So in an article from May 2005, I described how I allocate my 3 daughters their weekly allowances.
The simple explanation is that I took advantage of the free transfers between accounts that I had signing authority to transfer the money directly to their accounts. At the time, this was new and exciting. This can be done now using Interac transfers, so your kids don’t even need to be at the same bank.
What I have learned now from running this experiment for over an extended period:
- I don’t forget to give them their allowances, which was the major problem I had.
- The girls learn how direct withdrawal works
- Some fiscal concepts like saving become obvious, which is good. I can also transfer baby sitting payments to my oldest, easily as well.
- They are using their money to buy things like gifts for friends and their own clothes, which was not the plan, but I applaud every time they do it.
- Kids don’t see the money, so forget that they have it.
- They have not picked up the “checking your monthly balance statements” the way I hoped, they rely on me telling them how much money they have.
- Money seems to be invisible to at least one of the children.
- The cafeteria at the high school takes direct withdrawal, so they use their allowances to buy lunch a little too often (IMHO).
All in all, I think the experiment is working. I need to sit down with the girls and discuss a few of the finer points I’d like to see, but I think it is working.
I am now searching for any other interesting experiments like this to teach my kids more about money. No, I am not giving them access to their RESPs. That is not going to happen until they need it!
I have restarted this with my son. I am not sure how it will work with him, but the methodology is still sound. He still is working on what money really means, but he is slowly learning.
C8j said: Disadvantages
1. Kids don’t see the money, so forget that they have it.
I’m not entirely sure that this is a disadvantage. If you consider the “pay yourself first” idea posed by many financial gurus, it is similar. IF you remove some percentage of your paycheque to ‘hidden’ savings, then you are doing something similar.
I do agree that they should be looking at their accoount balance on a regular basis, though.