5/20/2011 11:41 AM ET|
Allowances: 'Welfare' for kids?
When children feel they're entitled to parental payouts, teaching the value of a work ethic, as well as sound financial practices, becomes even more important.
Giving your kid an allowance is supposed to be a good way to teach important financial values, like delayed gratification and the importance of budgeting.
So explain why:
1. High school freshmen who received allowances were no more likely to save money than those who didn't, and the allowance-getters were less likely to view work positively, a study indicated. In other words, allowances seemed to undermine the formation of a work ethic.
2. High school seniors who received regular, unconditional allowances (one not tied to chores) scored worse on a national financial literacy test (.pdf file) -- 49.1% correct answers -- than kids who received no allowances (52.5%) or allowances dependent upon chores (52.1%), according to a 2008 study by the National JumpStart Coalition.
3. Unconditional allowances are also associated with lower participation in the labor force. Nearly one-third of seniors who received such allowances had never worked in a paid job, compared with 20% of those who received no allowances, the coalition study said. Paid employment is associated with higher financial literacy.
4. High school seniors with no plans to attend college were more likely to receive unconditional allowances (25%) than the general population of seniors (10%), the coalition reported.
5. According to another study, most teenagers who received allowances viewed the money as either an entitlement for basic support or earned income, rather than educational tools that promoted smart financial habits later in life.
It doesn't matter that a couple of those studies are more than a decade and a half old. Fifty years' worth of research about allowances has yet to turn up evidence that regular cash transfers to kids have the positive impact that parents expect, and unconditional allowances appear to have significant negative effects.
"It's very consistent with child development theory," said financial literacy expert Lewis Mandell, who pointed me to the studies cited above, "which is that if kids get something for nothing, they will say, 'Why work?' In a less politically correct era, we'd call that a welfare mentality."
Mandell wonders if kids wouldn't be better off simply nagging their parents when they want something, rather than getting money for free.
"They should at least have to do something unpleasant to get the money," Mandell said. "Then getting a job at McDonald's might seem better than having to cadge their parents for money."
Holy cow. As a parent who leans toward the unconditional-allowance end of the spectrum, I didn't particularly want to hear what Mandell (and all the research he's citing) pretty clearly states.
I know some parents are comfortable tying allowances to chores, reasoning it replicates the work world, where you get paid for your efforts. But I believe that chores are what you do because you're part of the family and that everyone needs to pitch in.
Still, I have to admit to seeing the entitlement mentality take root in our daughter, who's 8. The first time I heard her demand, "Where's my allowance?" I promptly instituted rules requiring her to finish her weekly chores before I paid up.
But she has yet to save much money, beyond the amount we require her to put in her credit union account. And if I tell her she can save up to buy the toy or game she's currently coveting, she quickly loses interest.
That's fine, for now. I'm not interested in training her to be a bigger consumer, even though I would like her to see the benefit of saving toward a goal. What really worries me, though, is the idea that her allowance may interfere with her work ethic.
A 1994 study by University of Minnesota professors indicated that high school freshmen who received allowances were less likely to view work as a source of "intrinsic satisfaction" -- in other words, to see the positive value of work -- as well as less likely to value the "extrinsic" benefits -- the money that could be earned.
"Parents and financial counselors need to be careful about undermining the development of work values through allowance practices," the researchers warned.
That finding concerns Mandell, too, since a good work ethic is so important to success, financially and otherwise. Not all jobs, especially those available to teenagers, will be fun, and the ability to persevere through "boring, dirty and exhausting" jobs, as he puts it, is important to later achievement in life. Not that I want my daughter necessarily cleaning houses to make ends meet, as I did in college, but I also don't want her flaking out when the going gets tough at work or in life.
Mandell, who is a fellow at the Aspen Institute and a visiting professor at the University of Washington's Foster School of Business, believes parents could make allowances more effective by talking to their kids about what lessons they're expected to learn -- and about how the family copes with financial matters in general.
