Should You Give Your Kids an Allowance?

It’s time to talk about the age old question for parents: should you give your kids an allowance?

I am participating in a “kids allowance debate,” and I’ll be arguing that you should give your kids an allowance.  The matching article that argues that you should NOT give your kids and allowance can be found here: 5 Reasons You Should Not Give Your Kids an Allowance.

I think allowances can be a great way to teach your children about personal finance if done PROPERLY.  Check out these five ways an allowance can help your kid:

1) Teach Kids The Value of Money

We have all heard the cliche “money doesn’t grow on trees.”  It is true!  Money does not just come out of thin air (unless you’re the Federal Reserve).  We all need to work in some form, shape, or fashion to receive money.  Helping kids to understand this early in life will help them to understand the concept of “hard earned money.”

2) Helping Children Understand the Benefits of Delayed Gratification

Many, many adults struggle with the “I want in now” feeling.  They go out and spend money they don’t have for things they don’t really need.  If a little bit of delayed gratification discipline were utilized, most folks would not be drowning in debt.  This is where an allowance can come in.  You kid wants that brand new sparkling scooter with a chrome handle bar?  No problem, wait a couple of weeks until you have enough money to pay for it!

3) Kids Need to Learn Simple Accounting

It sounds a bit obvious, but some kids really need practice with simple accounting such as how much they have in the wallet, and how much they are making every week.  This will help them to form the foundation of budgetary thinking when determining how long it will take them to save for their next desire.  If the parent just throws money random the child’s way, they are less likely to pick up this important skill.

4) Educate Kids on the Time Value of Money

No one said allowances have to be boring or set in stone, did they?  We make our kids allowance fun by actually adjusting the amount they get paid based on how much they have saved.  We pay them a 1% interest on their allowance they have “saved in the bank” to encourage them to save.  This helps them to understand the time value of money and good saving and investing habits.

5) Use an Allowance to Drive the Right Behaviors

No one said an allowance has to be used just to compensate kids for performing chores the last time I checked.  We use our kid’s allowance to drive the right behaviors we would like to see as parents.  Reading a book or doing something creative for an hour?  That’s one dollar!  Watching screen time, that’s minus a dollar.  Nagging your sibling or having the wrong attitude, that’s also one dollar!

We use the allowance to giveth and taketh away   This helps us to teach our children the responsible way to act and helps them to build other habits and hobbies that are positive.

Summary on Child Allowances

As you can see, there is a right way and a wrong way to do the “child allowance” thing.  If you are just straight out handing you kid money each week, you are not really using the allowance to its full ability.  If you can put in the extra work to use the weekly/monthly allowance as a tool to teach your child personal finance topics, then you can really make the allowance count.  Taking these extra steps will really ensure your child has a good footing in personal finance habits when they leave the nest.

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Yard Sale Deals for August

Yard Sales are an awesome way to get nice stuff at great prices.  Our family has incorporated Saturday yard sales into our normal weekly routine to help save money.  If you’re patient, you can find just about anything you’re looking for if you go to enough of them.

In August, we saved over $300 buying some cool stuff!  Check it out…

Top Yard Sale Deals for August 2013

OK, I know we found a ton of great stuff in August, but I did a horrible job keeping track of all of it.  There are two especially good deals that stick out in my mind that I’ll highlight here for your yard sale viewing pleasure.

Yard Sale Subwoofers

If you’ve been following along with some of my previous yard sale posts here or here, you’d know that I’ve been looking for a good subwoofer for the stereo that I’ve hooked up to my computer.  For June and July I hadn’t had much luck at all finding one for sale.

Well, it looks like my luck has turned.  I found this kick-ass 12″ Subwoofer for sale at a yard sale where the guy was selling a ton of his old stereo equipment.

The guy also had a smaller one that he thought didn’t work.  As I asked him more about it, he said he’d just give it to me for free.  It turns out it doesn’t actually work, so I’m glad I didn’t shell out anything for it.  I may open it up just to tinker with it down the road…

Then, I moved onto the main attraction.  I asked him how much he wanted for the 12″ big bertha.  He said he wanted $20 for it.  Hmm….  I’d been looking for a subwoofer for weeks – should I risk trying to bargain him lower?  What the hell I thought to myself, I might as well.  I asked if he’d take $10 for it.  We finally agreed on the price of $12 for it and I hauled it away to the van (I think the thing probably weighs 40 or 50 Lbs!).

It is a 600W Klipsch subwoofer that isn’t produced any more.  About the closet thing I could find to it was the Klipsch RW-12II for $499 new.  There is a little damage to one of the feet that you can see in the picture, but that end is pointed away from me, so I don’t even see it.  All together I saved about 98% on this deal!  Very awesome!

Books, Books, and More Books

Our son is now in the first grade and is going through simple chapter books like crazy (he reads for 20-30 minutes every night).  Well, we found a brown paper bag filled with a complete set of Star Wars young reader type books and a couple other miscellaneous kids chapter books.  He got about 23 books total for $2.  The books all normally retail for $4.99.  So, he saved ~$112 or 98% off.

We’re going to have to stop buying books for a while until he can catch up.  Between the new Star Wars Books, Mystery Treehouse, and Wishbone books he has about 60 chapter books to read through.  If you have young readers, please don’t pay full price for books.  You can save hundreds for yourself by picking up good conditioned books at yard sales.

Final Thoughts

As you can see, we found some pretty good stuff in August.  All-in-all we saved ourselves more than $300 and found some great items.

If you don’t have yard sales (garage sales) as part of your Saturday morning plans, what are you waiting for???

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Quit World of Warcraft Today – Why spend the money where there are so many free alternatives?

