Many kids in the USA receive an “allowance”. A weekly or monthly allotment of money they can spend more or less as they like. As they get older, this may transition into a personal savings or checking account, with some encouragement to save or learn some money management skills.
When I was growing up, my parents assigned a dollar value to my chores, so I would “earn” my allowance by doing my chores. Skipping a chore meant less allowance, and I had a savings account so I could save for big purchases. My parents were attempting to teach me to manage money.
My parents’ approach gave me a better footing than some, but when I started supporting myself, something that shocked me was the cost of necessities. While I learned principles of earning and saving, I didn’t understand the impact of money I earned being “taken away” from me by bills I had to pay.
SO, with my oldest daughter entering high school, I am attempting an experiment to fill in the gaps I discovered in my own monetary education: the 15th (or so) of each month, we’ll give my daughter $100 allowance. If that sounds like a lot, keep reading…
On the first of the following month, she’ll need to tithe, save, and pay “rent”, “utilities” and “food”, with my wife and I functioning as her landlord and grocer.
So, if she saves 10%, tithes 10%, and has to pay $50 for rent, $10 for utilities, and $10, for food, that $100 doesn’t seem like so much.
If you’ve done the math, you’ll see that she only gets $10 to spend on pleasure, and my wife and I get $70 of that $100 back.
“Why not just give her $30″ you may ask. That’s the purpose of the two-week lag between receiving the money and having to pay her “rent”. It gives her time to think of the money as “hers”, and then see it disappear for living expenses.
This is an attempt to simulate real life in an environment that won’t foreclose on her and won’t force her to go hungry if she mismanages her money, and in so doing give her some skills that I had to learn through the school of hard knocks.