Some families dole out money so they will have fewer interactions with their kids, Mandell said. Busy parents may see it as a way to head off whining or nagging, but simply handing over cash doesn't necessarily teach kids the right lessons.
Instead, parents should be looking for ways to:
1. Make their expectations clear, including what duties their children are expected to perform.
2. Talk about what they're hoping the allowances will teach, including the value of saving and budgeting. Parents should also talk about the importance of hard work, discipline and repetition in achieving success. Playing the piano for friends is fun, for example, but the fun part comes only after a lot of practicing and drilling.
3. Match their kids' savings, if possible, to encourage that habit.
4. Help children understand that money is a finite resource. Grade-schoolers may be too young to grasp how much of their parents' paychecks go to housing, transportation, utilities and other "must have" expenses, but an older child can be let in on the fact that the family's money stretches only so far.
"You don't just hand over $20," Mandell said. "You say, 'Here are your responsibilities, and here's why (we're giving you an allowance), and here's something about our financial situation. I know you'd like to get $30, but this is the best we can do right now.'"
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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My daughter started receiving an allowance when she was 4 years old. She had chores that were age appropriate. If she wanted a toy, she had to save for it. When we went to Disney World when she was 5, she had saved more than a hundred dollars from her allowance and birthday money. She kept track of her spending and would ask how much she would have left if she purchased a certain item.
Now, at age 26 she completely understands how to handle her money. She is not one who needs dozens of shoes, purses or the latest fashion. She is able to buy what she needs or wants since she knows the value of a buck. Amazon is definitely her friend. She loves to travel and saves for her trips. This year we are going to Belgium and London for 10 days.
For us, giving her an allowance and making her live up to her end of what she needed to do and being consistent resulted in a very responsible adult.
Sounds like my wife got this one right.
After a short experiment with allowances, we cut off because of the "entitlement" mentality.
We replaced with charts of various chores, each having a value, that are two children can either do or not do. The more they work, the more they get paid. If they don't work at all, they don't get paid. Direct cause and effect. If they want something, they have to work. They learn value of work, and that no work = no new stuff. And they compete with each other.
I admit - I'm jealous! I'm working 2 jobs to keep my home right now, just crossing my fingers that the start-up company I'm with takes off so I can start having free time!
Obviously the questions in this article are rhetorical and the issues are obvious. Money not tied to responsibility is merely a handout and children begin to expect that handout throughout their lives.
Yes. "Chores" such as cleaning one's room and picking up after one's self are what a child should learn to do as part of a larger body ... the family. Chores such as helping mom with laundry, helping with or doing the dishes, mowing the lawn, cleaning the yard, walking the dog, things one might pay someone outside the family to do might be tied to some monetary payout.
Weston herself noted that she has historically been of the irresponsible, give the kid some money for nothin' parenting group. And, while I would like to see the numbers for kids who receive pay for work against their school scores, I would be more interested in another classification - those parents who actually spend enough time with their kids to teach them the parents' moral and ethical code of behavior. I'm guessing this group would score the highest in all areas simply by virtue of parents taking the time to actually BE with their kids! Can you imagine some kid fresh off the farm who grew up from the age of seven or eight working side-by-side, shoulder to shoulder with Grandpa and Dad and Uncle Joe to keep that farm productive , being irresponsible and not understanding the value of hard work to get you where you want to go in life? Or the inner city kid who, at the age of nine or ten, who got an after school job delivering groceries for the local market or delivering newspapers so he could bring his meager pay home to Mom so that she could pay the bills, having no sense of the value of money?
If a child is brought up with no respect or awareness of the value of work, they will, indeed, have no appreciation of the correlation between physical ergonomics and personal economics.
And twenty bucks? Seriously???? Who in their right mind would just give a kid $20? By the time an adolescent reaches an age where he or she may have an actual need for that much money in a week ... they'd better be in high school and getting themselves a part time job at the local fast foodery or a neighborhood garage or Christmas tree farm or whatever is available in their neck of the woods. And we can only hope their parents taught them well enough that the kid'll appreciate it and be able to do that.
