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We didn’t give our children an allowance because we want to encourage entrepreneurship, we are opposed to rewards that kill internal motivation, and our kids honestly get a seat at the family economy. Then one of my kids presented a compelling argument for an allowance as a homeschooling expense to practice all the money concepts he was trying to learn. If he wanted to learn to sculpt, I would pay for clay. If he wanted to learn soccer, I would buy him a ball. As a homeschooling parent, part of my role is to provide my children with the resources they need to dive into their interests. Money, I came to realize, is no different.
Looking at our baggage
I needed an allowance to survive as a kid because I was on my own.
It’s important when we’re making a parenting choice that we check in with our past and acknowledge how it affects the present. Were you given an allowance? How did it feel? Why do you think it felt that way?
I didn’t want my kids to feel like they needed an allowance because they knew I was there to take care of them.
This rationale was helpful to draw from as a starting point but was always held with an open mind. We can parent based on the needs of our own inner child until our actual child shows us that they need something different.
Setting learning intentions
When I sat down with Bay for his Bucket System seasonal collaboration session to talk about what he wanted to learn, he was clear on his desire to dive deeper into personal finance. So I planted some books in his room and added him to the Sage Money course. Once he started really learning all of the concepts, he sat us down to request an allowance to practice them (and his siblings were happy to join in the party).
Back when we were on team No Allowance, we set up each kid with jars for them to “Spend” and “Save” the plentiful cash and coins that came their way through things like birthdays and odd jobs. The problem was, they never spent it. Because duh, role modeling—we never spend cash or coins.
If money ever was spent, it was funneled through me (“If I give you these bills and coins, will you purchase this thing online with your debit card?”). It made me the middle man and kept them disconnected from the actual purchase.
So I knew that if we were going to invite allowances into our lives, they would have to be digital. I set us up with a Greenlight account, which provided the things we needed for the kids to practice and play with real personal finance.
- Kid debit cards: Each kid gets their very own debit card, used just like mine.
- Online banking app: Each kid has an app on their device with their balances, used just like my online banking app. Each parent also gets an app in which I can see and manage all the kids’ accounts.
- Automated allowance deposits: Each month funds are automatically withdrawn from my connected bank account and deposited into each kid’s Greenlight account.
- Spend and Save accounts: Each kid’s app displays a “Spend Anywhere” account (like a checking account) and a “Save” account (like a savings account). In the Save account, the kids can set savings goals.
- Automated savings rate: When they receive their allowance, 50% is automatically transferred from the Spend to Save.
- Parent sponsored interest: The money in their Save grows with parent sponsored interest, like a real high yield savings account.
When we were sitting down altogether in collaboration to discuss an allowance, there was one request I brought to the table: I wanted them to practice a 50% savings rate.
Our family has a 50% savings rate and teaching them the power of this practice is a priority for me. We automate the act of paying ourselves first and now our children do too. If they begin their income earning lives with this habit, they could reach financial independence in no time.
So 50% of their allowance is automatically transferred to their Save where they get to set their own savings goals and watch those funds grow with parent sponsored interest (just like we do in our adult accounts).
Once the agreements are made and the system is set up, all you have to do is keep your critical mouth shut (I say with the utmost love and respect). Don’t judge your kids money choices.
View the natural consequences they experience as valuable lessons. They don’t need you to add an exclamation point to them because then it becomes about their relationship with you and not about their relationship with money.
Children learn through experience (we all do actually). Most kids blow it with money upon launching because they have no experience at self-direction on the heels of a childhood where every aspect of their lives was managed and controlled by an authority figure.
They need to earn, spend, and save, regret purchases and fall short on savings goals, make mistakes and achieve successes on their own two feet—true ownership of their own mini fortunes while the stakes are harmlessly low. This is the evolutionary purpose of play and they need freedom for that to happen.
Greenlight does include a whole chore system but we don’t use rewards and the House bucket in our Bucket System ensures we’re all contributing to the family and our home (in a way that doesn’t destroy a child’s natural drive to help and participate).
But we will sometimes offer our kids money for jobs that are outside the scope of what would be an expected contribution for them. So if teaching your children that money is earned is important to you, there are still ample opportunities for that lesson to unfold.
And of course, we are always encouraging and supportive of any budding entrepreneurial inclinations. I run my own business and my kids have a front row seat that I believe is both inspiring and informative. Whenever my kids talk about something they might want to do one day, they know I’ll respond with, “Why not today?”
We didn’t start our parenting journey in favor of allowance but one of the many gifts of gentle parenting and natural homeschooling is that it doesn’t let you get too comfortable with any of your positions.
Kids need experience to learn. They need to play out concepts with real tools in a safe environment and an allowance with a system like Greenlight provides just that.
If you want to hear more about allowance, you can listen to this episode of the Sage Family Podcast with Chelsea Brennan (coming soon). But if you’re ready to attain financial freedom and live a truly values-based life (becoming the role model your children need), then join the Sage Money course.
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