Should I Give My Kid an Allowance?

a small child facing a standing adult goat with a baby goat on the ground

Many parents struggle with the question:  should I give my child an allowance?  Does this help them or hurt them?  There are two sides to this story – some parents believe that children should not receive an allowance, as it teaches children that they don’t have to work for their money, while others feel that giving them an allowance is the only way they will learn about money. 

My personal opinion is this:  children should definitely receive an allowance.  After all, if they aren’t given their own money, how will they ever learn to manage it?  The real question may be whether or not it should be linked to chores – in order to get your allowance, you have to do chores around the house. If you don’t do your chores, you don’t get your allowance.   Some people take this approach. 

However, if your child never does his chores, then he will never get any money.  So how will he learn to manage it?  Some experts believe that an allowance should be given unconditionally, and that children should be expected to do chores because they are a part of the household and “everybody needs to chip in around the house.” 

This is the approach that I took, for the most part.  And if my son wanted to earn some extra money, then I gave him extra chores.  He had specific chores that had to be done regardless (keeping his room clean, cleaning the bathroom, etc.), but he could also vacuum the house or clean the basement if he wanted to earn extra money.  I was trying to teach him two things:  one, you need to contribute to the household, and two, if you want money, you have to work for it – it’s not just going to be given to you. 

A hand holding a paintbrush that appears to be painting a fence

I think I’ve been fairly successful.  He started working a part-time job when he was around 16 or so, and he’s been pretty responsible with his money.  He’s 24 now, and every time he gets paid, he makes a list of bills he has to pay, and sometimes if he has a little extra, he’ll put a bit more on one of his bills in case he’s short next payday.  However, he does still make bad financial decisions at times and runs short of money (he spends $50.00 on pizza for one night, when he should have bought groceries for a week), but overall, I think having an allowance helped teach him about money.  Hopefully he will make better decisions as he gets older.

However, I don’t think you should just give your child an allowance and leave it at that.  You have to teach them how to manage their money.  Tell them that this $10 has to last them an entire week, so they need to make it last.  Don’t blow it all in one day.  If they do, do not give them an advance on their next week’s allowance.  This is not how it works in the real world.  You cannot spend your entire paycheque in one weekend and then go to your boss to get an advance on your next cheque.  And the sooner your children learn this lesson, the better.   And it is your responsibility to teach him this lesson. 

a pink piggy bank

Some people also believe that you should divide money into jars – 10% savings, 10% charity, and the rest for spending.  I do think that this is a good idea, but I was a single parent and my son didn’t get very much money for an allowance, so I felt that he should be able to spend it as he saw fit.   And there were times when I had lost my job and he didn’t get an allowance at all, so when he had money, I didn’t want to tell him how to spend it.  You also have to let them make their own decisions and learn from those decisions, both good and bad.   I certainly did tell him that he needed to save money to buy certain things, and he was pretty good at this, but I must confess, the charity donation just didn’t happen.  However, we did contribute to charities – it was just in a different form.  We never threw out anything that could be donated to charity (clothes, toys, etc.) so he learned about giving to charities in that way instead.

How much do you give?  Gail Vaz-Oxlade, suggests a dollar a week for each year of the child’s age.  So a 13 year old would get $13.00 per week.  I think this is a pretty good guideline.  However, it’s up to you.

So should you give your child an allowance?  I would say yes, but at the same time, you must also give them the proper tools to learn how to manage money.  This is an extremely important life lesson that every child must learn.

Article by Sharon Skwarchuk

Meena’s Note: On the topic of how much of an allowance to give, it’s important to decide what items the allowance is meant to cover. In some families, all “essentials” such as food, clothes, school activities are paid by the parent, so the allowance is only meant to cover some extra fun items.

But in some families, once the child is a certain age, they are given full responsibility for buying their own clothes for example. So then a much larger allowance will make sense.

And don’t worry if you can’t afford to give an allowance or can only give a very small one. I think that if you explain in a calm, rational way, that you have limited money, children will understand enough. Of course, there will be some whining; but as adults don’t we still whine sometimes about having to go to work, or do chores? And then we deal with it. Kids have to learn this too.

When it comes to money secrecy is never a good policy, especially when it comes to your children.

Moving Out for the First Time – What Do I Need?

Last week we shared this post about the financial side of your child moving out. Now we’ll explore what items to get and where to get them.

