Doing is the best sort of learning. One becomes a good cook by cooking, a good driver by driving. With money, it’s spending, saving and sharing that you practice.
My daughters, ages 14 and 12, have been receiving an allowance in the “Spend, Save and Share” format for six years. In fact, all money (birthday checks, babysitting, etc.) is processed through their three allowance jars. Here’s how it works:
- 50% goes into Spend. Spend can be used immediately. Don’t get in the way, you want them to experience and learn from buyer’s remorse. But veto anything unhealthy or unsafe.
- 25% goes into Save. Money accumulates in the Save jar until a savings goal is reached. Parents match the savings, and the funds then move to Spend.
- 25% goes into Share. Money accumulates until a charitable gift is made, and parents match that as well.
Matching is key.
Matching amplifies the positive emotional feedback around saving and sharing. This also (mathematically) eliminates objections about sharing, if any, especially where they may have earned the money themselves.
I started my girls at $1 per week. Sitting at the kitchen counter with a stack of four quarters, they would count two coins to spend, one to save and one to share. The ratio is easily scalable as you increase the allowance in dollar increments. I set the initial savings goal at $3 so that they would get a “match” every 12 weeks. After a couple of cycles, they began to anticipate the match, counting the money each week to monitor their progress.
It is conditioning.
Fifty-two times a year, they get an imprint: Spend, Save and Share. Four or more times a year their delayed gratification is rewarded. And whenever their empathy is engaged by awareness of a humanitarian crisis or a charitable drive at school, they are empowered to give.
As they develop increasingly good judgment, I turn over control of their purchases for books, clothing, cosmetics and even a portion of our family charitable giving. And as they learn to handle their cash flow, I try to increase their ability to make a mistake. I’m not trying to be mean; I just know they’ll learn best from their mistakes. There is nothing like running out of a clothing budget, right before you want to buy a new dress for a friend’s bar mitzvah, to drive home the value of always having a reserve.
The result is engagement.
It is worth highlighting that a lovely side effect of the Spend, Save and Share strategy is that it minimizes begging and whining. The answer is always, “Yes, you can have that. Use your allowance.” If allowance is inadequate and you want them to have the item, you may have discovered a new area of spending over which they are ready to take control. Additionally, I recommend keeping chores separate from allowance. Otherwise, be prepared for your child to calculate that it is worth it to give up a week’s allowance to skip load the dishwasher.
Allowance has been a hugely positive point of connection with my girls. They are highly engaged in our discussions of money (and cooking and driving–on everything else I know nothing). But most importantly, they feel smart and confident about how they choose to use their money.
I will continue to build upon these thoughts and more in future posts. But the Spend, Save and Share allowance strategy is a great place to start building financially savvy kids.
