Welcome back to #throwbackmonth! For those not familiar, to get us back into the blog-writing groove for the month of July, we pick a past post each week to spotlight. Then we do a deeper dive on that topic to revisit the content and talk about some other things that may be related. On Tuesday, we picked our double post on Introducing Chores and Chores by Age.

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When my son first started showing interest in helping around the house, I was ecstatic. Awesome, he wants to do chores. That means he’ll ALWAYS want to do chores. Haha, silly me.

Now that he’s 7, he groans when he’s reminded of his duties. Although he understands that chores are a part of his daily contribution to the household, he’d obviously much prefer to be doing something (anything) else. While research shows that chores provide positive outcomes for kids (like autonomy, self-control, empathy, and overall success), it can be difficult to get them to participate and WANT to do it. Jennifer Aniston wants you to WANT to do the dishes….

One motivator that we are all familiar with is paying our children for their hard work (aka an allowance). I’m sure we’ve all received payment for doing good deeds around the house, from doing dishes to maintaining a tidy bedroom. In fact, a survey conducted by the American Institute of CPAs found that 4 out of 5 adults say receiving an allowance taught them financial responsibility. But are money incentives really teaching responsibility? Yes, but not in the way you’d think.

One or the Other

An allowance tied to chores looks good on paper. For one, it’s assumed that this form of compensation mimics real-life situations, just like employment. Additionally, we want our kids to learn the meaning of hard work and understand the value of money. But herein lies the issue: the conflict between intrinsic (internal) vs extrinsic (external) motivation. In other words, do we want our kids to do chores to gain a sense of personal accountability, duty, and accomplishment (internal motivators) or to earn money to get what they want and need (external motivators)?

Motivation crowding theory is the idea that providing external incentives, like rewards and punishment, can undermine and “crowd out” internal motivators to complete certain behaviors. So when we pay our kids to do chores, we unintentionally commercialize how the home functions. You cleaned your room? Money! You took out the trash? Money! You fed the dog? Money! Rather than teach the significance of chores and what they mean to the home and family, we create the notion that they should get paid for doing anything remotely helpful around the house.  

Furthermore, external motivators are short-lived. Sure, your child may be excited to earn $2 for emptying the dishwasher for a couple weeks. But as their joy of cleaning fades, you’ll have to up the ante to make it worth their while and ensure the job is done well. You seriously gonna pay them $25 to put dishes away? I think not.

While paying our kids to do their daily chores may not be the best at getting them to complete their household responsibilities, an allowance itself is great at teaching the connection between work and money.

Moral of the story: Teaching your kids about money is awesome and so is teaching them the importance of chores, but don’t combine the two as they are two different concepts.

Best Payment Options

Once our kids learn basic math skills, between 5-6 years of age, they are ready for an allowance. The purpose of an allowance is to help kids learn about money and how to appropriately manage it. So how can they earn it, especially if paying them for chores is frowned upon? Here are four popular ways:

Earn-Money-For-Chores Allowance. Before you call me a hypocrite, hear me out. This isn’t the “Great job on doing the chores you’re expected to do on a daily basis, here’s some cash” as discussed. Instead, this involves your child completing certain tasks around the house in exchange for money. These chores are ones that you don’t expect them to do and may require more time and effort on their part to get the job done. Think of it like your kid is a contractor and they are doing gig-economy. These could be jobs like giving the family dog a bath, weeding the yard, cleaning windows, or mowing the lawn. Another option is to have a list of chores, each with their own set price. More involved work has a higher payout while quick and easy ones pay less. If they don’t do it (or do it well), they don’t get paid. Again, these are not their everyday chores that they are expected to complete.

• Pros: Child sees a direct correlation between effort and the money they receive, which can serve as a motivator
• Cons: Parents must keep track of what chores were done on a consistent basis (can be difficult with multiple kids)

The Unconditional Allowance. Your child receives a set amount of money without having to earn it. Because of this separation of money and chores, it allows parents to teach financial literacy while the kids learn that household duties are part of their daily routine.