First, make a list of everything your child might need, which will often include everything from dishes to towels to furniture.    I would suggest that you go through each room in your house and make a list of what your child needs and what you are able to give him.  For example:

 

Room Johnny Needs Johnny Has I Will Donate
Kitchen Plates and bowls Nothing 4 plates and 4 bowls
Glasses Nothing 4 glasses
Linen Closet Towels 2 towels 1 towel

 

Go through each room in this fashion.  When I (Sharon) moved out of my parents’ house, I had very little, and your child may well be in the same situation.    Don’t feel that you need to provide the best of everything to them as soon as they move out –nobody gets to have a new house and new furniture without working for it.  (I didn’t get a new couch from the store until I was about 40 years old, and I’m not kidding.)

 

Your child can buy additional items as he can afford them. If you can, it’s great to provide the basics.  If not, there are lots of other options:

  • Thrift stores and dollar stores are great places to get affordable miscellaneous kitchen and housewares
  • For upholstered furniture, where bedbugs are a concern, you might know some who wants to get rid of furniture as well as other household items
  • Check out websites like Kijiji – you can often get good deals on used items – sometimes you can even get them for free.
  • In the summer, we all know how popular yard sales are. Remember to negotiate.
  • Consider cheaper alternative items. I wish I’d known that a good inflatable mattress can be just as comfortable as a regular bed, for a fraction of the cost.

 

The above tips will help you save money on what you buy, but you save even more money when you don’t buy anything at all. I, (Meena), regret a lot of my purchases when I first moved out. In hindsight I’d buy a lot less and wait until I actually needed an item before I purchased it. It’s too easy to end up with a lot of stuff, and as a young person there’s a good chance you will be moving often.

Don’t worry if your child doesn’t own much until they are well settled, and even then, being picky about your belongings can be beneficial.

How did your first move go? What did you buy? What do you regret buying or not buying?

 

Co-authors: Sharon Skwarchuk and Meena Kestirke

Getting Your Own Place Back

The time has finally come – your firstborn is leaving the nest.  Hopefully this is a day that you’ve looked forward to and planned for; when my son left, he announced he was moving in with his girlfriend’s family and I couldn’t stop him because he was 18.  And that was pretty much it.

However, before your son (or daughter) moves out for the first (and hopefully last) time, there are a number of things that ideally you should consider:

  • Where is he moving to? Is this a room and board situation, or is he getting his own apartment?
  • Will he require furniture and household items?
  • How much is the rent? Does it include utilities, cable, Internet, etc?
  • Is he moving in with friends? If so, how will the expenses be split?

There are, of course, other things to consider, but these are the basics.

How can you help him accomplish this? Ideally you will both plan ahead.

Let’s assume that your son is moving into an apartment with a friend of his.  He will need money for the:

  • first month’s rent
  • damage deposit,
  • hook up fees for power, cable, Internet,
  • moving expenses (truck, gas, pizza for his friends)

Show him how to create a realistic budget to determine what these expenses will be. Don’t let him guess. Many kids don’t realize how much food costs, for example. For this you could share your grocery receipts. For other items you can determine an exact cost. Have him phone the utility companies and find out what the initial charges are. Have him look at a friend’s actual electricity bill.

Once he has a budget in mind for the total expenses, make sure that your son’s friend kicks in his share – don’t take his word that he’ll pay you back when he can afford it.  Make sure your son gets the money from him up front – tell him no money, no move.

Now that he knows how much money he’ll need, have him figure out how long it will take him to save that up. For example, if he needs $1,200.00 and he can save $300.00 per month, then he can schedule the move for four months in the future.

Make sure he looks at the other side of the equation too:

  • Will he be working? How many hours? How much per hour? What will the deductions be like? (For quick tax estimates I like this calculator.)
  • Is he using student loans or scholarships?
  • Are you helping him financially?

If so, determine your limit and stick to it. If you want to make an exception for holiday gifts, plan for that too. Don’t pay for groceries in November using his Christmas money, and then still buy him a Christmas present.

It’s his turn to be the adult. You can offer  guidance but don’t solve his problems for him. We were all young once. We figured it out and your child can too.

 

Author: Sharon Skwarchuk
Editor: Meena Kestirke

The Gifts That Last a Lifetime

a wrapped present box with purple paper and white ribbon

We all know how it goes – kids get too many toys. They either quickly lose interest, or the toy breaks, or you have to declutter it to make room for more stuff. Whether you are buying for your children or grandchildren, you are probably looking for alternatives.

Experience gifts are a great option, but what about something longer lasting? What about something that gives both of you peace of mind, and protects them, their future spouse and children, even after you’re gone?

If this appeals to you, here are a few insurance gifts to consider:

Child Critical Illness Insurance (my favourite!)
It’s amazing value for your money. I explain it in more detail in this post.

Whole Life Insurance 
I know there is a lot of talk about how term insurance is the way to go, and I agree that in some situations having only term life insurance is fine.

However, when you are helping a young person get started in life, you just have no idea what will happen to them in the future. What kind of job will they get? Will they get married? Have kids? Will they have a medical problem and become uninsurable? 

