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Wed September 18, 2013
Your Kids And Money: Teaching The Value Of A Dollar
Originally published on Wed September 18, 2013 2:41 pm
What's the point of an allowance?
For Ron Lieber, personal finance writer for The New York Times, it's a tool to help teach values and character traits like patience, moderation, thrift and generosity. And Lieber, who's writing a book, The Opposite of Spoiled, about kids, money and values, tells Morning Edition host Steve Inskeep there are three basic ways that parents approach an allowance.
No chores necessary.
This is the method that Lieber and his wife use. They give their 7-year-old daughter $3 a week, which she divides in thirds. She puts $1 into a "spend" jar to buy anything that she wants, $1 into a "save" jar for medium- to long-term goals and $1 into a "give" jar that ultimately goes to a cause of her choosing. "She spends a lot of time thinking about that," Lieber says.
He says this approach has fostered a sense of confidence and empowerment in his daughter, who, on a recent shopping trip, "was so thrilled at the idea that she had the power to make some decisions for herself, and that I or my wife wasn't going to have anything to do with it."
No free money.
A second way to approach allowance is to link it to the performance of chores. "The thinking here," Lieber explains, "is that nobody gets free money in the world, and neither should my kids, and that would spoil them."
Lieber counters that an allowance is a teaching tool. "We don't want to couple it to labor, because the problem you run into then is that if your kids decide that they're not really so interested in money or having money after all, can they then decline to do the basic chores?" he says.
No allowance at all.
Some parents give no allowance and instead take a "reasonable request" approach. In other words, parents buy their kids what they need and then require that for things they want, they must make a persuasive presentation.
"They learn to literally make a sales pitch, and then the parents decide on a one-off basis whether or not the kids ought to have it, or whether they ought to find a way to make some kind of money on their own in order to buy it," Lieber says.
Parents in Morning Edition's Facebook community use strategies similar to these when it comes to giving — or not giving — an allowance. And the comments show that disbursing allowance dollars has caught up with the digital age. Some parents make direct deposits into their teen's bank account, and withdrawals are made with a debit card. One commenter uses a virtual banking app that helps parents and kids keep track of chores, deposits and withdrawals. There are other apps, too.
NPR wants to know: Do you give an allowance to your kids? Please answer in the comments section.
STEVE INSKEEP, HOST:
Many children get their first taste of money in the form of an allowance. For parents, an allowance can be a way to teach basic values: patience, moderation, even generosity.
New York Times personal finance writer Ron Lieber has been thinking about the purpose of an allowance, because that determines how you pay it. Some parents see the allowance has an incentive for doing chores, like payment for job. Lieber would rather use it as a way for his seven-year-old daughter to practice saving and spending.
RON LIEBER: She gets $3 a week and she has to put $1 into a jar for spending on anything that she wants, $1 goes into a save jar for medium-to long-term goals and then $1 goes into a give jar and that money gets given away to a cause of her choosing. And she spends a lot of time thinking about that.
INSKEEP: So $3 a week and you said one-third spending, one-third saving and one-third giving away. But you also mentioned that there are other methods that people used to pass on an allowance. What are the others?
LIEBER: Well, a second way to handle it is that you can tie allowance to the performance of chores. And the thinking here is that nobody gets free money in the world and neither should my kids because that would spoil them.
LIEBER: And my counterpoint to that is that allowance is a teaching tool here. We don't want to couple it to labor, because the problem you run into then is that if your kids decide that they're not really so interested in money or having money after all, can they then decline to do the basic chores?
INSKEEP: OK. What's the third way to pass out an allowance?
LIEBER: The third way to handle an allowance is simply not to get one at all. You know, I tossed this notion out on the Facebook page for "The Opposite of Spoiled," the book that I'm working on right now.
LIEBER: And the community there had all sorts of interesting thoughts about why not to give an allowance. But the best idea I heard was from parents who said we let our kids pitch us on things that they want. We buy them everything they need, but the things that they want they have to come and make a presentation to us and say look, you know, it cost $2 or it cost $20 or it cost $50. And then the parents decides on a one-off basis whether or not the kids ought to have it or whether they ought to find a way to make some kind of money on their own in order to buy it. And I thought that was a reasonably good approach - although it's, you know, it's fairly labor intensive.
INSKEEP: There's also a question of power here, isn't there, Ron Lieber, because if you do not give the kid an allowance and the kid has to ask you for everything, you have all the power and, of course, you're the parent, you should have. But if you give the kid an allowance, there's a little bit of self empowerment there because they get to make some decisions for themselves.
LIEBER: You're right about that, Steve. And it was driven home to me recently when we were at Lollapalooza with our daughter, and she was wandering around sort of the retail portion of the fair with $10 or $15 rolled up. And she walked around the place with such confidence and authority. And she was so thrilled at the idea that she had the power to make some decisions for herself, and that I or my wife wasn't going to have anything to do with it.
INSKEEP: Well, let me ask about some nuances there, because you said in that situation with all those retailers around, you and your wife were going to have nothing to do with her decision. Was that really true? If she started looming over some terrible purchase, would you have stopped her?
LIEBER: No, we wouldn't have because we told her that the money she was going to be allowed to use in that particular context was the money from her spend jar. And so we felt comfortable letting her buy basically anything that she wanted there, because she only had $15 and there was nothing there that was really inappropriate. But, you know, by all means in other circumstances, parents should exercise whatever authority they want and lay down any of their own values that they wish.
INSKEEP: What she came to you and said, you know, I think I'm going to borrow from the save jar. And to give jar, I've got a way to sell a derivative on that one that I think can make an awful lot of money on the open market?
LIEBER: So the whole of allowance arbitrage thing has not come up in our household yet, but I think it's perfectly reasonable for a 12-year-old to charge a 14-year-old interest. I think that could be a good learning experience for everybody involved.
INSKEEP: The next bank reform is going to have to deal with allowance reform as well.
Ron Lieber, New York Times personal finance columnist. Thanks very much.
LIEBER: Thanks for having me.
(SOUNDBITE OF MUSIC)
INSKEEP: His forthcoming book is called "The Opposite of Spoiled." And you can take a totally unscientific poll about allowances at NPR.org.
This is MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.