That being said, the only thing left to say is ... This article is pretty dumb. But, I guess one must consider the source!
I was never given an allowance and I feel like that made my work ethic great as a teenager and early 20 something, I couldn't WAIT to get a job because mom and dad would rarely give me money, they bought my clothes for me(which wasn't always clothes I wanted) and occasionaly gave me spending mom if my friends did something...but not much.
My parents used to get upset that I spent a lot of time working and trying to get more hours than at home, when I first moved out, i usually worked 2 jobs and loved it. It shocked me when I was waitressing how many people my age didn't take their job seriously, we're always late, and we're always broke, while i was paying all my bills on time and had a savings of like 700 bucks that I saved in just a couple months.
OK i know I'm bragging, but I hated that my parents wouldn't give me an allowance when I was younger, I was expected to do chores and not get anything(except not being grounded) in return. But looking back, I am so happy my parents did that, it shaped who I am today. Both me and my husband drive paid off cars and have money in savings and have great ambitions....I want my kids,when I have them, to learn the same things I learned from my parents.
It just kills me see parents today to just hand kids money for doing nothing. it don't show kids how to save money or earn money . they miss the true value of money when you do this . All teenagers should be made to get a job a mini wage job some where . and be made to pay there cellphone/cable/car related items.. by the time there out of high school.. they should have a handle on saving money for bills when they move out . " i dont care what there parent does.doc ,lawyer w/e" kids will think its owed to them..when its time to live on there own, they will always run back to mom and dad for money when there broke to help pay bills..
Back in the 50's, I originally got a $.50 weekly allowance, then $1, and then when I got to be about 12, $3. It was clear that the money was for certain purchases that were entirely up to me rather than the necessities. I kept three envelopes in my dresser and put $1 in each. One was for any sort of fun thing I wanted--usually a movie ticket, an ice cream cone at the drug store, a 45 record. One was for saving toward something that cost a bit more and one was for long-term savings toward college ( took it to the bank every time it reached $5). The set-up was my own choice. But by then I had already been taught the importance--and the FUN--of saving. Any time I received a cash gift of more than $1 (maybe it was less--I forget) for Christmas, birthday, or other holiday, I had to put half in the bank. Yes, half, and, yes, a real, honest to goodness bank.
Back in those days, children were encouraged to use the bank. I can remember proudly marching in with my dollar and my very own passbook and having my deposit welcomed. I got to watch how my savings built up from each small deposit. (My mother tells a story of using the post office bank, which went out of existence in 1966.) Do the banks we have nowadays welcome small depositers and engage in helping children to learn the joys of saving? A few years ago I discovered that my bank was charging a small savings account I had started for some "mad money" $5 A MONTH because it had less than $500 in it--in spite of the fact that they had several thousand dollars of our money in other accounts. What a rip-off. I was able to transfer additional funds to raise the amount, but what a disincentive for people who are trying to save, even if they can only manage a small amount each month.
As for allowances, mine and the chores I was expected to do were not linked. During the school year, my parents considered that my primary "job" was to learn and do well in school and chores were fairly minimal. During the summer, when I had more free time (even when I had a paying job), I was required to do a lot more around the house and yard. The summer I was twelve I started trying to find a summer job--you wouldn't believe the number of businesses that weren't interested in hiring a 12-year-old! I was persistent in applying, but finally ended up deciding to take a typing course to help prepare me for high school instead. I did find ways to make money, though, from selling things (greeting cards was one I remember) and baby sitting and finally starting to find summer jobs when I was a bit older. And I think part of that was as much from watching the money pile up in the bank (and some of my summer jobs didn't pay all that much, nor did baby sitting, but the amount kept going up anyway).
I'm not sure just how much influence parental attitudes have in the final analysis. My mother and her sister had the same frugal, savings-oriented, etc., immigrant parents who were always talking about living within your means, etc. My mom is just like my grandparents were. My aunt? Definitely not so much.
I think getting an allowance is not a bad thing for younger kids (pre-teens). Mine was tied to my chores, sportsmanship in intermural leagues, and academic success. I also had to manage it and was actively encouraged to save most of my money. I did odd jobs around the neighborhood, but the allowance was still a good teaching tool.