• Pros: Similar to a paycheck; gives children the opportunity to manage money regularly, making it easier to save for specific goals and make plans based on expected income
• Cons: Does not teach kids how money is earned or how it works; relies on parent involvement and financial lessons to be successful

The Pay-As-Needed Allowance. In this rewards-based method, kids ask for money as needed rather than earn money or receive regular payments. The parent determines whether their child has earned the funds requested or what actions are required to receive it (What chores can be done to earn it?).

• Pros: Allows for frequent financial discussions each time this scenario arises, primarily with spending and budgeting money (How much does it cost? Is it worth the money?)
• Cons: Money is inconsistent and not steadily earned, making it difficult for kids to understand how money is effectively earned or saved overtime

The Hybrid Allowance.  This approach is utilizing different aspects of different allowance methods to best suit your family. For example, some may use the unconditional allowance as the foundation to teach money management and combine it with a rewards or chore-based allowance to encourage motivation, earn extra funds, or gain certain privileges, like screen time or a trip to the trampoline park. We use this method with our son as he has a base allowance but can earn extra cash with additional jobs around the house.

To go along with how you pay out the allowance, you also have to determine where it’s kept. Do you have a piggy bank or open a bank account? Do you keep a running tally just in your phone notes or on a chore chart, or give your kid actual cash? If you give your kid actual cash and they lose it, do you replace it or have them learn the hard way? Think of it like setting up a game for your kid. You have to have all of the parameters and rules thought out before you implement it in your household.

*Small aside before we move on. Patti read that you should not be paying your kids for something you wouldn’t expect a cleaning person to do. For example, you wouldn’t hire a cleaning person to brush your kid’s teeth. They should do that on their own having to be paid. Another way of looking at it is that kids personally take care of their own spaces (mostly just their room), but could be compensated for helping take care of communal spaces.

Dollars that Make Sense

A 2018 study found that kids learn more about money from their parents than any other source. Specifically, they learn from the example their parents set, what their parents actively teach them, and through experiential learning (learn by doing and through experience). So if we want our children to be financially savvy, we not only have to show and teach them, but also allow them to practice every aspect of money management (earning, spending, saving, and budgeting). This can apply toward their weekly allowance, but also if they get cash or a gift card as a present. Here are some ways to do it:

• Replace the piggy bank with a clear money jar so they visually see their money grow each time they put their allowance in (or shrink if they spend it).
  
  
• Give them a hands-on learning experience letting them purchase items at the store using their money. Don’t offer floater-loans or handouts to cover the difference if they don’t have enough as it will hinder the concept of money management; they’ll just have to pick something else to buy or save up for that item.
  
  
• Help them understand opportunity cost and avoid impulsive buys by talking out potential purchases and determining the most effective way of spending their money. “If you buy this toy now, you won’t be able to purchase that video game. However, if you wait a couple of weeks and save up, you can buy both items.”
  
  
• Teach them how to budget by utilizing the 50/30/20 rule. For kids, this means that 50% of their allowance goes to long-term goals (like a certain toy or a special outing), 30% for immediate wants (like candy or small treats), and 20% for sharing (like buying gifts for friends or donating it to charity).
  
  
• Play board games that have a money management component, like Monopoly, The Game of Life, Pay Day, or The Allowance Game. You can also read them books that discuss finances, like The Berenstein Bears’ Dollars and Sense or Trouble with Money.
  
  
• Banking for Real. If you opt for opening up a bank account for your kid, fully lean in. Have them monitor the account through online banking. When they get a little older, this could set them up for saving and investing, learning interest, etc. You can also show them any 529, money market, or college accounts that may also be in their name.

Remember that there’s so many ways to teach our kids about money and these can be mixed and matched. Patti and I utilize different techniques to teach our kids how to be fiscally responsible humans and these will most likely evolve once our kids get older. Regardless of what methods you use at home, make sure that you and your partner remain consistent with whatever allowance tactic used, stay firm with monetary boundaries, and continue to have open conversations about money and finances.

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