In today’s Office Hours, Eric answers Kyle’s question: “Does giving my child an allowance teach them positive or negative lessons about money?”
The short answer is it can do both, but there are ways to offer an allowance that can teach your child about saving, philanthropy, and other important life lessons.
Have a question? Post it in the comments, tweet it to us at @BrotmanPlanning, or post it on our Facebook and it may be used in a future episode of Office Hours!
Eric Brotman: [00:00:00] Welcome to Don’t Retire… Graduate!: The podcast that asks you what you want to be when you grow up so you can graduate into retirement with purpose and passion. I’m your host in valedictorian, Eric Brotman, and this is Office Hours where we answer listeners’ questions about personal finance, retirement readiness, and more.
We received a question from Kyle who asked, does giving my child an allowance teach them positive or negative lessons about money? And like so many questions we’ve received. First of all, thank you for sending it and, and secondly, Both. It can teach both positive and negative lessons about money to your children.
And so you wanna make sure that you use allowance properly. And there’s lots of different schools of thought, and I, I’m certainly no therapist, but I am a dad and I am a, involved in personal finance and personal financial literacy. And so I’m gonna sort of tackle this from both angles. First thing is there’s definitely positive, positive lessons that can be learned from allowance [00:01:00] if, in my opinion, If they are tied to certain activities. It can be household chores, it can be age appropriate activities.
It could be extra, extra learning opportunities. It depends a lot on your child, but I think age appropriate activities around the house, things that are beyond what maybe are the norm that that’s worthy of an allowance, and it’s a way to create some pride around receiving it rather than entitlement around receiving it.
And I know there’s folks who would disagree with me, but to me, you tie allowance to the performance of certain activities that are positive so that it becomes positive reinforcement. Then it’s important to learn lessons about allowance that go beyond just having $5 in your hand that you can go blow at the candy store.
It’s important to teach lessons around that so that there’ll be some learning around allowance. And we’ve done shows on Don’t Retire… Graduate! About this topic. And one way to do it, I just refer to it as the three jars method. And that’s [00:02:00] a method where instead of handing your child a $5 bill or whatever the amount is, do single bills, $1 bills, and have three jars that they create and label and have one be titled fun, one be titled long term, and one be titled charity.
And if you do it that way, you will teach not only philanthropy and giving to others, which is such a valuable lesson to learn and always feels good for adults even. You’ll also teach about long term, this idea that some things shouldn’t be bought every week. If you wanna save up for something special, let’s figure out how long it’s gonna take and let’s create a savings plan around it .
Now you’re creating lots of positive lessons and then of course fun because we have to tie money to some fun. And even for adults, if every penny that you make gets squirreled away and saved, you’ll have a relationship with money that’s actually a little bit disturbing and uncomfortable. It’s great to be a good saver.
It’s great [00:03:00] to plan ahead. It’s great to be charitable. But at some point you also have to enjoy yourself, your life, and your good fortune and your career and all the things that come with it. So for kids, I think if you tie allowance to some form of age appropriate chore or activity or, or academic pursuit and then you teach kids how to enjoy some of it, how to save some of it for a big deal and how to give some of it to those who perhaps need it more than they do.
You’ll be teaching lots of positive lessons about money that hopefully will last a. Now, what are the negative lessons that can come out of allowance, Kyle? Cuz you asked what those are. The biggest one is a sense of entitlement that you’re gonna sit with your feet up and, and watch TV and collect money just because it’s Friday.
And unfortunately there’s some of that that still happens. And it, it doesn’t create learning opportunities. It doesn’t create responsibility. It creates a handout. And in my opinion, that is a, a habit that you don’t want, [00:04:00] not only for your. But you don’t want it entering adulthood because that doesn’t continue in adulthood.
If you’re going to be a member of society and you’re gonna have a a job and you’re gonna create something for yourself, for your family, your own net worth, it’s important to feel a certain way about money, and that means you’ve earned it and it’s now yours to spend. Deploy, share, save, giveaway. So I think the negative lessons a around allowance are just entitlement lessons that really I don’t think any of us want our kids to learn.
So Kyle, I appreciate your question. I think there’s more positive than negative to allowance, and I think it’s worth doing depending on your kid. It’s a great way to teach them a little bit about money and financial responsibility and life . So if you’d like to send us a question, which we might answer in a future episode of Office Hours, please post it on our Facebook page.
Tweet us at brotman planning or contact us at dontretiregraduate.com. If you like what you hear, please share our podcast with family [00:05:00] and friends. Don’t keep us a secret and leave us a review on your favorite podcast platform. They mean everything to us. I thank you for coming to Office Hours. I hope you’ve enjoyed today’s show.
I hope you’ll be back with us next Thursday when we have another engaging guest on Don’t Retire, graduate. And for now, this is your host saying, we’ll see you next week. Don’t retire. Graduate. Don’t Retire. Graduate is part of the Evergreen Podcast Network
Narrator: Securities offered through ketra Investment Services, llc. Kestra is member FINRA, SIPC. Investment advisory services offered through Kestra Advisory Services, llc. Kestra AS. An affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Brotman Financial or any other entity discussed.
