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Saving with Albert: Teaching a Four-Year-Old the Value of Money
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Saving with Albert: Teaching a Four-Year-Old the Value of Money

Saving with Albert: Teaching a Four-Year-Old the Value of Money
Saturday, 24th May 2008 (by J.D.)
This article is about Basics, Kids, Real-Life

My friend Albert - age four - loves electricity. Ever since he was young (ha!) he's been fascinated by the stuff. His parents have carefully nurtured his hobby. Now that Albert's older, they've decided this might be a good way to teach him about money. In this guest post from my friend Lisa, she describes how they're helping Albert take the financial plunge.

My son Albert loves his collection of colored light bulbs with all of his electrical little heart. One of his favorite pastimes is adjusting the lighting in his room by switching bulbs. Recently he broke the green bulb, ignoring me as I reminded him that light bulbs are fragile. He was distraught, but I wasn't all that inclined to rush out and buy a replacement because he had been a bit of a turkey.

It was blindingly obvious that it was time to implement an allowance for discretionary spending. Starting with an old Get Rich Slowly entry, I surfed around until I found a strategy that works for us. It goes something like this...

Albert gets an allowance once a week, on Sunday morning. He has four glass jars in his room: Spend, Save, When I'm Old (eventually will become Investing), and Donate.

We're still trying to find the right amount to give him, but it's in a form that's easily divisible by four. (Right now we're giving him $2.00 in quarters, but it's not adding up that quickly given today's prices. We'll probably switch to four $1 bills so that the accumulation in his spending jar is more meaningful for a little guy whose concept of time is rather vague.)

Regardless of the amount of money given, people generally seem to agree that clear containers are important for visual feedback when saving, so that's why we used glass, taking the ideas for our labels from the Money Savvy Pig.

Albert's allowance is not tied to chores. This avoids the expectation that household work should be compensated. His allowance is a salary that doesn't depend on performance. (And chores are a topic we'll address sometime in the future.)

Are you wondering what Albert's first independent purchase was? You guessed it: a light bulb, though he went for a rainbow-colored one instead of plain ol' green.

The light bulb store near us is full of funky bulbs and all the supplies for making fixtures. (In fact, Sunlan Lighting is just plain fabulous, with a brusque proprietress, shelves stacked high with unusual bulbs, and rumors of unknown depths of electrical goodness in the basement.) Albert will have no problem spending his allowance there in the future.

This is Lisa's third article at Get Rich Slowly. Previously she offered career advice for new college graduates and explained how to find great deals on eBay.

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31 Responses to "Saving with Albert: Teaching a Four-Year-Old the Value of Money"
etw Says:
May 24th, 2008 at 5:15 am
What a great idea!!

Even though my daughter is only 8 months old I've already been trying to think of ways to introduce her to money, how its used, and how to respect it. I like how you use the clear glass jars and I agree it would help him visualize how his money is growing. My mother would just occasionally show me my savings passbook when I was little and that did NOTHING to motivate me to save. I think your plan is wonderful and let us know what amount you finally decide on. Thats something Ive been debating as well.

Shirley Says:
May 24th, 2008 at 5:35 am
This post is a nice, cheerful one to start the day! Love all the pics. Hopefully, we'll get an update a bit down the road to find out how Albert is doing with his allowance and how the system has evolved.

Sean Says:
May 24th, 2008 at 5:45 am
His allowance is not tied to performance of chores? You say that like it is a good thing. I'm not sure I agree. I don't get paid just because I'm me - I have to accomplish things in order to keep getting paid. It seems risky to teach a kid that money just comes from above and doesn't have any particular reasoning behind it's arrival. *shrug* But then I'm not a parent yet - my wife is only 3 months pregnant.

Joel Falconer Says:
May 24th, 2008 at 5:55 am
Sean - certainly understand your point of view, but disconnecting allowance from household chores, I think, is a good thing. My son's not quite old enough to have an allowance, but when he does, he'll have to achieve something for it.

I'm not sure what that will be, but it won't be the kind of housework that he'll be expected to do on his own when he has his own place.

The reason I don't believe associating an allowance with chores - specifically, anything involving household hygiene and cleanliness, or personal hygiene - is that I've seen kids raised like this take a pretty mortifying attitude to housework and hygiene into adulthood, again and again. Too much to be a coincidence. From what I've read, experts and other parents have come to similar conclusions.

Pay ‘em to do the dishes and they'll stop doing them when nobody's paying them

Cairsten Says:
May 24th, 2008 at 6:18 am
I'll agree with Joel and Lisa here - when you teach a child that he should be compensated just for contributing to the daily chores, the minute the money stops, the work stops too, and you'll never again be able to disassociate "you must pay me" from "I must do chores" in his head.