So, I finally took the plunge and canceled my subscription to World of Warcraft.  I feel great to be rid of this game once and for all!

Off an on I’ve probably played World of Warcraft for ~7 years (canceled three or four times along the way).

When I went to calculate out how much I’d spent on the game over the years I was pretty shocked.  If you’re still paying for a subscription based game monthly – please read this article and consider quitting!!

  Money Saving Breakdown – I Quit World of Warcraft

• Difficulty (Super Easy/Easy/Medium/Hard/Expert): Medium
• Average Savings per Year ($/year): 360
• Time Required (mins): 10
  
• Savings for your time ($/hr): 2,160

It Wasn’t Easy To Quit

I’ve always been a computer nerd at heart.  I got World of Warcraft in the first week that it came out and I’ve been playing it off and on for the past roughly 7 years.  I got my wife into it for a while during the Burning Crusade expansion and we both had level 70 characters.  It was much fun – but also very expensive.

More recently, my son and I began to play using the free trial.  We converted over to paying customers after we hit level 20.  He loved the game, and we had fun with it.  We have two accounts and would frequently play together for hours at a time.  With school starting for my son and I (MBA classes) and my new energy to save money everywhere I can, it just made sense to cancel our accounts.

How Much Have I Spent on World of Warcraft?

Well, if I assume that I’ve played the game for ~7 years, the monthly subscriptions for have added up to $1,260.  Now, assume that 3 of those 7 years were other folks playing with me (wife and son) and that’s another $540.  Now, assume about $220 in the actual game software.  The grade total comes up to be more than $2,000!

I don’t even want to try to calculate how much time I’ve spent playing this game because it would probably put me into a depressive state.  I probably could have gotten at least two PhDs with the time spent, but I digress…

What Are the Alternatives?

I’m trying to be more productive with my time and encourage my kids to do the same.  In the time that we do decide to relax and veg out, I’m planning for us to enjoy free to play games and abandonware.  I have a ton of childhood games (especially adventure games) that I’d like to replay and introduce my son to.  These include:

• Tribes Ascend – We both love to play this F2P game.
• Day of the Tentacle – One of my top-5 all time favorite games.
• Full Throttle – I enjoyed this game quite a bit when I was younger.
• Any Other Lucas Arts Adventure Game – come to think of it, I never met a LucasArts adventure game that I didn’t love.  Why not replay them all?!?
• MAME arcade games – Ninja Turtles, Simpsons, Metal Slug, etc.
• Legend of Zelda: A Link to the Past – Also in the top-5 all time favorite games.
• Quest for Glory Series – Sierra made some of the best adventure games, I’d love to replay all of these (Space Quest, Kings Quest, Police Quest, etc.)

Why Pay When There is So Much Free Content?

As you can see, there are literally hundreds of great old games to keep our family entertained.  When I reflected on saving money and entertainment value / $, it really didn’t make sense to continue to pay $360 a year for World of Warcraft.  When I stopped to think about it, there are enough free-to-play and abandonware games out there to keep me busy for probably the rest of my life.

What about you?  Do you have an entertainment vice that you struggle to do without?

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Why is it a good idea to teach your kids how to make money?

Teaching your kids how to make money is an important part of parenting that should not be overlooked.  As we raise our children, we teach them how to take care of their own hygiene, how to perform their chores, and how to treat others kindly, so why also give them the skills they need to start or run their own business.  This certainly isn’t covered in very much detail through the public education system.

We wanted to give our kids their first lesson in making money  (besides the tooth fairy and chores) and running their own small business.  So, we thought a lemonade stand would be a good idea…

Benefits of Teaching Your Kids How to Make Money

There are several benefits that result from teaching your kids how to make money.  Here are a couple that I can think of right off the top of my head:

1. Learn to brainstorm what works – most kids learn by doing.  By experimenting with ideas and figuring out what works and what doesn’t, they can begin to learn important marketing and business lessons from a very young age.
2. Value of hard work – it was an all day process for the lemonade stand that we helped the kids setup and run.  I know that being out in the hot sun from 8:30am – 5pm to earn a buck will give both of them more value for how hard money can be to come by.
3. Place higher value on saving vs. spending – because it wasn’t easy to earn the money, kids are more likely to save the money versus spending it on the first thing that fits their fancy.
4. Setting and achieving goals – teaching the kids how to run their own lemonade stand helps them understand the importance of setting a achieving goals.  Our son set his goal to earn enough money to buy a Skylanders game for the Wii.  He hit the goal with flying colors, but because is was tough to get there, I think he has changed his mind and decided to save the money versus spend it.
5. Teach them to be better communicators – our son is very shy by nature.  By the end of the day, he was walking right up to people asking them if they’d like to buy lemonade.  This was a big improvement and something I hope to cultivate further.

Results of the Lemonade Stand

The kids worked hard to make the lemonade stand signs, help bake the muffins and cupcakes, set everything up, and run the stand for 8+ hours.  At the end of the day the stand made a total of $88.  Not too shabby – this was way higher than what I would have predicted.  The stand was setup outside their Grandma’s thrift store, so they did have pretty good exposure.

The total expenses for the lemonade and the cupcakes was ~$25.  I wanted to have our son pay this back to teach him about revenue, expenses, and profit, but my wife decided to let him keep the $25 for his first time.  We agreed that future expenses for the next time will have to be self funded or will have to be paid back to the parents (probably without interest for starters).

Picture of the Lemonade and Treat Stand

Final Thoughts

If you haven’t taken the chance to teach your kids how to make money and start a new business, please consider taking the time to do this.  What they learn from going through the exercise can lead to valuable life lessons that will help them in many aspects of their life!

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