This is a guest post by David Palay.
The recent economic downturn taught us all a few lessons. It changed our perception of what a safe level of savings means. It hit my family pretty hard because my father is a business owner. Fortunately we escaped with only emotional wounds. But it got me thinking.
How could we use our Jewish perspective to teach young adults the benefits of fiscal responsibility?
I believe that we can impart the tenants of strategic thinking, positive attitude, and community involvement by incorporating Jewish principles into an alternative allowance system.
My parents gave a nominal weekly allowance that was not tied to task performance. Each week I got a few dollars regardless of the quality of my housework. I was traditionally punished for laziness by getting yelled at or losing privileges. Now, I am not implying that you should never yell at your kids. I am simply saying that ignoring the power of allowance is a missed parenting opportunity.
I am in favor of giving task performance allowance to children. I am also single and have no kids. I believe that my business experience will help me with this aspect of parenting. Hear me out.
We can all agree that money management skills are important. I believe that the foundation must be set as early as possible in order to get young adults to respect the medium. Children should save up for their own toys and have no limits on how they spend. This technique naturally introduces an incentive to look for deals and think strategically about long-term large purchases.
Here is how it works:
Say there are three tasks such as washing the dishes, cleaning the house, and mowing the lawn. Assume a weekly base allowance of $2 for doing nothing. Each completed task is worth $2 a week. We can then add a $2 bonus if every task is accomplished and behavior is positive. So in theory the maximum is $10 a week if the child does all the chores properly with a good attitude ($2 base + $6 tasks + $2 bonus).
Now we can talk about interest. The child has a $40 maximum monthly allowance. We can give an additional bonus to reward long-term saving. Maybe 10% of whatever is left of the $40 for that month (10%*$40 = $4). At month end allowance becomes savings and receives standard annual bank interest.
Allowance can be used to encourage tzedakah. Tzedakah can be an educational activity used to give children community perspective. Teach them about some of your favorite charities. Bring your children to local events. Give the child a list of three charities and require a minimum $5 monthly donation from allowance. The child picks the charity. The parent should also donate.
This allowance system can work as long as parents clearly set task expectations and let the children finance toy purchases. It only works if parents can resist buying toys for begging children. There must be consequences for poor money management. I realize that too much focus on money and toys could be dangerous. We are not trying to teach kids to be materialistic. As with anything parents need to understand the best way to communicate these valuable lessons to their unique children.
There are so many opportunities for powerful learning. Parents can use allowance as a way to reconnect with the community by making service a family event. Of course this system teaches lessons about money. This concept also encourages hard work and more importantly prepares kids to be deliberate and thoughtful young adults. So it isn’t really about money at all. It is about empowerment, perspective, and Judaism.
I’m just one guy with an idea. What would you do differently? Already tackled allowance in your family? Tell us about what worked for you!
David Palay is pursuing an MBA from the Carlson School of Management and has worked in operations strategy and marketing. He will be an intern for Medtronic in Strategic Sourcing this summer. He is distracted by writing and recording music with his band, Savin Hill. David is interested to see how his business experience translates to parenting and hopes that children learn quickly. He encourages readers to think critically and is open to alternative views. So share them on the site! He can also be reached at [email protected].
(Image: bradipo)
Let me share this with you David, the forty dollars a month you speak of is not only ridiculous, but totally unrealistic. While your intentions are well meant, it is obvious you have no children. Good luck entrusting your kid with forty dollars per month, in the real world, this will never happen. Get real!!!!!!!
One problem, David, with your proposal is the child with few material wants. This is the child who decides on a weekly basis whether they “feel” like mowing the lawn, or doing dishes, and instead says “Nope. I don’t need the money, so I won’t do the chores.” I don’t believe an employment model works for a family. The child needs to do the dishes as a respectful member of the family, not because they are getting paid to do it.
Thanks for the discussion! The $40 a month is just a framework. I don’t pretend to know how much parents give kids these days. And yes if your children are not motivated by money or toys the system breaks down. It’s just a starting point. I think parents need to understand their children before trying something like this. But I’m going to do it this way when I have kids.
A modest proposal.
@Rachel: The rules would obviously need to be tweaked based on your child’s personality. Say your child is unmaterialistic, how do you build that expectation of responsibility without either a carrot or a sitck? I’m not challenging you, but just curious actually.
David, I enjoyed your article very much. I used to cut off TCJewfolks Emily Cornell’s allowance on a regular basis to try to get her “on the program.” The tactic failed miserably because every time I did it she just went out and started a business of her own. Who would have thought that, as a 6 year old, she could make more money than she got for her allowance by selling, door to door, bracelets that she made? Even though my allowance program failed miserably, I think she turned out pretty well. Maybe its not the program but the fact that we care enough to really think about such things.
Ooof. Now that my mom (@Amy) has weighed in, I clearly have no excuse to not jump in.
I’ve been thinking about your plan since we discussed it last shabbat (yes Dear Jewfolk, our group of some with and some without kids young Jews was discussing allowance over dinner). I like the idea of the performance based allowance but, like my mom pointed out, don’t think it will work if my kids cause me as much trouble as I caused my mom. I also really like the idea of interest accrual for savings (really, really like and fully intend on tucking away for that time that I’ll need it in the future).
The conclusion I’ve come to? I’ll probably have to try a few things to see what works to teach my future children both fiscal and familial responsibility.
And I think Mom says it best: ‘it’s not the program but the fact that we care enough to really think about such things.’
Thanks for an engaging debate. Looking forward to more with you!
David, I think you’ve got some excellent ideas in there. I like the hybrid of a “base allowance” plus a “performance based” component along with incentives for saving. Since we have 5 kids, we didn’t like the idea of having to track all the completed chores, so we went with performance penalties instead – i.e., subtract from the weekly allowance for chores not (or under) completed. The hope is that the cases of NOT doing chores are the exception, not the rule and we reduce our bookkeeping. (Not necessarily the case during the trying teen years!) Here’s what it looks like in the system my wife and I use:
http://www.flickr.com/photos/famzoo/5553655209/
Bill, holy cow! That is some system! Yeah I can see how as the number of kids and tasks increases, the time spent managing the books also increases! Looks like your family has it figured out. To be clear though I understand that your system or my system would not work for every family. The system has to match the culture.
David,
Agreed completely. That’s why we built a site at FamZoo that lets families set things up pretty much any way they like. The system has to match not only the culture, but the individual family’s values and financial situation. Even kids within a family are different – mine sure are. We have thousands of families all with their own customized “Virtual Family Bank” tweaked to meet their needs.
Cheers,
Bill