Our son is turning four at the end of June, and my spouse and I decided that four was when we would start introducing an allowance to him. And just in time, since he’s just started to understand the concept of money and that it can buy things. We’ve been discussing how we want to introduce the concept of saving, both short term and long term, as well as giving, and we have finally come up with a plan. This is our first child, and we’re new to the whole allowance thing, so we may find it doesn’t work at all, but we’ve at least decided what we want to try.
We are starting with the four “classic” categories we’ve seen a dozen other places – spend, save, invest, and give. But we’ve renamed them to four year old terms (or at least, our four year old) – Now, Later, Grown-Up, and Others. Now is for immediate spending money, while Later is for things he wants to save for long term (he can’t just spend it randomly, he has to have a plan for using it). Grown-Up is the invest one, which will be for when he’s grown up (ie retired, but we’ll cross that bridge later), and Others is for giving to others who need it. We are going to use 4 plastic peanut butter containers, one for each category, as long as they clean out well in the dishwasher (I might have to find other containers, but they will be clear plastic ones with lids if I do).
We’re only giving him $1 a week. In quarters. Some might think that’s not enough – and it may not be (we may raise it sooner rather than later) but we’re pairing it with a “matching” program to encourage using more categories than just “Now”. So he is able to collect more than $1 a week from us, depending on how he chooses to distribute his money. When he puts money in the Now container, he doesn’t get matching money from us. But when he chooses to put money in Later or Others, he will get one extra quarter from us put into that jar for every quarter he puts into it. And when he puts quarters in the Grown-Up jar, we will put two quarters in for every quarter he puts into it. That jar will also be taken to the bank, by him (with us of course), every so often to deposit in his very own savings account. How often, I’m not sure. We’ll figure it out as we go along. I am also not sure how often we’ll have him decide what to do with the Others jar. I am hoping he will see his own opportunities but we will also start encouraging him to think about charitable gifts with exposing him to our choices and other situations where he can help others.
So that’s the allowance plan, for our four year old at least. Four jars, four categories, four quarters a week (with the opportunity to double or triple that money depending on the choices he makes with how to use the quarters). I have no idea how it will go, but we’ll be rolling it out at the end of June and I’m sure I’ll be updating as time passes. I am hopeful that it will be effective, but time will tell.