When I went to high school, my parents decided that they would continue to give me an allowance if I spent my summers doing things that would help me get into college, such as volunteer work or writing workshops. In hindsight, my parents should probably have encouraged me to go work a part-time job in the summer.
The 4-H program just conducted a Dollars & Sense Reality Store. The 5th and 6th grade . As they entered the gym, students were given $200 in fake money. About 15 booths were set up, and students could spend their money on fast food, toys, electronics, home decorations, medicine and other items. But it’s not that simple. First, they handed over $20 for taxes. Then they deposited $20 in their savings accounts. Before they were free to spend their money, they drew cards that gave them pets. Some students had several pets and had to spend money on pet supplies and veterinarian services. Rude awakening for all of them. It’s a lesson some students learned the hard way one had to take $20 from his bank account. He also returned a few items he purchased, such as a video game and a board game. One had to take $20 from his bank account. He also returned a few items he purchased, such as a video game and a board game. They’re learning about finance at a very early age,” “They need to learn it’s not all about them. It’s a bigger world.
Im a mom of 8 now besides the fact that we are a big family. I believe all families big or small should take part in cleaning up after themselves but also helping take care of the home they all share ie.. yard work, house work like decorating painting etc. A big one here is grocery shopping I go so far as teach my kids to coupon, to shop which teaches them to balance money, they get to practice manners in a social setting to cleaning the fridge to put the groceries away teaches them proper food handling skills all values I believe will help my children later as adults. ALSO. Maybe because I have been a tax preparer for over 12 yrs and My education is within financial management or MAYBE big maybe its the memories of being a tween babysitting so both parents could work also held 2 paper routes in which more then often my folks "borrowed" but if I dared to ask why or anything in regards to how much my folks made I was slapped by hand or words I was taught this isnt proper but..WHY? because parents were/are ashamed of there job/ income? I think its very wrong for a stanger to ask this but why our children? I believe and I say so only because I know first hand that its ok to share your income situation and sometimes its better to do so rather then tell your child No you cannot go on this trip or buy new shoes or what have you not being able to afford at the time of requesting. they know its not personal its not that you dont want to provide what they request its maybe you just cant- This teaches your children to consider others it also teaches children to respect money and the sources who provide it (parents) I have 6 children in school 5 honor roll students 3 straight A students, My kids all do chores, they do recieve a weekly allowance varies based on chores and age from $3-$10 weekly, if they do not do the work they dont get get paid just like in real Life but I do not pay extra for things such as helping paint decorate OUR home, OUR Yard tending OUR garden etc.. Nor do I pay them to clean there own rooms- chores are made up of extras like washing clothes for the house not just there own, scrubbing a floor that usually moms have to or babysitting or cooking (like I pay .50 to a older kid if they make sandwichs slice some fruit for youngest lunchon a busy day) ETC... actual work things that help me/dad.. not things they should do- after all we adults go work for money and do jobs either the owner cant do alone or doesnt want to be doing right? AS for these parents who just toss money at there kids without it being earned.WELL you reap what you sow, when your unable to give allowance and your kids demanding pay.. or when your kids and adult and moving back in with you or never having moved out... cant hold a job.... before you complain remember the cause.
i think its much more important to teach kids about the banking system and exactly how it works.
my daughter was floored when i explained how buying a $20 pair of jeans with a credit card could end up costing her more than $100,000 if all she ever made was the minimum payment and that by only making the minumum she would simply NEVER pay off that one pair of jeans even if she lived to be 100 years old or more.
that was because the first card she was offered had a 32% interest rate attached to it. it was a good lesson in knowing about how the banks use interest to keep you a slave to the system
and how the federal reserve and the central banking system really work to enslave you and keep you in debt your entire life.
i have taught both of my kids to save their money so they can pay cash for the things they want.
and to NEVER put their money in a bank account because the banking system is totally corrupt.
but the biggest lesson i think EVERY child should learn is to NEVER EVER EVER use a credit card....because once you start spending money that you dont have you can almost never get out of debt, because that is exactly how the system is set up to screw you and keep you endebted to the banks for life.
they simply dont teach these things in school i guess thats because the schools are run by the state, and the states are controled by the banks so of course they wouldnt want the kids to know the ins and outs of how they are going to get screwed after they go out into the real world.
other very important things to teach your children are things like there is actually no law that says they have to pay federal income taxes,,and more importantly how they can get away with not paying it in the first place..another is to teach them the entire history of the federal reserve and how it totally controls our government and the policies of this country.
