Updated Allowances

Just about the only major change to our family financial policies made during my blogging sabbatical was in regard to the children's allowances.

To recap the old policies:

• The Daughter's allowance was $6 per week.  In addition to her weekly allowance she was also "given" a hypothetical $100 per month with which she was expected to buy all of her own clothing, accessories, and personal cosmetic items beyond shampoo, hairbands, and feminine hygiene products.  The latter was hypothetical in that I created a YNAB budget category* and all expenses of this nature were applied against that monthly $100 budget.  The Daughter was encouraged to develop a surplus whenever possible but never allowed to go in the hole.
• The Son's allowance was $2.50 per week.
• Allowances, though weekly figures, were paid once a month and calculated based on how many Fridays in the month.  Each child was responsible for asking for their allowance at any point within that month; if the entire month passed without asking for allowance, that month's allowance was forfeited.
• There were generally no restrictions on what they could spend their money on nor any requirements about saving or tithing [see my thoughts on compulsory tithing].
• Allowances were not tied to chores or behavior [my thoughts on allowances].  The only requirement for receiving allowance was that they remember to ask.

~ ~ o o O o o ~ ~

The Son -- turned 15 this month

Some time this Spring, it occurred to us that The Son's allowance was disproportionate to his sister's.  This might seem blatantly obvious to an outsider but it was actually a subtle thing.  After all, The Son, whether due to his Asperger's or simply a function of his personality, is quite ambivalent toward money altogether.  He's light-years apart from his sister in regard to awareness of money -- spending and saving and the overall value and use.  He, much more often than she, would forget to ask for his allowance and he's so completely free of a desire for "things" that he's nearly impossible to shop for on gift-giving occasions.

The Husband and I decided that he was carrying as much or more responsibility around the house as his sister and that it was time to give him a raise, whether he wanted it or not (he actually argued against it).

In our household, with additional privilege comes additional responsibility.  In The Son's case, he would begin receiving $6 per week but he would become responsible for paying for his own fast food lunches (the ones he initiated -- like his infrequent walks down to the nearby Subway or his more and more frequent requests to stop by Panda Express).  He would also be expected to take a more active role in his own banking activities.  In fact, I decided it was time for him to open a checking account and get a debit card.

As I had discovered several years earlier, banks are not very forward thinking when it comes to teens and money.  I found several banks more than happy to let The Son open a checking account but most would not issue a debit card -- even though the bank officers all agreed that paper checks are nearly obsolete and completely useless to a minor without a driver's license (think picture ID).  I did eventually find a local bank that was not only willing to open a free checking account (custodial) and issue a debit card but they were also offering a new-account incentive -- a free iPod Shuffle.  So I was able to turn the banking lesson into a lesson in free enterprise:  since The Son had no interest in the Shuffle, he sold it on Craigslist for $40 cash -- which he promptly put into his savings account (earning 1.25%).

The Son is still pretty ambivalent about money -- having a larger allowance and a checking account with debit card hasn't magically changed him -- but I've decided that given his lack of interest I'm going to have to use a different approach to his financial education that the one I've used with his sister.  One exercise we've used several times this already this summer is to send him to the store.  He gets exercise, sometimes he indulges his sweet tooth (on his own dime, of course), and he buys whatever odds or ends I ask him to get while he's there.  He puts these purchases on his debit card and then has to calculate how much I need to reimburse his account -- an easy enough activity since The Husband and I have a joint household checking account at the same bank;  it's a simple matter of an on-line account transfer.

With the new debit card and soon a driver's permit and student ID taking up residence in his wallet, I've taken to reminding him each time we leave the house to make sure he has his wallet with him.  The Son's Asperger's makes his case rather unique but it does nicely illustrate my very fundamental and strongly held belief about child-rearing and education -- what works for one will simply not apply to another and the best and only way to teach a child is by basing the lessons on each individual child in each unique situation.

~ ~ o o O o o ~ ~

The Daughter -- turned 17 this Spring

This summer, just as The Daughter was finishing her junior year in high school, I brought up the changes I wanted to make to The Daughter's allowance.  They were big changes and The Husband was, at first, quite resistant.  Actually it was an incredible marital moment because we just weren't seeing eye-to-eye when he suddenly stopped and said, "okay, I'm listening, explain your reasoning" after which he gave the whole plan his complete approval and full participation.

The plan was to go from a part cash/part hypothetical or budget allowance to an all cash allowance and make The Daughter 100% responsible for her personal spending.  The argument was that in one short year she'll be moving away to college beyond our immediate reach but still spending our money -- in a much larger world with much larger financial temptations.

