Karen Shaw, TEP, CFP®, CIWM
Giving a kid an allowance can go one of two ways. Either it’s loose change handed over every Sunday and spent by Monday — or it’s the start of a money conversation that lasts a lifetime.
At Birch Bay Wealth Management Inc. we believe it should be the second one. Because when done intentionally, an allowance becomes more than money. It becomes a message: ‘You’re ready to make choices. And I trust you to learn from them.’
Start with your values. What values do you want to pass along to your child that money plays in to? Do you want to teach them that there is value in contributing to the household? To be generous? To learn discipline? Hard work is rewarded? That finances and money are fascinating? (I will die on this hill: finances are fun!)
The underlying value flows into the clarity. Both you and the child need to know why they are getting money, and how they are getting it. Why are you giving them money should reflect the values you are passing on. After all money is just a tool. Are there parameters around the money? For example is a certain amount to be given away? Saved for a specific goal? Saved just to save? Does there need to be a written budget? Do they need to give a PowerPoint presentation on the value of compound interest and growth? Depending on the age of the child, these can be parameters that you set together to increase their buy-in.
Now that everyone is clear on why they are getting the money and any parameters that align with the value you are teaching. Next is everyone needs to be clear on how they get the money and how much. Do you reward chores? Do they get a lump sum weekly to teach budgeting or let them experience freedom in a safe way? Is it a hybrid option, such as a general lump sum and they can earn extra with the chores no one wants to do (*cough* bathrooms *cough*)? As adults, we know what our jobs are (mostly) and what we will be paid for doing that job. Your child needs to know the same. Otherwise, like with any interaction, you will each have your own vision of why the money is changing hands. Without a clear process, the whole thing tends to fizzle out — or turn into a mini power struggle about who owes what to whom.
Next comes structure. This can also be guided by the values. Want to teach them that they need to donate? Let them pick the cause, and then set up three jars/envelopes. Spend, Save, Share. Are you teaching that hard work is rewarded? Have a chart with the household chores that need to be done just because they are a part of the family, and then the amount they would earn by picking up the extras. Have them create an invoice for the work done to drive their entrepreneurial spirit. Wanting to teach discipline or delayed gratification? Use that big item they want as a tool and teach the power of mental bucketing by nicknaming their account with that want. Or have an envelope with the picture of it on the outside. It’s simple, but it teaches so much. Spending now versus planning ahead. Delaying gratification. Thinking about others. Watching their own progress build over time. All without a single spreadsheet (unless you are teaching the fun of finances and they you really should let them experience the fun of Excel as well).
The hard part: Let them mess up. They’re going to buy junk. They’re going to feel disappointed. They are going to dip into the “special item” envelope. Let them. Those tiny financial flops now are what stop the bigger ones later. A $12 regret at age 8 is a priceless learning experience — especially if you follow it up with a no-pressure chat instead of an ‘I told you so’. Steering clear of the ‘I told you so’ conversation is especially important to ensure that money doesn’t have a shame connotation around it.
Don’t forget: you’re part of the lesson. Our thoughts and emotions around money start to develop between the ages of 5 and 7 and form core beliefs by adolescence. If they see you saving up for something, or choosing not to buy on impulse, they notice. If they hear you talking about giving generously or working toward a family goal, that gets stored somewhere too. You don’t have to be perfect. You just have to be present.
Allowance doesn’t have to be fancy. It doesn’t even have to be cash. It just has to be consistent, thoughtful, and backed by conversation. Because in the end, you’re not raising spenders. You’re raising decision-makers.
🗓️ Want help determining your own purpose with money? Click here to schedule a 15-minute clarity call, or phone 825.659.3003 (AB) or 306.482.3170 (SK).
This publication is for informational purposes only and has been prepared from public sources which are meant to be reliable. None of the information in this should be construed as investment advice. Designed Securities Ltd. (DSL) is regulated by the Canadian Investment Regulatory Organization (CIRO), and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Karen Shaw is a Registered Representative with Designed Securities Ltd., operating under the trade name Birch Bay Wealth Management Inc is registered to advise in securities to clients residing in Alberta, Saskatchewan, Manitoba, and Ontario. The views expressed are those of the author and not necessarily those of DSL. This report does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any reliable person to whom it is unlawful to make such offer or solicitation. Content is accurate as of the date of publication, and subject to change without notice. |
Karen Shaw is a Registered Representative with Designed Securities Ltd., operating under the trade name Birch Bay Wealth Management.