That’s why I recommend getting a permanent insurance product in place as soon as you can. You can always chose to cancel later if that makes logical sense. But you can’t reverse time and easily get insurance for a good price after they have been diagnosed with a medical condition.

Plus a whole life policy has a cash value component. The recipient can borrow against this amount to help pay for school or start a business.

As a gift purchase, I recommend the option of picking a 20-pay policy. This means that you pay for 20 years only, and then the coverage continues for the child’s entire life.

If you can afford about $1 a day you may be able to get about $60,000 worth of life insurance. And you’ll only contribute about $8,000. It’s pretty amazing.

 

Are these options too expensive? You’re not ready to commit to 20 years of payments? Or you are gifting to a teenager or young adult?

What about a travel insurance policy?
Young people love to travel but often think they are invincible. Protect their future by paying for their travel insurance. For as little as $126 you can buy your 18 year old a worldwide annual policy.

I hope I have given you some new gift ideas. These are just a few of the many options to use your money and wisdom to protect the children and youth in your life. Do you want to discuss all the possibilities? Let’s talk!

 

Lifetime Illness Protection for Your Child

girl in a yard looking at a playhouse

Your baby is perfect. (Even if he isn’t a technically a baby anymore, you will always remember that adorable, tiny newborn.) You are grateful everyday for his good health. But you’re practical as well; you know illnesses can affect anyone at any time.

So you worry. You’re a parent; that’s part of the job.

I wish I could reduce that fear of the unknown. But I know I can’t. I’m practical as well. We insurance people know that we can’t prevent illness and injuries. 

However, what we can do is strive to ensure that when bad things happen, at least you will have more money to deal with them.

Money allows you to:

  • take time off work to care for a sick child
  • pay for meals or housecleaning
  • buy medicines that the provincial government doesn’t cover
  • take care of a myriad of other things

But what I’ve found when researching the insurance companies I represent is that there are very few products available for children. Almost all products are for adults, who can make their own decisions. Adults have the right to decide how they spend their money and how they will deal with life’s difficulties.

Your child doesn’t have that choice. They only have you.

That’s why I was thrilled when i found out about Desjardins Insurance‘s child critical illness policy, Health Priorities – Child. 

Of course as an insurance broker I’m a fan of insurance. But not all insurance companies or policies. I’m careful to only recommend what is suitable and beneficial in your situation.

But when I heard about this policy I thought, Wow! Who wouldn’t get this?

Here’s how it works:

You pay a certain amount every month or year for twenty years, and then your child or grandchild (or niece, nephew, or godchild) has coverage for the rest of their lives.

Not to 65 or 75; but to 90, 102, 112! Whatever age they end up living to, they will have coverage for serious illnesses, such as malignant cancer, heart attack, stroke, multiple sclerosis, and many other conditions. 

I know you are wondering about price. Like any insurance, you pay more for more coverage. But let’s start with an amount that any anyone can afford:

For just over $1 a day*, you get can $30,000 in coverage. Now you are probably thinking that you’re just paying that $30,000 over time. However, if you do the math you’ll find that over those 20 years you are only paying about $8,000!

Couldn’t you just invest your money?

Absolutely! Investing for your loved ones is an excellent idea. Let’s say you put aside the same $1 per day and earned 5% interest. When would you have $30,000? After about 30 years. You would have spent about $12,000 of your own money.

If you can predict that your child will be perfectly healthy for at least 30 years, and you will always be able to put that money aside every month, year after year, that’s great. But if you are like me, your future prediction skills just aren’t that accurate.

But if you have an eligible claim, then you will receive $30,000 in that first year, even if you’ve only paid $100 so far. 

Sounds good so far, doesn’t it?

Well, it gets even better. Let’s say your daughter stays healthy, and either gets her own new policy, inherits some money, gets a great job, or otherwise doesn’t need the insurance any more. After twenty years you can cancel the policy and get all your premiums back, as long as a claim has never been paid.

I don’t recommend cancelling, but at least you know you have that option.

And what is the risk to not getting this coverage in place as soon as possible?

If your child develops an illness, or even signs that may indicate
an illness,  insurance becomes more expensive or even
impossible to get.

But if you get coverage in place now, she will have lifetime coverage to protect herself, her spouse, and future children.

Interested? Fill out this short survey and I’ll contact you with a quote.

Here’s a brochure with information on Health Priorities – Child product.

*Example only. Your price will vary depending on age of child and potentially other factors.

Disclaimer: Your Life Money Coaching Inc. provides financial education, but does NOT sell insurance. However, Meena Kestirke, the owner of Your Life Money Coaching is a licensed insurance broker in Alberta.