Thank you for stopping by and for the kind words on the site. I’ll be sure to check out your new site in more detail.

Regarding your comments on the allowance, you basically describe the allowance system that we are currently using although we based the amount on age as opposed to how much we spend on them. But since we try to follow a “living below our means” lifestyle, we really don’t spend much on them other than daily staples and gifts.

We have been using a 60/30/10 (spending/saving/charity) split for the allowance and it has been working well. As you mention, we have seen our kids learning that their spending decisions do come with consequences and they have started to put much more thought into how they manage their money.

Thanks again for sharing your thoughts, in reading your site it certainly sounds like you have a good track record and a wealth of experience to share!

An annual allowance might be a good idea for a late teen but we’d recommend against it for younger kids. In our two books on children and mone (Silver Spoon Kids: McGraw-Hill, 2001, and The Financially Intelligent Parent: Penguin, 2005), my wife and I view an allowance as a way to help our kids learn reflective thinking. That’s being able to think in terms of choices, alternatives and consequences. Keep track of what you spend on your kids for two weeks and then give them an allowance that shifts part of that spending to them. For example, if you are spending $5 a week on ipod downloads, start them off with a $6 a week allowance. Explain that 50 cents gets set aside for saving and 50 cents gets set aside for charity. The remaining $5 is for them to spend any way they want, but you won’t be paying for downloads anymore. So now your child gets to learn to think in terms of choices — buy downloads or buy something else or save — and consequences — if I buy something else, I can’t get all my downloads.

We think it makes a lot of sense to increase the number of things you shift to your kids and the duration of the allowance as they older, but an annual allowance needs to be built on a foundation of reflective thinking that starts when they are young.

Incidently, we have a free pdf “allowance tracker” on our website that can be downloaded and used to keep track of what you are spending on your kids.

Jon & Eileen Gallo

Impulse buying (or the lack thereof) can be a huge factor in your success with managing money.

Impulse buying is hurtful! hehe

With this approach, it gives them the opportunity to manage a larger sum of money and work on budgeting skills to make that money last for the entire year.

I think it is an interesting idea as well and something we may implement for our children. Like you, my money didn’t come from an allowance but by getting my butt out and cutting grass in the neighborhood or other odd jobs.

If that is so, then it is an interesting idea. I don’t think I actually ever received an allowance from my parents. Though I did make some money by helping with yard work. Eventually when I was in grade 10 I did get my first job and saved like crazy.