Here’s a brief excerpt from Chapter One (The Allowance Contract) of Book One (Allowances, Dollars and Sense, 2011 edition) by Paul W. Lermitte:
In most cases, parents answer their questions about allowance by drawing on their own experiences. They say: “When I was her age, I got 25 cents a week for allowance, and it was plenty.” Or they say: “I didn’t get any allowance. I had to earn money by doing chores around the house.” Parents also consider examples set by relatives, friends, and neighbors. They say: “His cousin gets an allowance of $20 a month, so that’s what we’ll do.” Or they say: “Suzie across the street only gets an allowance if she makes her bed every day.”
Unfortunately, taking your lead from the past, or from people around you, is a risky strategy. What worked 25 years ago probably may not work today. The world, and kids, have changed dramatically since you were growing up. Today we are bombarded with more advertising and much more product choice. Many of us lead busier, more stressful lives than our parents did. In the same way, what appears to work across the street might be the wrong approach in your house. Every family has different values, customs, income levels, and attitudes toward money.
So what can you do when faced with all these divergent examples? The solution is quite simple, really. Create your approach based on certain principles that have been proven to work over and over again, by my own family and by the families of many of my clients and friends. I call these “The Key Allowance Guidelines.” In setting them out and providing the Allowance Contract, I aim to help you
- introduce your children to the value of money
- teach them the basics of good money management
- establish in your children a lifelong habit of saving
THE KEY ALLOWANCE GUIDELINES
In this chapter I’d like to state these guidelines twice because they really set the foundation for much of the financial advice to come. The five key allowance guidelines are as follows
- Make a promise to your child
- Have your child make a promise to you
- Be consistent and firm
- Do not tie allowance to chores or achievement
- Make savings part of the allowance contract
Paul goes on then to describe each of these Allowance Guidelines in some detail, which you can read by borrowing this book from the library or by getting a copy for yourself or for your grandchild’s family through this order page. For a set of free, downloadable worksheets you can keep and use with your own family, including an Allowance Contract to help you get started, visit our Book One Worksheets Download Page.