Dear Dave,
My wife and I are trying hard to get out of debt and get our finances under control. We have always given our children allowances in the past, but we were thinking of stopping their allowances until we pay off our debt and are in a better financial position. What do you think of this idea?
Cody
Dear Cody,
I'm glad you're both making smart changes in your lives, but I wouldn't stop what you've been doing where your children are concerned. It can be a series of great teachable moments for them. However, I would stop calling it a grant. In my mind, there is a victim mentality attached to the word “grant,” and that's not something you want in their minds.
Children should learn at an early age that money is linked to work. Even a preschooler is old enough to start doing some age-appropriate chores around the house. So, let's start calling it a “commission” instead of a grant. Why? Because in cases like this it should not be considered as “allowing” them something. It should be viewed—by you and them—as a rewarding achievement.
My wife and I do this with our children as they grow up. Each of them had a list of tasks that they were expected to do each day. If they did their work, they got paid at the end of the week. If they didn't get it, they didn't get the money.
Some people may look at this approach and call it “tough love.” But in reality it is not. It's just love. It's something you do when you try to educate your children, and guide them to become independent, responsible adults.
— Dave
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Dear Dave,
I was wondering if you recommend including future purchases, especially large purchases, in your monthly budget. If so, how far in advance should you do this?
Andy
Hi Andie,
If you wait until things go wrong or something goes wrong, you will find yourself in trouble and a victim of your poor planning. That's why I started putting money aside in my budget as soon as I saw signs that there would be a need for anything.
Let's say you're certain you'll need a new car in a few years. Go ahead and start putting money aside now. Decide on a reasonable, affordable ballpark price, then do the math to see how much you'll need to save each month to make it happen. And if you can make it happen sooner than two years? Good!
And remember, this kind of stuff is a lot easier when you don't have things like car loans and credit card payments hanging around your neck!
— Dave
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