Sunday, April 24, 2011

Cash for Kids

When my first child was born, I started giving him an allowance.

He was born on a Tuesday, and, the very next Tuesday, I set one dollar aside.  And the next Tuesday, another.  This was not for his future: on the contrary, I’m a firm believer in having kids do those sort of things for themselves.  As far as I’m concerned, if my kids want to go to college, they can pay for it themselves.  This is primarily because I went to college twice: once, for two years, right after high school, and then, three years after that, for three years to finally complete my B.A.  The first time, my parents and grandparents paid for everything, and I got very little out of it.  I screwed around, I dropped half my classes my second semester of freshman year, and I generally didn’t care about my grades.  The second time, I paid for it all myself (well, I took out a lot of student loans, which I’m still paying off), and let me tell you: that time, I took it seriously.  Perhaps it was because I was older, but I think it was mainly because, when it’s your money, you don’t want to waste it.  So I think it’ll be a good experience for my children to do that too.  (Their mother doesn’t agree, but I suppose we’ll cross that bridge when we come to it.)

So what was this money for?  This was to be his money.  His personal stash, to be used for whatever he wanted.  The first year of his life, he got a dollar a week.  The next year, two dollars a week, and so on and so forth, until he’s getting eighteen dollars a week until his eighteenth birthday, at which point he’s on his own.  On each birthday, he gets a bonus; my original plan was to give him $100/year, culminating with $1,800 on the final birthday, but happily his mother talked me out of that.  Not particularly practical, unless I was planning to become super-rich at some point, and especially if there were plans for future children (which, as it turned out, there were).  So we backed it off to $25/year—that is, $25 on the first birthday, $50 on the next, and so forth to a maximum of $450.  Any cash gifts from relatives for birthdays, Christmas, etc are just added to the pot.

When my elder son was approximately two years old, we took him to a petting zoo.  He had a great time petting goats, ducks, and various and sundry other animals.  To exit this zoo (as with pretty much any attraction these days), you have to pass through the frightening gauntlet of the gift shop.  By this point, the kid was back in the stroller, having (in his opinion at least) walked under his own power quite enough for one day.  As we rolled along through the shelves of pointless knick-knacks and stuffed animals, he suddenly reached up and grabbed a small purple orangutan.  I tried to take it and put it back on the shelf.  He wouldn’t let it go.  “I think he’s just spent the first of his money,” his mother said.  So he bought it.  I think that stupid purple organutan is still around here somewhere, a living testament to the first lesson in financial responsibility.

And that’s the way it’s gone, for both of our children.  They start when they can barely speak, buying small things, not even truly understanding what they’re doing at first.  Each time, I say, this costs X dollars, and I translate that into time: this costs two weeks’ worth of your salary, or whatever.  At first they just nod: yeah, yeah, whatever I need to say to get me the toy I want.  But it sinks in.  By the time they’re five or so, they’re starting to understand that their money is a finite resource, and, if they spend it too fast, they won’t be able to buy the next exciting thing they want.  As with nearly all my parenting philosophies, there is no waiting until they’re “old enough.” By the time they’re “old enough,” I need the groundwork to be laid and we need to be moving onto the analysis and exploration of larger issues.

Notice that we don’t call it “allowance” any more.  That was what I called it at first, but we switched paradigms somewhere along the line.  Now it’s a “paycheck.” You get paid every week, with an annual bonus, for fulfilling your duties as part of this family.  At first, your only job is to be a kid.  Have fun.  Enjoy life.  What the hey, you’re young and foolish, may as well have a good time with it.  As you get older, you gain more responsibilities: perhaps taking the trash out, or cleaning out the cat’s litter box (after all, that’s your cat, not mine).  These aren’t technically “chores,” although we do refer to them that way sometimes.  These are your work duties; it’s what you’re getting paid for.  Everyone in the family has certain things they have to do, and you’re no exception.

Another thing that’s changed from the early days is that I don’t actually set physical cash aside any more.  Nowadays it’s all electronic: I keep a running total of their income and expenditures on the computer.  This is referred to as the “Daddy bank.” I know roughly how much each one of them has in the Daddy bank at all times, and I can easily get an exact figure upon request.  If one of them wants to buy something when we’re out and about, they don’t have to worry about having actual dollars; they just tell me and I purchase it for them and then subtract that from their balance later.  Basically, I’m their ATM machine.  Technically, they can demand all their cash at any time, but we caution them against making a run on the Daddy bank.  Don’t want their financial institution going belly up, now, do they?

The idea behind all this is simple.  You’re going to buy your kids a bunch of crap they don’t need anyway.  Let’s face it: we’re Americans (or at least I and most of the folks I hang around with are), and we’re consumers, and we’re parents and we love our kids, and we have a burning desire to spoil the crap out of them, so, when they want a toy, we’re gonna buy it.  We’re suckers like that.  With this system, you’re still buying them all the same crap, only now you’re making them think about it.  You’re putting the responsibility for what to buy and when to buy it back on them.  Instead of spoiling them to no gain, you’re forcing them to consider monetary issues and manage their own money.  What you’re setting aside for them is plenty of money for a kid that age, and, if they manage to spend it all anyway, then maybe they really don’t need to buy that whatever-it-is.  Or possibly a loan could be arranged ... we have very reasonable interest rates at the Daddy bank.

My kids don’t have to buy their own clothes, and they don’t have to pay rent, and they don’t have to chip in for groceries.  They don’t have pay for their own presents on holidays, obviously, and books are always a family expense.  They still get plenty of swag for free.  But if they want a new toy, or a new video game, or a new video game console, or a new computer (my elder just bought half a laptop, since his Christmas gift budget would only cover half), that comes out of their bank.  They do have to pay for the presents they give to other family members, starting at a fairly young age.  And if they want to go to McDonald’s or somesuch, they may have to agree to buy dinner for everyone.  How bad do you want a Happy Meal anyway?  Maybe eating in is not such a bad choice.

They’ve both been flat broke, and they’ve both been flush.  Right now the elder has almost $500 in the Daddy bank, while the younger is in the hole and has been for the past month.  They learn generosity, and stinginess.  They spend recklessly and regret it; they hoard and are pleasantly surprised when they can afford big items.  I believe they have a firm grasp on the concept of money already, and it’s only getting better with time.

I honestly believe this is the right thing to do for my children.  Perhaps if I were richer, I’d give them more every week and more every year, or perhaps not ... certainly, if I were poorer, I’d give them less.  But I believe I’d still do it this way.  Because I think this is something that I was lacking as a child: the concept of working for a living, and having a budget for spending money.  In fact, their mother and I are now on the same plan for our hobby expenditures and luxury items such as personal electronics or music downloads.  It’s a convenient way to insure we too live within our means, and it has the added benefit of being a simple rule that we can apply to ourselves just as it applies to them, but it scales for our more expensive tastes.  Now everyone in the family has an account at the Daddy bank ... even Daddy.

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