When we returned from Georgia, we decided to give the kids an allowance. Matthew was at the age that he understood the concept of money and wanting to buy things. He needed to understand the value of money and it was time to learn.
The children do not have a lot of wants or needs so we did not start an allowance earlier. It was tough to decide how much to give. We talked to different people and got different ideas. We knew how we were going to divide the money for savings and spending etc but how much money would be good? Since we were giving Matthew an allowance, we decided to give one to Natalie and Andrew too. So we gave them 50cents per year of the child’s age. Natalie(4) got $2 a week, Andrew(6) $3 a week and Matthew (8) gets $4 a week.
We keep a paper record where the kids calculate the amounts and write them in themselves. It also gives them the ability to understand what they are doing exactly. Click here to download a spreadsheet.. It is based on the theory from T Harv Eker and his book Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth
Here are the definitions of the acronyms and a brief description – As kids do not have to pay for any necessities, the division of our money is different from the kids.
We need to share our wealth with others and the kids need to understand that from an early age. When we give, we will receive many times over whether it is monetary or otherwise.
This is for them to spend on bettering themselves, for workbooks, going on a specific course of buying a learning tool of some sort. It is self explanatory.
This amount has to be spent every month. They can spend it on whatever they want and we have no say. This money is for them to blow, even if it is impulse spending. They need to understand how it feels. If they save and save and save without spending, they won’t learn to appreciate it.
LTSFS Long Term Savings For Spending (30%)
The LTSFS is where the kids have to save up for a bigger item. In this way they do not end up purchasing an impulse item. When people talk about picking something out and then waiting for 24hours before making the purchase to make sure it is something you really want, the saving up time will give the kids time to make that decision. An example for adults is to save up for that vacation or that new pair of shoes. Smaller scale for the kids.
FFA Financial Freedom (35%)
This is where the kids save their money to grow. This is basically the golden goose, you do not kill the goose so you cannot spend the money in this account. The money is used for investments or any other money making vehicle.