As a parent you will be aware that having kids costs money. Since long before they were born, you have been spending money on them, and that amount seems to go up as they get older. At some point you actually have to start giving them cash regularly so they can buy something to eat or drink, pay their membership fee at whichever clubs they go to, pay their train or bus fare to get home, some more to top up their mobile and have something left over in case things don’t go as planned.
After all that, the day will come when your child finds out that their friends are getting allowances from their parents – and they are going to want to know why you haven’t been giving them what you owe them. Now they think about that, they’ve really been missing that money – they could have used it to go to the cinema or to buy a new computer game with. And you will make one of four choices.
The first choice will be to do nothing. Tell them they have everything they need at home and that you already give them enough for their clubs etc. This method will potentially upset your child and rightfully so. You are actually denying them the chance to learn about money – to experience having some disposable cash and being able to decide what to spend it on, or to save it or invest it etc. If you outright refuse to give them an allowance it could cause resentment and potentially encourage them to lie to you in future or even turn to petty theft.
The second choice is to cave in to what they want and start handing over the juice, the tax, their fee or whatever you choose to call it. This is also an appallingly bad choice, as the message you are sending is that money is free. You devalue money – you may tell them how much you work to get paid, and beg them to think carefully about how they spend it, but what you are showing them is that money is easy to get. This could result in them squandering the money and constantly asking for more. They won’t learn how to save or invest and this could cause them major problems as adults.
The third choice would be to offer them a ‘job’ – a chance to earn their money. They wash your car, they get paid. They mow the lawn, they get paid. They clear the snow from the driveway, they get paid. This is what most parents would do, as it teaches them that money has to be earned, and therefore has a value. The problem with this is that they have no incentive to do the job really well – as long as it looks okayish, they know they’re getting paid. They can’t earn any more either, as you don’t want your car washing or the lawn mowing twice or three times a week. You’ve effectively capped what they can earn. Effectively, you’re preparing them for a job in the service industry.
The fourth choice would be to offer them an opportunity. Let’s say, if they wash your car with a sponge and a bucket, they can get $5. They could then go around the neighboring houses and offer to wash their cars for $5, too. In an afternoon, they might make $25 or 30 dollars. However, if they had a faster way to wash cars, they could probably make double that. So, knowing that there’s really only one option to wash cars more quickly – you offer to buy a power washer. They agree to wash your car for free, and after that they can use the power washer to make as much money as they can and keep it for themselves. This option will send some kids money-crazy. They won’t believe how much they can make, and they’ll start coming up with other plans, such as saving up for a better lawnmower or a snowblower. This teaches your children a lot about money. They earn it, save it, invest it, earn more of it and repeat. They might scale the business by involving their friends on other streets. Choose this option and your child will know about money. They might just drop straight out of school, though, so watch them carefully!