A preschooler’s allowance

As I mentioned yesterday, we’ve started giving our three-year-old daughter an allowance in exchange for simple household chores.

Photo by Michele Catalano

I know that $2.45 weekly isn’t going to buy much more than M&Ms or a bouncy ball. But that’s not the point. The point is, we want our kids to start learning how to manage money early.

I’m a Dave Ramsey-ite, but this idea is not trademarked by him. The basic concept of giving, saving, and spending has been around for generations, and we want to keep it that way in our family. The sooner our children understand that our money is given to us by God, and that out of thankfulness, we give some of it back, the easier it will become a lifelong habit.

Saving money likewise requires discipline, and to practice the art of paying yourself first, even from the 17 nickels like we did last week, will reap benefits that far outweigh whatever could be bought with 1.7 coins.

So when we give our daughter her allowance (or commission, or whatever you want to call it), we count the stickers on her chore chart, and then count out the same amount of nickels. We then tell her how much goes into the giving jar, and how much goes into the saving jar. The rest goes into the spending jar.

Her spending money can go towards whatever she wants. That means that yes, if she’s in the grocery cart and she wants those gummy bears, she can buy them if she has enough money. But it comes out of her spending jar. (A side note: Of course we take care of her needs, and yes, we buy her gifts from time to time. Not a lot, but we aren’t expecting our three-year-old to fend for herself financially. That would be nice, though, wouldn’t it?)

We haven’t used this system long enough to really see the longer-term benefits, but friends of ours who use this method have nothing but good things to say.

There’s a guy in his mid-30s from our church back in the States who bought his family’s Suburban with 100% cash from his childhood allowance. We don’t really have those kind of expectations for her giving and spending goals, but again, the account balance is not the point. The point is cultivating a habit in preschool that’s hard for grown adults to do. Hopefully, her heart will follow.

Isn’t that a great gift to give your kids? It really is all about changing your family tree, one small thing at a time.

How do you work out money with your kids?

Tsh Oxenreider

Tsh is the founder of this blog and just finished traveling around the world with her husband and 3 kids. Her latest book is Notes From a Blue Bike, and believes a passport is one of the world's greatest textbooks.

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  1. I love reading posts on how different people handle the allowance/commission topic. As a child (and as a teenager), my mom did everything for me and my brothers. My bed was always made before I even got out of the shower. I can only remember one time in my life when we were offered chore money. But we had no incentive to do anything because my mom always did it and the money incentive didn’t last very long. I definitely want to have a different situation with my girls. I am going to save your chart and definitely use it in about 1 1/2 years when my girls are 3!
    Oh BTW, what program do you use to make all your charts? I am trying to make a weekly docket instead of a daily docket (I need to see the week all at once and want to plan menus in advance and it can be all in one place) but I have no clue where to start. Thanks!

  2. We use a chore chart system identical yours for our kids’ pocket money. We haven’t implemented the 80/10/10 split though, but I think we will. It seems like a good next step. Only my eldest (6) has grapsed the concept of saving at this stage – he saved $50 for a toy he wanted. The younger girls tend to spend their pocket money each week.

    Journeyers last blog post..Getting things done – Book review

  3. I love what you’re doing. We’re not quite ready for it yet (our son is almost 2), but I can’t wait to teach him about money.

  4. @Lynn – I use Adobe InDesign and Photoshop. I’m also a part-time freelance graphic designer, so I already have those programs on my MacBook.

    @Journeyer – That’s great about your son! $50 is quite a bit at his age.

    @bee – Thanks! Hope it may work well for you one day.

  5. Thanks! I have photoshop but I have yet to figure out how to use it! LOL! Now might be a great time! 🙂

  6. @Lynn – It’s a wonderful program; I feel like I use it everyday. That’s probably because I do. 😉

  7. I really like your system. I wish my parents had given me this kind of tool regarding money when I was little. Thankfully my husbands parents did a far better job with him and we tend to balance one another out quite well.

    Jens last blog post..He’s Crawling!!

  8. LOVE THIS. Thanks for sharing your thoughts on this. I wish my parents had taught me about managing money, especially starting in childhood. We plan on doing this as well!

    Megan@SortaCrunchys last blog post..Warm Biscuit Bedding Winner!

  9. @Jen, Megan – Yeah, I wish I learned it earlier, too. But it really is great passing it on to our kids.

  10. I really enjoyed your thoughts on this. I started my blog about a month ago, and recently posted about this same idea, and how it works for us. I’m so glad to see someone else cheering on others who are teaching children these values at a young age!

    Allisons last blog post..Casualties already

  11. Great idea – I’m still trying to learn how to manage money!

    Alanas last blog post..Updates: Kale & Open House

  12. We started giving our 3-year old daughter allowance a couple weeks ago and we use a check system on the bulletin board (2 or 3 chores) the Moon Jar that my husband got for her so she can save, spend or share it. She doesn’t really get this part but I think she is starting to get the spending it part if there’s something she wants we will take money out of her jar to let her use it for that item (usually $3 or under!). The main thing I make her do is clean up her toys from the living room and so if she says she doesn’t want too I tell her “then no allowance for tonight, no check.” She always chips in and does it.