Worse, the kid becomes an employee, you become an employer, and the money and the chores become things to *negotiate* about (or bribe each other with) instead of contributions that you make to each other just because they're important in and of themselves. If you must tie the allowance to family contributions, make it *extra* contributions above and beyond the regular everyday chores.

On the other hand, there's really nothing wrong with teaching him "I'm giving you money because when you're a grown-up you'll need to know what to do with it."

fivecentnickel.com Says:
May 24th, 2008 at 6:31 am
Sean: To each their own. I see this counter-argument all the time, but it almost always comes from non-parents who (no offense intended here) have no experience, and don't actually know what they're talking about. As you yourself pointed out, you're not a parent yet. We have four boys ranging in age from 3-10 and use a very similar strategy.

"I don't get paid just because I'm me - I have to accomplish things in order to keep getting paid."

That's at work. At home, you do things that need to be done because they need to be done. In our house, the kids do their chores because they're a part of the family, *not* because they're getting paid.

Honestly, I think that your thinking on this is completely backwards. Do you really want to teach kids that the reason they should help around the house is because they're getting paid?

We pay extra for things that go above and beyond the call of duty. Like when our 10 year old spent the better part of a day helping me improve the vapor barrier under our house. He got extra paid for that. But picking up his room, busing his dishes, etc? No way.

As Cairsten said, an allowance is a teaching tool for us. A side benefit is that the kids no longer whine for things in the store. Instead, they figure out how much things cost, how much they have, and how long it will take them to save up for it (if necessary).

whitney Says:
May 24th, 2008 at 6:32 am
My parents always expected me to do normal chores without getting paid, it was just part of life; but, if I wanted any sort of allowance, I had to earn it by doing *extra* chores (beyond normal household stuff)-things like washing the car or deep-cleaning all the bathrooms. I always thought it made sense. You don't get paid for normal household jobs, but you do have to earn your spending money.

curt Says:
May 24th, 2008 at 6:34 am
Excellent article. It gives me hope that I'm doing something right. I grew up in a spendthrift household and am trying to teach my four year old the lessons I was never taught. We too have four glass jars. On the inside of his "short term" jar he draws a picture of the next monster he wants for his collection. (We live in Japan and the boy is nuts for Ultraman).

As Cairsten pointed out I was worried about conditioning our son to only respond to pay. He has seperate "chores" which are non-negotiable and extra "jobs" that he gets paid for.

Again, good article.

Starving Artist Says:
May 24th, 2008 at 6:36 am
Wow! Reading these responses, I'm just amazed. You guys get up before 6:00 on a weekend????

A sidenote-my niece gets so many presents for her birthday, I stopped buying toys and now get her savings bonds. She probably doesn't understand them, but then, she didn't understand which toy I'd given her in the huge pile of gifts she receives. By the time she's in college, my hope is she'll have enough cash built up for a plane ticket abroad.

fivecentnickel.com Says:
May 24th, 2008 at 6:39 am
Starving Artist: We don't all live on the West Coast, but the GRS clock is set to Pacific time.

Roshan Says:
May 24th, 2008 at 6:58 am
It is said that "the morning shows the day".well ! i like the idea of Albert's parents. the habit of saving and investing right from the childhood will lead him to become financially strong in the future.

Don Says:
May 24th, 2008 at 7:07 am
I highly recommend "The First National Bank of Dad." I just read it, and he has thought pretty carefully about this.

Short, short summary: Offer to "bank" their savings for them and pay them 5% per month; even a kid weak in math will see the benefit of saving.

He also agrees that you don't pay kids for chores. If you want kids to learn money sense, then that means 1) letting them buy crap and learn the hard way, and 2) letting them go cheap if they want. If you pay a kid to empty the dishwasher, then it would be reasonable for a kid to say, "Nope. That's not worth it. No thanks, I can live without the money."

Particularly if you aren't paying market rates (i.e. what it would cost to have someone come in and do chores), you risk having your employee quit.

Starving Artist Says:
May 24th, 2008 at 7:08 am
Nickel: thanks-I don't feel bad for getting up at 8!

layoffsean Says:
May 24th, 2008 at 7:09 am
Lay off Joel people. I agree that opinions can change when you have children but NEVER tell people they don't know what they're talking about (no offense doesn't cut it here sorry.) Maybe as a "non-parent" he grew up taking care of his 3 younger siblings when mom and dad died in a car accident. That comment just came off as very condescending. People have different experiences, let them and DON'T JUDGE! Alright, that being said, I'm done with capslock and I agree to separate chores from allowance is a good idea.

