TL;DR This one’s about allowance. (Pretty important, weirdly complicated, worth it. Read the whole thing.)
A wise accountant once told us people spend 40% less when they buy with cash and not credit. Is this true? Maybe. What does it tell us? Your little person needs to see and understand money before they start spending it. The majority of us transact with plastic or phones, so kids don’t see money anywhere. It’s tough to value what you can’t see. Good news, your five-year-old will happily save for their goals or simply for saving’s sake, if you normalize and encourage it.
Start here.
One great way to make money visible… allowance. We get a lot of questions about allowance.
Take this advice.
It’s allowance, not bribery. Think of allowance as a fixed weekly or bi-weekly “salary” for being a kid. Chores? They’re part of being a good citizen. Don’t pay for them. Set an allowance, and keep it consistent.
I haven’t carried money since the 90s. No prob. A mom we admire uses cotton balls as in-home currency. Her kids’ allowance is paid in dollar balls. Cotton fills a jar fast, which may have your five-year-old vibing like a plutocrat and looking to make it rain. (All fun and games until they ask about tax havens.)
Save Spend Share Shares. Sure, your kid can direct their allowance into separate “accounts”. 50% into saving, 25% into spending, 25% into sharing? Maybe. But while giving is important, don’t overlook the importance of giving time. Experiential giving makes kinesthetic memories. And putting that extra 25% into a “shares” jar to invest could mean your child has a meaningful nest egg to dip into for philanthropy once they’re older.
BONUS.
Don’t Create a Wage Gap. These are your child’s formative years. Champion equality. Remember that women still earn 82 cents or less on the dollar, and it might be a good time (and a great conversation) to make that up to the young girls, girl-identifying, and nonbinary kids in your home.
