As mentioned earlier, we have had the signal loud and clear that it is time to start teaching Miss Oh Waily some of the basic financial skills that she will need throughout her life. It is not the first time that the idea of what to do and how to teach our children about money has come up, but it is now clear that this is time to start taking action.
A few posts have inspired our ideas on what to do, the first was a guest post at one of my favourite personal finance blogs, Get Rich Slowly. This led to reading that author’s first and subsequent posts about how they approached allowances for their children.
From that reading and our own thoughts about what we want to teach the children about their money we have come to the following end result.
The children’s pocket money, or allowance, will not be linked to any form of regular household jobs they are asked to do. These jobs will be considered to be their contribution to the family and household. Unusual jobs or going above and beyond any regular work will be considered for extra payments. I don’t see that becoming an issue for another year or so at the moment. They are not yet of an age where I think I need to be encouraging their entrepreneurial spirit. There is plenty of time to do that.
There will be rules around the spending of the pocket money. Mr Oh Waily and I both agree that the basic idea of allocations that Nickel describes in his updated allowance post is the best for our purposes. So the Oh Waily children will have the following allocation rules to follow – 50% spending, 40% saving, 10% charity/donation.
Now we come to the nitty-gritty. Just how much is enough. Just how much is too much. This is probably the hardest part. I also see that in the early days there may need to be some guidance* on what is appropriate to spend the “spending” portion of money on.
We think that the idea of $3 per month, per year of age will work well too. This means Miss Oh Waily will receive $12 per month. Master Oh Waily will need to wait a bit longer before he can join the Oh Waily pocket-money plan. At least until he can count well enough.
As this is a considerable jump from having no money, I can see that I will need to be careful over the first few months with regards to guidance and help to make decisions. This does not mean I plan to spend her money by proxy, simply that the sheer novelty of having money could sour when she tries to have an almighty spend-up in one go and then gets left with nothing. While self-control is a lesson that needs to be learned regarding money, I think it is a little harsh to expect a four year old to possess it instantly on contact with their own cash in hand.
So Miss Oh Waily’s introduction to monetary self-determinism will involve three jars, labelled appropriately, and a small purse**. She will be entitled to $12 per month until her next birthday, of which $6 is hers to spend as she pleases, $4.80 is to go into savings and $1.20 is to be set aside for a charity of her choice.
I will report back on the mechanics of this once we have it in full swing. I think that December might be a good month to start this off.
* probably in the form of “no, you cannot spend all of your money on junk food”.
** that no doubt will turn up in my bag on a semi-permanent basis.
Today in history: 1925 – June Whitfield was born. (British comedienne)
The three ages of man: youth, middle age and ‘my word you do look well’.
– June Whitfield