Three Reasons to Get Rid of the Allowance

Three Reasons to Get Rid of the Allowance by

Your first car proves that you shouldn’t give your kids an allowance. 

That’s right, here’s why.  Remember your first car (or bike or major possession)?  Think back to that moment when as a teenager or young adult you just couldn’t believe you had your own set of wheels.  Close your eyes and picture that moment when you looked at your car… and it was the most beautiful thing… pride swelled up in your chest and your face was taken over by the biggest smile ever!

You’ve experienced pride of ownership.

What happens when we translate that same pride of ownership to our kids as they learn to make and manage money?

I propose that:

[A Kid’s Healthy Relationship with Money]

is equal to: [pride of making their own money]

plus: [the respect they give money]

plus: [the way they manage money]

1. Pride of Making Their Own Money.

Allowance doesn’t count because it is impossible for kids to experience the value of it.  There is no pride of ownership when money is given to someone.  Easy come, easy go!

It is critical to help your kids experience the value of money.  As kids, Natalie and I both experienced money in very different ways.

My experience came from an overall lack of money.  I was taught that money is scarce and hard to come by.  That in order to get something I wanted I would have to save for a very long time or simply learn to do without.  I got five dollars a month and with that I was supposed to divide that into savings, giving and spending.  $1 was for giving, $2 was for saving and $2 was for spending.  My experience taught me that if I wanted a $10 lego set, I would have to save for 5 months.  If I made a poor decision in my purchases, it was easily a 6 month set back.  A $25 lego set was simply out of my reach and I’d hope to get lucky on my birthday or Christmas.  Today, I am still trying to overcome those money patterns that started for me as a child.

Natalie’s experience was nearly opposite.  Instead of scarcity there was the perception of complete abundance.  When she wanted to get a $20 music album, she could go to mom or dad and say can I have $20?  Which they would give her for what she wanted.  They tried to hide the financial realities and as a result, Natalie didn’t learn the value.  I’m not saying that our parents did the wrong things.  They did what they thought was best for their kids and I respect them for that.  

In many households, parents attempt to teach their kids about money by giving them an allowance.  In other households, parents try to shelter their kids from their financial troubles.  But there is another way!

Quick tip #1: Get rid of the allowance and help your kids earn their own money. (With their own business of course! We can help you, learn more HERE)

 2. The Respect They Give Money.

Money is not just for spending.  When I became a young adult and suddenly realized how much money my parents made and how little was left to spend, I was astonished.  Taxes took a chunk, housing took a chunk, food took a chunk and giving to charity took a chunk.  In spite of my $5 allowance, it never dawned on me that money wasn’t just for fun.

What is money for?  What can money do?  Is money good?  Is too much money bad?  How much is enough? 

Quick tip #2: Cultivate experiences for your kids around money that don’t involve spending.  From tip number one, find ways for your kids to make money.   How can you give money to causes your family believes in?  Find ways to experience saving money.  And for the adventurous, try investing creatively.  Talk about how each experience makes them feel.

3. The Way They Manage Money.

Bottom line: no money to manage = no experience.

When we were first starting Entrepreneur Kids Academy, I was talking to a mom about her kids and their experience with money.  She remembered that when she was a kid, there was just no extra money in her family and she got very little money to spend and manage.  She said that as she grew to an adult, that lack of experience translated into poor money habits.  She said that today, her boys are into all kinds of businesses to make money and she encouraged them to do so for the primary reason that they would have more money to manage and get more experience than she ever had.

Quick tip #3: Talk with your kids about their goals.  What do they want to save for and what do they like to spend money on?  Give them ideas on how they can manage their money to get what they want.  Help them see how much they’ll need and how long it will take them to get it.  Start with an easy cash envelope system.  Then when they’re ready, help them set up a checking and savings account. We have a free worksheet for kids to help them with money management coming to the blog soon!  

Comment below… what was your childhood experience with money?  What do you hope your kids learn about money management from the money they make in their business?

PS Are you ready to help your kids start a business so they can  start earning money now? Click here -> 

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