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What if my children can’t handle their money as adults?

What if I don’t give my kids what they need to do a better job than I did?

Am I even giving them allowance correctly?!

If you’ve asked yourself any of these questions, know this: you’re not alone, and you are capable of teaching your children what they need to know about finances.

Let’s break those worries down to a more practical question: when should you start paying your kids allowance to teach them about finances?

The answer will cover a broader range of concerns than you’d think.

In today’s edition of Dinner Table Discussions, we’ll cover:

✅ Why teaching financial values to your kids starts before they get allowance
✅ How you should pay them allowance (AKA the commission vs. stipend debate)
✅ How allowance needs to change as they grow older

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🍽️ Main Course: Financial Literacy Starts When They’re Toddlers

Oh, but it is true. The foundations of your kid’s mindset about finances actually starts at a very young age. It just doesn’t have to do directly with money yet.

You see, as soon as you start teaching your children anything about responsibility, you’ve already begun laying the groundwork for financial values.

Because that’s the point: finances should be a natural extension of your value for “responsibility,” not some scary separate concept you learn separate from your fundamental values.

And if you can teach your children about responsibility from a very early age, key financial concepts won’t confuse them.

They’ll actually probably be able to understand financial lessons very intuitively, because they’re all based around responsible living and thinking and acting.

What does teaching you children responsibility look like? Here are some simple (but helpful) options you could consider:

• Making sure your children clean up after themselves when finished with toys or playing outside

• Keeping your children accountable to the small tasks you give them (room cleaning, taking care of their things)

• If your child hurts someone, having him or her apologize for it

Note: this list isn’t prescriptive, these are just examples.

So, start your kids early with (appropriate) responsibility.

When (and How) Should Allowance Come into the Picture?

We’ll knock the “when” question out quick. You can start paying your children allowance as early as age 7 or 8 (or earlier if they’re capable of doing meaningful chores and tasks).

As long as they’re old enough to do more than just brush their teeth and make their bed, you should be good to go.

On to the “how.” A lot of the general principles below come from Dave Ramsey’s Baby Steps Millionaires, but you’ll find people all over that share similar views.

Why are those views held by many people who value financial health? Because these ideas work!

So, as for how to implement allowance in your family… you don’t actually want to pay your child allowance at all.

You want to pay them a commission.

Listen: an allowance is a stipend that children are paid (no matter what) to do the general responsibilities that they’ve been assigned by their parents.

And a lot of parents will pay their children allowance even if they didn’t complete every one of their chores. And regardless of quality of work.

Meanwhile, a commission is something that’s paid explicitly as a reward for work that’s completed. And if you do more work, you get paid more. Work less, earn less.

Does this seem cruel? It shouldn’t. Commissions honor the work that your kids do and build a sense of (good) pride in them for what they’ve accomplished.

Allowances are like a handout, and only teach them to do the bare minimum to get what they want.

Practically speaking, the set up of a commission for your kids probably looks a lot like an allowance, but the foundation is different.

From Baby Steps Millionaires:

“When kids are young, they can start checking boxes on chore charts to visually accumulate enough completed jobs so they can buy the latest toy or video game. When they’re older, they can strategize and plan out how many times they need to wash the car or mow the lawn to earn enough for the latest tech gadget or used car.”

And one more thing: not every chore should be paid, because you need to teach your child the balance between paid work and family responsibility.

Example: you could pay your child to rake the leaves, but it could be your child’s (unpaid) weekly responsibility to keep his or her room clean, because that’s his or her space.

If you need ideas, here’s a list of age-appropriate chores that you could consider assigning to your children for their commissions.

The Game Changes When Your Kids Turn 14

So, starting at about age 7 or 8, your children are earning “allowance” (really a commission, but feel free to call it allowance).

But what about… getting a job?

When your children are ages 14-18, we think it’s a really good thing for parents to encourage their children to get jobs.

These jobs could be anything from working in fast food to retail to starting their own business.

The point is for them to understand that money can come from other people besides you (again, thanks Dave Ramsey). That will help them start their own careers and embark on their own financial journeys when the time comes.

Now, ideally, if you’ve instilled values of responsibility and hard work into your children, they will be looking forward to the day when they can get their first jobs.

If not, you may need to encourage them or even require it of them at some point. Again, this is not to be cruel. It’s to set them up well for their adult years!

If you want to check out some ideas for ways your child could work and earn money, check out our free resource: 15 Ways for Your Kid to Earn Extra Cash.

Bottom Line

In summary, your children are (almost) never to young for you to start building the foundations of financial literacy by teaching them responsibility and a good work ethic. Then when it comes time for allowance, the basic principles will already make sense to them!

And make sure to 1) scale how much you pay them with their age and task difficulty and 2) to help your children find a source of income when the time comes.

Cheers to getting 1% better each week! 🥂

👂 We’d love to hear from you

👂 What’s your philosophy on allowance?

We’d love to hear about it—and your thoughts could help someone else figure out their own philosophy.
Just hit reply and share.

Thanks for reading,
—Your friends @ Future Funders 🍽️

P.S. Forward this to a friend who’s paying their kids allowance without having them do ANY chores. 😁