Liz Says:
May 24th, 2008 at 7:10 am
My kids do chores because we all function as a family and everyone has a place and job to make the family go. I give a base amount according to age. Then above for other help around house. The kids put half of it in the bank. They have to fill out the deposit slips and take them to the bank. Then the other half they donate and have spending money, which they can save for something or spend as they like. They figured out on their own what they wanted and how to save for larger purcheses.

Frugal Dad Says:
May 24th, 2008 at 7:11 am
I love the four-jar idea! We do pay our kids commissions for select chores (others are just part of being a member of the household) and they divide the earnings up into three or four similar categories. When my daughter saved up $50 we opened an ING sub-account and deposited her money. She loves watching the compound interest grow each day!

By the way, Albert seems like a pretty cool kid to be so interested in the sciences at such a young age. I sense a future electrical engineer or scientist in his future!

Bree Says:
May 24th, 2008 at 7:31 am
Albert, you are a supremely cool kid.

L Says:
May 24th, 2008 at 8:38 am
I'm with Frugal Dad, Albert seems very cool!
I also have to agree with the not tying chores to allowance group, I don't have children but growing up, chores were something that everyone did to contribute to the household. I never got cash for good grades either.

Alison Wiley Says:
May 24th, 2008 at 8:41 am
Great concept, great post. I'd even take it a step further and teach Albert that LED lights use a fraction of the electricity that normal bulbs do, and hence reduce electricity bills considerably. So do compact fluorescents (CFL's). Our home's energy bills are less than half the national average. More at Diamond-Cut Life http://www.diamondcutlife.org/high-energy-prices-good/

TosaJen Says:
May 24th, 2008 at 10:30 am
I have to agree with the majority here, that kids shouldn't get paid to do their share of household maintenance.

We don't connect chores with allowance. Chores are part of keeping the household running smoothly and safely. Work that we'd pay another person to do (deep cleaning, self-directed lawn work and snow removal, painting, etc.) will be paid for, but our kids (4 and 6) are too young for that, now.

Allowance is the amount of money the child gets to spend or save on his own volition (with some guidance). We like allowances, because it allows us to push the "I wannas" back on the kids, as in "Sorry, but you already spent all your money on the toy at the other store. Maybe next week." and "That item is 5 week's worth of allowance."

We have rental properties, so there will always be chances for the kids to make more money when they need to.
Albert's doing a lot better than my kids: DS (6) is getting $2/week now, and DD (4) only gets $1/week.

Sandeep Goswami Says:
May 24th, 2008 at 12:10 pm
Albert is in really good hands!

Charlotte Says:
May 24th, 2008 at 12:26 pm
J.D.- Posts with pictures really tell the story. I hope you will use more pictures in the future when appropriate to the topic. Good Post, Lisa! Yes, the selection at Sunlan Lighting will make your head spin...

Funny about Money Says:
May 24th, 2008 at 12:49 pm
What a great idea!

LOL! When d'you suppose a four-year-old thinks "when I'm old" happens? Maybe when he's six?

Actually, y'know what? Some people ARE paid for who (or what) they are, not for what they do. I was introduced to this concept by internationally prominent author Alberto Rios, who remarked that the university where he was serving as director of a creative writing program did not pay him for his teaching or his creative products, but for who he was. On reflection, I realized he probably was right: He achieved prominence because he is the kind of person that he is. Look around and you'll see this is true of many people who have achieved seniority or eminence in their professions.

Now how much seniority a four-year-old can claim remains to be seen!

IMHO those who question connecting the routine activities of daily life with a paycheck have a good point. There's no reason you can't give the kid an occasional freelance fee for service above and beyond the call of duty, but to pay him to take out the trash or make his bed suggests that normal, responsible behavior gets done because someone pays for it.

We never paid our son for routine chores; as an adult he's very responsible about money and never has been otherwise. How the kids see the parents behaving is probably more important than anything.

Automatic Personal Finance Says:
May 24th, 2008 at 3:15 pm
When I was younger my parents never paid me for working around the house. They expected it!

They did get me nice things once in a while, they never associated the items with the work though. I think this was best since I would help with work yet didn't expect anything for repayment.


Kara Says:
May 24th, 2008 at 6:09 pm
Albert seems like a really neat kid! It's nice to see a child so interested in science at such a young age! It'd be interesting to find out if he ultimately peruses a career in science, engineering, or another related career.

I like his parents' idea on teaching him how to save, it's setting a foundation for a lifetime of sound financial management.

