Welcome back to the second post in this series about teaching kids about money management. If you missed the first post, be sure to check out WHY this is a vital life skill for your kids and WHO needs to do the teaching. For this second post, we’ll look at the primary way kids earn money. Should you pay your kids for chores?
Money as a Tool
Money is the primary tool that our society uses to buy goods and services that we need or want through voluntary exchange. It is earned by providing a service or product that someone else finds valuable. For kids, that often comes in the form of chores. As they get older, it comes from entrepreneurial tasks such as lemonade stands, making crafts to sell, looking after neighbor’s pets, and other first “jobs”. Kids need to have their own money in order to learn first hand about managing it.
This is far more powerful than reading books about the subject. It’s their introduction to doing valuable work in exchange for money. This experience of earning their own money is the foundation that will build healthy habits that follow them into adulthood.
Paying Kids for Chores
There are many different opinions about paying kids for chores. Some people believe in giving kids an allowance based on age instead of chores. Others believe all chores should be paid. I fall somewhere in the middle.
I believe that kids should have some jobs that they do just because they need to learn to be productive members of the family. However, they should also have a few jobs that they do for commission. Being big Dave Ramsey fans, we use his wording of commission instead of allowance. Commission implies that work is done in exchange for the commission. This helps build the connection between work and money. If no work is done, no money is received. Simple as that.
For small kids, the point of doing a job isn’t that it’s done well. They have to start somewhere when learning these tasks. If they make a good effort, count it as done. As they get older, you can begin to judge how the job is done based on the quality of their work. If the job isn’t done well, they don’t get paid until they complete it to your liking. Encourage them to take pride in their work. Celebrate a job well done, not just with money, but with praise and high-fives!
For ideas on age-appropriate chores, check out Chores for Teens and Chores for Children from Life Beyond the Lesson Plan.
How Much to Pay Kids for Chores?
There’s no magic number when it comes to how much to pay kids for chores or an allowance based on age. I see recommendations ranging from $0.50 to $1 per week per year of a child’s age. My 10 year old would be getting $5-$10/wk. That seems like a lot!
In all honesty, my kids just got raises to $2/week if all of their work is done well, and I don’t have to constantly remind them to do it. We just started talking with them about saving for larger purchases such as paying for a good chunk of their first car and college. Because of those larger savings goals, they need a decent bump in pay which comes with an increase in their responsibilities around the house. I certainly don’t need my 10 year old to have $500/yr to buy toys in addition to all the gifts she receives! However, she does need to make more if she’s going to save anything meaningful for these large expenses.
Related Post – Teaching Money Management to Kids
Encourage Negotiation
Invite your kids into the discussion about chores. Explain why some chores are done just to help around the house. Ask for their input as to what they want to do and how much they’d like to get paid. Their answers may surprise you! Sometimes we see our kids as resistant to doing chores at the same time that they’re asking for more difficult tasks. Try to incorporate their ideas in the final plan. Make sure everyone is on the same page. Including their input encourages them to take ownership of their responsibilities around the house.
Early Savings Goals
Starting this idea from a young age can quickly halt potential tantrums in a store when kids want their parents to buy them something. I simply ask my kids, “Did you bring your money?” The answer is always no. If they want a toy (aside from holidays), they have to use their own money to buy it. If it’s that important to them, they can save up for it.
Many times they change their mind about the toy once they save the money. They start to question whether or not the toy is worth the money. They can equate the work they’ve done to the cost of the toy. My kids will often comment that they’d definitely pay $10 for it, but not $15.
On the other hand, they will sometimes gladly pay a lot of money for what I see as junk. It’s all about perspective. They’re starting to understand value. What they see as valuable is different than what I see as valuable. We do try to guide their purchases while also respecting their choices. Sometimes it’s tough!
They learn that they’re exchanging their time and effort for this toy. Many adults don’t make this connection. Every purchase decision is an exchange of your time that it took to earn the money. Is that purchase worth that amount of your time?
Our Favorite Resources for Teaching Money Management to Kids
Much of what we teach our kids about money are just lessons that I remember learning as a kid. As we’ve learned more about finances as adults, we’ve come across a few resources that help bring these ideas to life for our kids. It’s also reassuring that these resources follow much of the same teachings that I remember as a kid.
We started down our financial journey as adults when I stumbled across Dave Ramsey’s podcast. Following his plan led us to be able to become a single income family. Naturally, we paid attention to what he has to say about teaching personal finance to kids. We love his Financial Peace Jr. program and his Junior’s Adventure Books. Also, check out the book Smart Money Smart Kids which he co-wrote with his daughter Rachel Cruz.
We’re also big fans of the Tuttle Twins books. This gets more into economic topics that even adults have a hard time grasping. These children’s books break down complex topics with stories that kids can understand and enjoy.
Learning that money comes from work is one of the most important finance lessons a kid needs to take into adulthood. Without the experience of managing their own money as kids, they’ll have more trouble managing it as adults. Earning money through chores and small entrepreneurial jobs helps kids draw the connections between work and money. Walk them through this process now to help them avoid bigger mistakes down the road. The next post in this series will look at what to do once your kids start earning their own money. How do we help them manage it?
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