    Amys last blog post..Nothing much

  13. Oh how did you know I needed to read this today? I needed this advice!

    Vanessa’s last blog post…Wednesday: Mid Week Ramblings—Ideas for School Lunches

  14. I love the idea of three jars. My daughters (5 and 3) just started saving their coins and dollars in piggy banks. It’s funny how they value the coins more than the dollars – but that’s a lesson for another day. My oldest daughter just had her first spending day at the toy store. It went better than I could have imagined. She had $15 to spend and she kept looking until she found something in that range. Then she asked me if she had enough left over if she could also buy something for her sister. I was so proud.

    Jill’s last blog post…Late Summer Blooms

  15. I love the idea of jars, and our daughter (5) is really getting it. She’s been taking her “Jesus Money” to church each weekend for about 1.5 years now. However, my husband and I have yet to figure something out. I was raised to do things around the house (chores) because you’re part of the family and that’s what you do- no reward. It’s expected. I did not get an allowance growing up, but my parents did not just throw money at me either for any wish I had. It worked out really well, and I never felt like either side was taken advantage of. My husband grew up on the other side. He had a $70/2 week allowance for everything when he hit Jr High. Shoes, haircuts, clothes, etc. He had chores as well and was “paid” his allowance for doing them. We are both disciplined with money, and have a healthy respect for the good and bad it can do. Yet, we grew up worlds apart on how it was handled. Any thoughts?

    Erin’s last blog post…Share your grocery budget??

    • I instituted an allowance system with my children when my daughter was 5. Every store we went to, she would ask me to get her something…explaining to me that it was “only” $2 or “only” $3. As soon as I started allowance (which for us was $1 for every year old you were with a slight bonus for jr. high and a bit larger one for high school when expenses are higher) and they would have to spend their own money… I was amazed to find that it suddenly wasn’t “only” $2.. it was TWO WHOLE DOLLARS!!!! Too funny! I do think kids benefit from learning money management, saving and giving techniques. I was often told I started allowance at too young of an age but I disagreed then and still do.

  16. I’m reading your backlog of blogs, and I think this is a great idea, especially the saving part. From personal experience, I’m a firm believer that the little things can add up to something huge. I’ve always been a saver, and just put my allowance, birthday money, babysitting payments, etc. in my bank savings account. My freshman year in college, I took an economics course and learned that my savings could be much better served in a mutual fund, rather than the bank. So, I went to my dad and told him I wanted his help opening a mutual fund. He kind of laughed and said, OK how much do you want to put in it. My response was $5000, and that was even keeping a couple thousand in the bank, just in case. That mutual fund is now worth over $15,000. So don’t think for a second that teaching your kids to save, even the $2.75 they get for their allowance, isn’t worthwhile and can’t add up to something big with some patience.

  17. This is all good but I don’t know how we would go about doing it with 3 kids all a little over a year and a half apart – the oldest turns 4 in a month – when the middle child doesn’t “get it” but knows he wants EVERYTHING his brother gets. I think we may start this when the baby is old enough to understand so we only have to introduce it once instead of three times. The different levels of comprehension drives me nuts some days.

    Jennifer´s last blog post…Who What When (Where) Why and How of our cloth diapering

  18. This is something my parents did with me as a child, well not so much the giving and savings, but an allowance and allowing me to make my own decisions with it. As a small child it was normal for me to have more money than either parent 🙂 I was always a big saver and penny pincher! This is something I will definitely be doing with my children. As a Dave Ramsey Fan I agree its okay to let our kids “settle” with “Kinda Had a Party Barbie” if they can’t afford celebration Barbie or wait until they can afford it. If we don’t teach them that they’ll always go for the instant gratification method in life.

  19. I love this idea, but do you have any suggestions for what to do when the 2 year old wants what his big brother gets? I can’t figure how how to handle that problem!
    .-= Emily´s last blog ..Art lesson =-.

  20. Hi Tsh – We have been doing the 3-jar system for awhile but found that a 2-jar system is how it is turning out simply because our son’s “spending” jar has become the same as his “saving” jar – he saves it all towards whatever he has determined he would like. We have a little chart that accompanies his spending/saving jar so that he can watch how he is getting closer to his goal. This system has been so helpful as we have been out and about – there are so many random things out there that appeal to children, but when we say, “Yes, you have the money to buy that, and that would be fine. But are you sure you want that more than (for example) the Lego star wars set?” the answer is consistently “No, I want the Lego star wars set,” and the item at hand loses its immediate appeal. That power of choice has been so great for our kids and they value so much more the toys that they have saved up for and bought themselves!

  21. We started both of our children on an allowance around age 3. The first amount was 30 cents: 10 cents for charity (church collection plate usually), 10 cents for savings, and 10 cents for spending. Second amount was 75 cents. Same principle with quarters. We had a rule that after 10 weeks, they could spend their savings if they wanted. We kept it in a cleaned out peanut butter jar so that they could see the coins accumulating! As soon as they figured out that they could have double the money & buy something decent, most of the time they elected to put their spending money in the savings jar as well. Once in there, it could not be removed until the 10 weeks were finished. Now they had enough money for a toy, a book, or a puzzle.
    The biggest show of success of this method was our daughter. When the American Girls dolls first came out, her grandmother bought her Samantha. When they came out with Addie, she desperately wanted her. We thought that was too much money to spend on a second doll, but we told her that if she could save 1/2, we would match it. This was about $100 ($50 for her half). For approximately a year she saved EVERY bit of money she got (allowance, birthday money, etc) (all placed inside the new “Addie” jar) and finally had saved enough to purchase Addie and her books. She was so proud that she bought the doll herself. It was an incredible life lesson of the benefit of savings.

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