If Allowances Are A Tool To Teach About Money, How Grandparents’ “Bank” Is Perfect

Average Weekly AllowanceThe Harris Poll recently did a survey for the American Institute of Certified Public Accountants about parents’ allowances for children, reported in the New York Times, October 5, 2019. The article title explains the results and concerns as a result: “Children’s Allowances Have Grown.  Why Not Savings? Parents Hand Out $30 a Week on Average, A Poll Shows, But Little of It is Being Socked Away for Larger Goals,” by Ann Carrns.

That children save little of their allowances is not the surprise for this Grandma, who knows that  adults’ savings are the lowest in history from previous reporting.  We are dealing with children here.  Not only do they model adult behavior, but their parents’ behavior in this day and age is not model behavior with regard to savings.

What is a surprise is the current average amount of allowance per week.  No, this Grandma will not get into the “old times” when we were children.  Yes, there is inflation, but, the current average of $30 a week is up from $17 in 2016.  Consider that the minimum hourly wage in Florida is $8.46 and it is going up in New York city to $15 an hour. According to the study, if the allowance is based on completion of chores (which the Institute does not recommend), the average hourly rate is about $6 an hour for children.  I wonder if the $30 average reflects how much difference it costs to live in Florida versus New York City, for example.

According to the study, the majority, three quarters, of adults said the main reason for an allowance for their children was to teach the value of money and fiscal responsibility. At $30 a week, children could potentially save $1,500 a year.  A member of the Institute’s Financial Literacy Committee said parents should take advantage of teaching children the difference between “wants” and “needs,” short term and long term goals, and teach savings.

So, why is this Grandma so interested in a study of how parents address allowances with their children?  Inadvertently, this Grandma and PopPop fell into a pattern of teaching grandchildren about those values and money.

At some point in time, our oldest grandchildren went from asking for video games as birthday and holiday gifts, which the Institute classifies as pricey short term goals, to really wanting even more pricey items such as Apple watches, which were more money than we individually gifted to them for those celebrations.  That is when PopPop thought of the “Mema and PopPop Bank.”  We explained that if the grandchild “banked” the individual gifts, it would, more quickly than they could imagine, equal enough for the huge expenditure they wanted.

All of a sudden, a new world opened for them and a fun world opened for us.  They tended to forget about how much they had in our bank, and when we reminded them, the joyful look on their faces was better than one birthday or holiday gift.  More often than not, they planned the savings for a longer term goal and combined cash gifts from others.  No, not for college.  We are indulgent grandparents and our long term planning with them goes more to electronics and experiences. Yes, we must admit that we “loan” against future monetary gifts, to gratify their desires, and keep that perk in our pockets.  So far, our loans are interest free, but the article gave me a thought about that. I probably will not act upon the suggestion to charge interest.  Let the parents do the heavy lifting, as always.  The article mentioned a great idea from a member of the Institute that his father stressed financial lessons from an early age by writing a check to match the cash his children saved over the previous year.  No wonder this member is a C.P.A. in adulthood.

Our younger grandchildren still get money for their college accounts from us, and smaller direct gifts for celebrations.  They, however, are on their way too, remembering that they receive ‘visit’ presents, now coveting cash rather than things, and even asking more often for “advances.”  I guess you might say they too are into experiences, as we all are, instead of things, but their experiences go to building more buildings on Mindcraft or a new skin on Fortnite. (If Mindcraft and Fortnite are not yet part of your grandchildren’s vocabulary, wait a few years as these or the next new trending activity will take over).

So, creating a personal grandparent “bank” helped us teach just what the American Institute of Public Accountants is recommending.  We grandparents love the joy we give our grandchildren, and teaching moments are icing on the cake of life.  The joy we grandparents receive from our grandchildren is beyond comprehension. . . but it is this beyond comprehension part that makes grand parenting the best part of life.

Joy,

Mema

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