Should You Pay Your Kids Cash for Chores? Here's What the Experts Say.
IT'S COMMON PRACTICE TO EXPECT KIDS to perform household chores to earn their allowance. But what if your kids balk at making their beds and taking out the trash?
"A more effective approach might be to tell them they're getting an allowance just for being part of the family—and that chores are a family responsibility," suggests Stacy Allred, managing director, Merrill Lynch Wealth Management Center for Family Wealth Dynamics and Governance™, one of the panelists in our recent "Your Children and Money" webcast.
"In adulthood, household chores are simply matters of life," adds panelist Michael Liersch, head of behavioral finance and goals-based consulting, Merrill Lynch Wealth Management. "By tying the allowance directly to a set of chores, you risk creating the misperception that everyday responsibilities should be rewarded."
What many parents miss, note the panelists, is the opportunity to use the allowance as a teachable moment—an opportunity to pass along some valuable financial lessons.
"Probably the most important thing that you're going to transfer to your children isn't money—it's knowledge and information and experience around budgeting, saving, smart spending and investing, and really just what your values and attitudes about money are," says Dr. Meg Jay, psychologist and author of the best-selling "The Defining Decade: Why Your Twenties Matter—and How to Make the Most of Them Now."
To send the right message, Allred recommends asking your children to break down their allowance into three categories: save, spend and share. This approach opens the door to discussions around your family's values, such as the purpose of money and how best to use it. As children get older, says Allred, you can add investing to the list.
Encouraging your kids to set aside a certain amount each month toward future purchases—say a bike or a video game—also leads to more thoughtful spending. "Delayed gratification is something that we imagine people are born with," says Jay. "But it's something that we're all practicing all the time."
WATCH A REPLAY of this webcast to hear more practical suggestions for raising financially savvy kids. For additional information, check out Merrill Lynch's "Financial Education Handbook: Practical Ideas to Engage the Rising Generation."