Nottheangel Says:
May 24th, 2008 at 8:24 pm
We were expected to do regular chores (and growing up on a farm, there were a ton of ‘regular chores') without it being tied to an allowance. In fact, we pretty much didn't get allowances until highschool in my family. In 1996 I started getting 20 dollars a month that wasn't tied to any chores. I sometimes wish my parents had started earlier and had developed a system like the one here, it would have taught me more about money at an earlier age. However, having only 20 bucks to spend a month all through highschool taught me budgeting right quick.

Once I started driving my dad made the offer of two hours of yard work a week and he'd buy me a tank of gas (which was 96 cents a gallon then... so about 10 bucks to fill my car). This worked pretty well. I still had to do my regular chores for no monies.

And frankly, I keep a cleaner house now that I live on my own than any of my friends, and all of them either didn't have to do regular chores growing up or got paid for those chores.

Callum Ginty Says:
May 24th, 2008 at 8:57 pm
Its great to see you fostering your child so well! Its also smart of you to not buy him another light bulb immediately. If you had of done this he might start to learn that breaking stuff is ok

Charles Says:
May 25th, 2008 at 6:59 am
I do agree that linking chores and money is a bad idea. When growing up, many of my friends had this done, and have now an interesting way of dealing with money/work relationship. I recieved an income about half that of my friends, and the rest could be made up by being paid relatively large amounts of money for menial tasks (polishing my dads shoes, cutting relatives grass etc).

Lisa Says:
May 25th, 2008 at 10:05 am
These are useful comments. We're still feeling our way along with the allowance plan for Albert, and the idea of using supplemental work around the house as a way to earn extra money is a great one. I like it in part because it teaches the idea that some types of work does earn money. It rewards motivation.

For now, by the way, we've settled on giving Albert $4/week. I think it's rather high, especially since I received 20 cents a week at his age. But given that he receives only 1/4 of that (he still hasn't figured out the Saving jar), it only seems fair to make sure that the spending money is meaningful. We're really just bankrolling the forced savings, which for him at this age seems the appropriate thing to do. Later when he understands more, we may give him more choice about how the money is divided and pay interest on the savings so that he can better see how saving works.

Thanks also for all the kind things people said about Albert. He certainly is a great and unique kid, and you can rest assured that we spent a lot of time thinking about how we can best nurture his tendency toward electrical engineering while helping him grow into a balanced person. In the meantime, he spends a lot of time taking apart broken electronics like DVD players-and buying absurd things like light bulbs.

Walter Says:
May 25th, 2008 at 4:47 pm
I am not a parent, so don't lump all non-parents together ala #6. I am not sure if #3 was given allowances or not, and perhaps that has been partly responsible for his opinion. Or perhaps he just reached his conclusions on his own. As a non-parent, I can only use anecdotal experience based upon my own up-bringing, and the fact that getting an allowance definitely aided in my learning the use and value of money. When the allowance was gone, that was it until the next allowance. I had to make it last. If I ran out, and went asking for more, the first question my folks would ask me was: "Didn't we give you an allowance this week?" followed by "well, what did you do with it?" Which would finally culminate in "next time don't waste it." As a side note, I was instructed to put half in the bank when I first got it, and could do with the rest as I pleased. (Watching my savings in the early to mid 70s grow at 6% interest hooked me on saving...until the interest dropped to sub 1% somewhere along the way) If I wasted it, that was on me and I had to bear the consequences (i.e., not getting something I thought I wanted when I wanted it!)

In short, don't think that all non-parents don't know the score. Sometimes, understanding what your folks did well in bringing you up is the only blueprint you need going forward with the next generation.

Peggy M Says:
May 26th, 2008 at 2:35 pm
I'm a mom to 3 kids and a co-founder of a preschool magazine, The Tessy and Tab Reading Club. Last year we created a couple of issues covering the topic of money and the response from our readers was so great that we decided to put together a full blown Money Manager Toolkit for preschoolers. We use big bright pictures to help parents discuss the concepts of everything from what parent's are responsible for buying (basics) to what kids need to purchase for themselves (extras). You can also find tools to help you figure out an appropriate allowance amount. Even if you don't buy the kit, you can download and print these easy to follow guidelines and charts at http://www.tessyandtab.com/money.

Like Albert, my kids have quickly caught on to the concepts and love having their own spending money. The hardest part for me personally is letting them spend their money without my intervention. But I do believe it's the best way for them to learn the true value of money and it's great to be able to say while shopping with child, "if you want it you can buy it with your own money" (or at least pay me back when we get home!).

Ref : http://www.getrichslowly.org/blog/2008/05/24/saving-with-albert-teaching-a-four-year-old-the-value-of-money/





Categories : Finance    Themes : Childrens
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