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The Simple Dollar

Can children learn money management? Yes!

Guest blogger Trent Hamm gave his children an allowance each week, broken up into quarters. What did they do with their quarters?

By Guest blogger / January 21, 2011

Guest blogger Trent Hamm took this picture of his son and his son's piggy bank, a specially designed savings bank with quadrants to 'spend' whenever he wants, 'save' towards a big purchase, 'donate' to a cause of his choosing, and 'invest' that will ultimately go into a savings account in a bank.

Trent Hamm / The Simple Dollar

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For us, 2010 was a year of learning for both the parents and the children in our household about what allowance means, how it works, and what kinds of money lessons our children are learning.

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Let’s roll back the clock to November 2009, when our children each received piggy banks and the allowance adventure got underway:

Our son received a Money Savvy Pig for his birthday, which has four slots to designate savings of various kinds. The bank featured a “spend” slot (you can spend that on whatever you want), a “save” slot (you’re saving up for a larger item), a “donate” slote (you’re donating that money to a charity), and an “invest” slot (you’re going to invest that in the future).

In order to minimize sibling rivalry, we gave his younger sister a single-slot piggy bank.

We decided to try a weekly allowance for each child, giving them each two quarters for each year of age they were. For the older son, we made a requirement that at least one quarter of his allowance had to go into each slot. The allowance was not tied directly to chores, but we occasionally gave them both opportunities to earn a few extra quarters through helping with chores that were above and beyond the usual household expectations for them.

What did we learn after a year of this? Did our children learn anything about money?

The younger one is a saver! Each week, our daughter would put her quarters into her bank and then put it back in the cabinet. We allowed her to decide when and how to spend the money inside, but almost without fail, she never wanted to spend it on anything. She likes that her bank is getting heavy. She has only used her allowance twice, both times on individual large toys, and neither time did it empty her bank. She doesn’t have any specific savings goals for the future at this point and seems to mostly enjoy having lots of quarters in her heavy bank, even though she understands she can use them for things that she wants.

The older one often lost focus on savings goals. Our son has no problem with the actual saving process. His problem is that he gets heavily into saving for specific goals, but by the time his savings starts to approach a goal, his interests have changed and he ends up having a new target for his savings. Thus, when he actually reaches a goal, it’s usually for an item that he’s just recently decided on.

He typically does not use his “spend” slot for small things, as he prefers to be patient and use it as part of his “savings” slot. He has expressed a desire to give the money in his “donate” slot to Jump for Joel, but that hasn’t occurred yet. The “invest” slot is going to eventually turn into a savings account at our local bank, perhaps around his sixth birthday.