When my kids were little, I debated if I should pay them an allowance [1], but now that they're old enough to understand the concept, I've decided not to. I realised that I would prefer them to help clean up the kitchen [2] because that's how we take care of our home and each other, rather than because they've been incentivised with money. But I still want my kids to understand how to budget and work hard for what they want, so instead I make an effort to discuss money in a positive way [3].
I regularly talk to them about resourcefulness, how to save [4], and how to earn. My 8-year-old loves the idea of starting a business. So far, he's learned how to collect bottles and cans to return for cash. He also gathers toys he no longer wants and we list them on for-sale pages. He saves those earnings, and the little bit of money he gets from family during the holidays, in a jar so he can eventually buy something he really wants. (Recently, it was a £50 video game — I was so proud when he saved enough!) When I get paid, I explain how many hours I put into my work and how much money I got in return. I'll even show my 8-year-old our internet bill and explain what it's for, how the money I just earned can pay it, and that paying the bill means everyone benefits from having WiFi all over the house. And I think it's working: just yesterday, he said he now wants to save up and buy something that can be in our house for a long time. ("You know, like a pan or something.")
My hope is that I'll be able to set my kids up for a lifetime of healthy financial decisions, without paying them an allowance.
For me, budgeting goes smoother when I use paper money [5], so I have a system of envelopes where I distribute cash for various expenses: groceries, bills, and so on. Because my kids are very visual, I also use this system to explain to them my thinking about budgeting and saving [6]. Sometimes, to help illustrate it, I give each of my kids £5 when we go grocery shopping [7]. They get to buy whichever real food (read: no candy) they want. While my 4-year-old frequently asks, "Is this less than £5?", my 8-year-old looks carefully at prices, and I help him figure out what he values more (a bag of chips or a bag of cookies . . . we're still working on the "real food" choices). With this type of practice, they can see how much money we have budgeted for something, and even more importantly, they learn to know when it's gone.
As hard as it is to teach kids about money, I know it's important. Learning how to manage money is an essential life skill [9] that all kids should be able to practice frequently. It took me a couple of decades to figure out what I was doing, and I want to be able to teach my kids before they have to learn the hard way. And I know this process doesn't have an end date — as they grow older, we'll discuss high-interest savings accounts, investing, taxes, and how to maintain a healthy credit score; all things that I wish I knew before I left home as a young adult. My hope is that I'll be able to set my kids up for a lifetime of healthy financial decisions, without paying them an allowance.