There's something key here: "...allowance seemed to undermine the formation of a work ethic." And why shouldn't it? Whether we pay our kids for doing chores, dole out a no-strings-attached allowance on a regular basis, or hand over money as it's requested (or demanded), we're only giving kids half the money-story. The second half. We've been using allowance as a way to get money into our kids' hands, but we haven't been allowing them to experience how adults earn money in the first place.
Work ethic is a skill. The more we practice it, the better we get. But at ages four or nine or eleven, there aren't many ways to practice work ethic in relation to the real world. Yes, homework is a great way to learn how to self-motivate, but it's too far removed from a real job for kids to make that connection. And it's not any fun.
So in our home, my daughter earns her allowance by having that "real" job (earnmykeep.com). She's been a market researcher, a toy designer, an entomologist, a photographer. Once a week we agree to a task that emulates a real professional's responsibilities, she completes the task to the best of her ability, and on payday, I pay her. Typically we spend a whopping 15-20 minutes a week.
But the results have been exponential. She now views work as a source of that "intrinsic satisfaction" -- the fact that she earns money for her efforts is secondary to the feeling she gets for having given a "real" job her all. Not to mention how much she enjoys exploring all the different career options that could await her one day.
Also because she's living this "real world" experience, it's opened the doors to realistic money conversations. We talk about long term and short term savings. How and when my husband and I pay our bills. Raises. Bonuses. Why we are choosing to not buy her an American Girl doll. Because she's replicating what he and I do to earn money, she completely understands that our money is finite -- because hers is as well. Her sense of entitlement has vanished. Her feeling of fiscal empowerment has grown exponentially. And do I think "grade-schoolers may be too young to grasp how much of their parents' paychecks go to transportation, utilities and other 'must have' expenses?" Of course not. She's six.
For 100 years, Americans have been using the same methods to teach their kids the value of money. Maybe it's just time to re-define the "value" of money.
So wait....kids get allowance without doing anything to earn it? It is a surprise to people that this does not teach motivation or good money skills? Seems like the kids are pretty smart and the parents are dense! I sound old and crotchety, but I'm not even 30.
Growing up I got a certain amount of money for doing certain chores. The crappy chores paid more (go figure). I was pretty motivated to mow the lawn, weed, clean bathrooms, and clean gutters! I even asked to be driven to my grand parents so I could do the work for them too!
Might sound crazy, but you learn the VALUE of money when you have to work to earn it. $5 might not seem like much until you have to clean a few bathrooms to get it. you might think twice before spending it on something stupid.
My parent's didn't use the same system for my sister. She just got an allowance without having to do chores. Not surprisingly, she still thinks everything is free and thinks work is a "hassle" but wonders why she has no money.
Kids should do chores to help out the family (and learn how to take care of themselves), but paying them for the jobs just helps teach that money does not grow on trees. Its a good way to make them think twice before asking for a certain amount if they can relate it to how idfficult that actually is to earn!
There are plenty of studies that show extrinsic motivation to be counter productive. That is, if you offer a reward or threaten punishment for an action or behavior, the behavior is only persisted/avoided as long as the reward/punishment is given. Whereas if you use intrinsic motivation - doing (or not doing) something just because it is the right thing to do - the motivation will be more likely to persist past the removal of the authority figure.
The fact of the matter is that you can't teach your children anything you don't know. At least if you give them an allowance and make them buy their own clothes or some such, they learn that money only goes so far.
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