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From Allowance to Retirement

July 23, 2009
Money in the bank!

Money in the bank!

Ok, maybe that’s a stretch. But it’s something I want to explore. Do you remember receiving an allowance as a child?

I don’t, because I didn’t receive one. I had everything I needed, and some of the things that I wanted, but I remember having to go to my parents each time I needed or wanted something extra.

So when my six-year old recently started talking about an allowance, I wasn’t quite prepared. She feels strongly that she should be earning money for completing all of her chores. My take on this? I don’t believe that kids should get paid for doing stuff that they’re supposed to do. Make up their beds. Pick up their toys. Study hard and get good grades. All of those things, plus some, are part of their responsibilities as members of our family/household.

But an article in Business week struck a nerve with me (hat tip to @Jessica_Lee for sharing the link on Twitter). The article talks about why minorities aren’t saving more for retirement.

From the article:

New research out from the Ariel Education Initiative, Hewitt Associates and several other partners shows that African-American employees who earn $120,000 or more have saved $154,902 in their 401(k)s on average, versus $223,408 for their white counterparts—a $68,000 deficit that worries retirement experts…”

Surprised? I’m not. Not from the numbers or the cultural reasons mentioned. The reasons seem so old-school to me, but I have heard some of these reasons from folks my age. These folks carry around a lot of guilt for ‘making it’. When you’re the first to go to college in your family, or the first to get a ‘good’ job, the expectations are high. Not only are you expected to succeed in your chosen field but you’re also expected to reach back, pull other folks up and to help out financially. But more times than not, in the course of growing up, these same folks probably did not have any money management training, or conversations related to retirement. So trying to do all of the above, AND save for retirement, seems like an impossible task. And many people just don’t do it.

So while I don’t believe in allowance for chores, on the other side of the coin, I want my children to learn how to manage money. To think about how much something costs and how to make appropriate spending choices based on the things they’d like to have. And I want them to learn the importance of saving. And while I admire that McDonald’s is working to close the savings gap in their 401(k) plan, I believe that the savings mentality starts at home and early in one’s childhood.

So, we’re not going to pay for chores, but I think we will start a weekly allowance for the kids and we will focus on money management and savings skills. (Got some good tips here and here)

I’d like to hear from you…..

Did you receive an allowance when you were young?
If so, was it for chores or good grades, or just because?
What did you learn from having an allowance?

Do you think you’re a better money manager now because you had an allowance?

 

image courtesy woodsy
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2 Comments leave one →
  1. July 23, 2009 3:59 pm

    crystal, this is so hard. there isn’t a parent i know who hasn’t grappled with this question. whether or not to give allowance. for what. how much. ugh.

    we decided to give an allowance for a variety of chores. they really are those things that you just think your kids should do as part of the household, but the way we reasoned it, they have no other way to earn money right now. and we also want them to learn how to save…and how to give. our kids must split their allowance three ways: a portion goes to spending, a portion to saving, and the final portion to giving. i don’t remember if i got allowance, but i’m pretty darn sure that i never really learned how to think about saving and giving, despite my mother being extremely dedicated to each with her own money. that’s part of the challenge — how do we ensure our lessons actually get embedded. i’ll let you answer that one for me!

    f

    • Crystal Peterson permalink
      July 24, 2009 12:43 pm

      Fran – I love how you’re making giving a piece of it as well. I think that’s very important. We plan to have discussions on a regular basis about money and a lot more frequently once they start earning thier own. Hopefully, that will help keep them on the right path when we’re not around to guide them (like those college years). Plant the seed… 🙂

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