Now, a little background.  The Husband, 30 years my senior, has four adult children though one has Down's Syndrome so he won't count in this example.  The Husband sent all three through college, full-ride, for their undergraduate degrees.  Each child went on to earn, on their own, additional degrees -- one's a PhD, one has a two Master's degrees, and the third earned one Master's.  All took college very seriously and did not squander nor to any great degree take advantage of their father's largess.  It has always been The Husband's intention to provide the same advanced educational opportunities for his younger children.

During our meeting The Husband explained how he handled his kids' college expenses -- each child was given a credit card and anything charged to the card that wasn't Dad-approved was paid back.  I know for a fact -- because I was there -- that none of the kids lived within any type of budget and what they paid for and what their dad paid for was simply a matter of how good their argument was.  Not that we're talking about anything extravagant; The Husband at his best made an upper-middle class salary and his stipulation was always that they could go to school anywhere they wanted... as long as it was to in-state public university.  [Their upbringing was certainly a lot different than my own:  financially independent by 17 and paying for my own unfinished night-school college education by working full-time during the day.  The Husband's upbringing was much more similar to mine though he chose a stint in the military and then finished a BS and Master's on the GI Bill.]

While generous, The Husband's method of paying for college-year expenses has a few major flaws:  one, it doesn't provide a good real-world sense of how fast living expenses add up; two, it provides no incentive nor any practice in budgeting; and three, it provides no incentive to save or engage in frugal behavior.

All of The Husband's children have done well for themselves and have good, secure careers.  But the only one with any real financial savvy or sense of budgeting is the son who married a frugal-minded budgeter.

My plan combines three of our four daughter-related money streams in one for which she will be solely responsible.  The four streams are:  cash allowance, hot-lunch allowance, hypothetical clothing/personal allowance, and school tuition/sport activity fees.  My plan combines the first three streams and gives her one year of practice while still at home to work out the kinks and probably learn a lesson or two.  Then the same system can be ported, as is, to the college/university environment next year.

A big advantage to the new system is that it will be nearly impossible for The Daughter to not gain an understanding of how quickly a couple articles of clothing and a few lunches-with-the-girls add up.  The Husband, once he listened, definitely appreciated this argument.

But even more convincing was my argument that The Daughter is a good saver.  She's always been the kind of kid who, given a dollar, will only spend a portion of it.  The Husband agreed that if you tell her she can spend up to but no more than $100, she'll spend $100.  But if you give her $100 in cash, she's very unlikely to spend it all.  We both strongly agreed that her monthly allowance was hers to spend, or not spend, as she wished.  Any money she squirrels away is hers to keep -- and kudos to her for doing so!

So here are the specifics:  on the first day of every month, I deposit $100 into The Daughter's checking account while The Husband is responsible for dishing out an additional $25 in cash.  This deposit/cash split took some negotiating because The Daughter feels she's more careful with cash than with card purchases but I didn't want to give her $125 in cash every month.  She didn't want the stress of having to go to the bank or use an ATM but I stood my ground -- part of growing up is learning to plan ahead and juggle multiple challenges like school pressures, banking, and budgeting all at the same time.

The Daughter still has her credit card but I'm being hard-nosed about what charges she's allowed to make:  gasoline, groceries and other sundries that I specifically request, and pre-approved charges only.  The first two months of our new allowance system, I found charges for meals and entertainment on the card and I've made it very clear that if they continue to show up this month, the credit card will be taken away and all charges, including gas, will run through her checking account and she'll have to ask for reimbursement from me.  I am not taking this personal finance lesson lightly with her and I want to make sure she understands that.

Funny thing -- about two weeks ago it finally dawned on The Daughter that she actually took a pay cut.  I had tried to point this out at the time but both she and The Husband calculated what $125 adds up to over the course of a year [$1,500] and both got a little light-headed at how big the total was.  So somehow between the two of them they came up with the $125.  I was happy to concede but did say that we'd negotiate that amount once school had started again and we had a chance to see how realistic it was.  Under the previous allowance system, her combined monthly "allowance" was in the $164-$176 range.  The $100 clothing/personal budget was constant but her cash allowance was either $24 or $30 (depending on how many Fridays in the month) and the general lunch guideline to allow her to order 2 hot lunches per week (@4.85per lunch) from the outfit that caters hot, organic meals to the school.

~ ~ o o O o o ~ ~

I realize that The Husband and I (well, actually the whole family) are lucky to be in a position that such an allowance system is financially feasible.  My mother, a single mom raising four children, couldn't have dreamt of being financially stable enough to provide her kids with the same advantages.  Most of the time she was borrowing from Peter and stealing from Paul just to put groceries on the table.  But then she also had absolutely not budgeting or financial skills to pass on to us either.

Well, that's where our allowance policies stand at the moment.  I'd love to hear comments from parents and young adults alike.

Related posts:

1. $$: Fluff
2. $$: Allowance, Food, & Supplies
3. $$: Allowances
4. A (qualified) No-Spend Day
5. Kids & Money: A 15-yo’s Financials