February 18, 2012 by
So you’ve decided to take my advice and pay your children. (See my last post Kids and Money.) Now what?
First you need to decide how much.
How much depends on a few factors. Age, your means, and the child’s spending wants/needs. When my son was 3, he’s 12 now, I started by paying him $3 a week. When he was 6 it went up to $6 a week. at 9 it was $9 a week. And that’s where it stopped. I could put it up to $12 now that he’s 12, but we haven’t negotiated that. So, there’s a guideline if you like.
I chose amounts that were mulitples of 3 as the weekly pay amount. And that was done on purpose. I also pay the children in small bills or change so they can divide their pay.
The next thing you need to do is set up rules.
Yes, you heard correctly. As the parents it’s up to you to set the spending rules for your children.
In our house everyone has 3 piggy banks.
- pocket money or spending money
- saving up money
- live savings.
When the children are paid, one third of their pay goes in each bank. The pocket money can go straight in their wallet/purse if they have one.
Any time we go shopping, they can use their pocket money for impulse purchases like gum or candy. There are weeks that they don’t spend all of their pocket money. This money can then be reallocated to the saving up or life savings banks. (My kids choose to put it in their saving up money 9 times out of 10.)
The saving up money is not for impulse purchases. This money is to be used to save up for something. My kids have saved up for things like a new game, iTunes money, or a toy. Sometimes they have a joint savings goal and they have bought Wii console, a Trampoline, a Playstation and accessories.
Life Savings is exactly what it sounds like. It’s money that they have put away for major life purchases, like university, to start a business, to buy a car, or a home. This money is never spent. 2 years ago my oldest son had amassed $1000 in life savings. He used it to purchase an interest bearing investment certificate that pays 5% a year for 5 years. (A great rate, for sure!) And he continues to fill the life savings bank.
The purpose of the 3 banks, I’m sure you can see, is to teach children that there are many different types of money needs. And some of them take time to save for.
This is why I chose the pay rates I did for the children: multiples of 3 work for the lesson.
Other posts you might like: How Much Help?, Kids and Money, Help Around the House