Part II
Here at Caterpickles Central, we believe that everyone in the family works together to keep our household functioning without expecting any particular compensation beyond having clean silverware to eat with, the ability to walk through the house without tripping, and clean clothes to wear.
So when we decided four years ago that The (then) Four-Year-Old was old enough to receive an allowance, we didn’t ask her to do any chores around the house to earn it. Instead, we decided to use the allowance simply to teach her how to manage money.
How we structured the allowance
The allowance itself is structured very simply. The (now) Eight-Year-Old receives a dollar for each year of her age, of which she is expected to set aside at least one dollar to save and at least one more dollar to donate to the charity of her choice. She can either save or spend the rest as she sees fit.
She earns her allowance simply by surviving the week, and gets raises for surviving enough weeks to host another birthday party.
The consequences of giving The Eight-Year-Old her own money
Naturally, The Eight-Year-Old loves having her own money to spend on whatever she likes. In some ways, giving The Eight-Year-Old her own money has been a boon to the parent-child relationship.
Now that The Eight-Year-Old has an allowance, everyone understands that Daddyo and I will only buy her toys on her birthday and Christmas. Which means that when we wander into a store and The Eight-Year-Old starts the inevitable lobbying for That Really Fun Thing Over There, I no longer need to try to talk her down. Instead all I have to do is ask “How much does it cost?”, “How many week’s allowance would it would take to buy it?”, and “Have you saved enough?”
Either she has enough to buy it now, or she will have to wait however many weeks are left until she has the money to pay for it herself, assuming she still wants whatever That Really Fun Thing Over There was by then. Most of the time, especially early on, she would forgot all about whatever it was by the time she saved up the money for it, and her saved money would be spent on something else entirely.
Admittedly, it’s hard to watch her fritter away 50 cents or a dollar on a cheap vending machine toy that’s going to break before we get home. But I let her. After all, there’s a lesson in that too.
Still, she is learning to save. At least sometimes.
The Field Museum is hands-down The Eight-Year-Old’s favorite museum in Chicago. When we first moved here two years ago, the Field introduced an Adopt-a-T. Rex fundraiser that allowed you to acquire a stuffed T. Rex in exchange for a donation to the museum.
The (then) Six-Year-Old immediately started lobbying for me to Adopt a T. Rex on her behalf, on the grounds that it was Educational and Not a Toy At All. Therefore, she argued, Daddyo and I should buy it for her under the Educational Exemption Clause of her Allowance Contract. But since a stuffed animal comes as part of the adoption package, I maintained that the adoption was only half educational.
The (then) Six-Year-Old, logically: “You could pay for half of it then, Mommyo.”
And so it was decided. If The (then) Six-Year-Old would save half the money for the Adopt a T. Rex, I would pay the other half.
With the negotiation successfully completed, The (then) Six-Year-Old finally allowed us to leave the ticket desk and go into the museum itself.
Much to my surprise, and the ladies at the The Field Museum membership desk’s glee, The (then) Six-Year-Old remembered that T. Rex over the intervening months and actually saved up enough money to adopt it. When she had finally saved her half, she insisted on our visiting the Field Museum within 48 hours so that she could bring home her new T. Rex.
Here she is, introducing her T. Rex to Sue.
She’s also learning some not-so-great things about how our banking system works
When my daughter turned seven, we got her a bank account at the same bank we use. It’s an account geared for children, with a relatively low balance requirement. At the time we opened it, the banker assured us that the fees would be waived for the first year to allow The (then) Seven-Year-Old to accumulate enough cash to waive the fees entirely.
That worked great for about six months. Just when I had settled into thinking the bank really was going to grant The (then) Seven-Year-Old a year-long grace period, I opened the September banking statement to find a fat $5 fee. Since at the time, my daughter was only raking in $28-35 a month, $5 was a giant chunk of change.
I showed my daughter the account statement, and after she panicked, I told her that the thing to do was to contact the bank. So she pulled up a chair next to me, and listened while I got a customer service representative on the line. After a bit of polite back-and-forth, the customer service representative denied all knowledge of the 12-month grace period, but said they would waive the fee anyway. She also told us that to avoid fees in the future, my daughter’s allowance would need to be deposited once a month as a lump sum.
This was a bit of a blow for The (then) Seven-Year-Old. Counting the physical money every week was one of her favorite parts about receiving an allowance. She also likes showing up at the bank every once a while with her felt fox wallet and making a deposit like a real person. But keeping those joys in her life weren’t worth sacrificing $5 a month. So she reluctantly agreed to let me set up an automated deposit into her account.
All worked well for about three more months, until the fees starting popping up again, despite the monthly direct deposit. This time, when my daughter and I contacted the bank, we were told that the fees were triggered by the fact that even though the monthly minimum balance requirement was relatively low, my daughter hadn’t yet stashed away enough money to cover it. The bank’s account rules had changed again, and the monthly direct deposit was no longer good enough.
This time, because The (then) Seven-Year-Old was only a month or two away from attaining the minimum balance, I loaned her the money she needed to bring her account up to scratch, and suspended the monthly allowance payments until the loan was paid off.
Now when The Eight-Year-Old wants to purchase some frill she finds in the stores, the questions are no longer simply “How much does it cost?” and “Have you saved enough?” There’s also the little matter of whether she has enough of a cushion in her banking account to prevent the recurrence of those pesky $5 fees.
She’s clearly more than a little bitter about it, but at least she knows that’s how the world works.
- Teaching your child to be a savvy spender (Caterpickles)
- Free financial management tools for the grown-ups among us (Personal Capital, the financial management company founded by Bill Harris, the former CEO of Intuit and PayPal)
- “I thought T. Rexes only had three toes. What’s that back thing for?” (Caterpickles)
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