Author Topic: Opposite of Spoiled - Implementation of Allowance and Interest  (Read 797 times)

Learner

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From one of the mustachian FB groups I recently saw a recommendation for "The Opposite of Spoiled".  I got an e-book version from the library and overall it was a pretty good read.  We've decided to go with the general allowance system he recommends, summarized as:
 - Allowance not tied to chores
 - $0.50 - $1 per year of age
 - Allowance distribution across 3 categories (Spend, Save, Donate).
 - Mostly equal distribution required.  For the older kids, I require them to put at least $0.50 in each jar.  That leaves them with $1.00 to allocate as they choose.
 - Storage in clear containers so they can see the contents (we are using mason jars, since we had some on hand anyway - they decorated with some strips of paper with their name and the purpose of the jar)
 - Routine distribution (we've chosen every Saturday morning, since it lines up well with the farmer's market)

Spend is "free money", so they can start choosing routine wants/needs, for example they often want us to stop to get timbits.  We have not decided exactly what they are expected to fund themselves yet.  For now it's just little treats or toys.  The caveat is that stuff they bring into the house is either quickly used up (food) or it replaces something of theirs already, to balance space (toys).

Donate will be applied only when the jar is full.  We'll look at a range of local / global charities.  Our goal will be to balance between helping local community vs most efficient use of donation money.

Save is longer-term, but with young kids he notes going for a much shorter time horizon than "college".  They have RESPs anyway, funded via the Canada Child Benefit (yes, the government can pay for [a bunch of] their education).  Some other sections of the book looked at cases where they had scaled interest (e.g. 50% while under $10, 25% while under $X, etc).  I liked this idea, since it highlights early the idea that interest can eclipse the contribution to accounts.

They haven't chosen what their target is yet - I was thinking something to the effect of 6-12 months, which is what got me started looking at projections to see how much they might have.  I quickly saw the challenge in high-rate weekly interest - that 50% weekly rate had an APR of about 2600% if I did my math right.

We're using a quarter-based system (for distribution for now anyway).  Looking at scaling of 50% under $10, 10% under 50, and 5% over $50, monthly interest paid in Dec is already $75.  If I use a bi-weekly interest distribution, the scaling would be 50% under $10, 25% under $40, 10% under $100, 5% under $200, and 2.5% over $200.  5% bi-weekly is still an APR of about 130%, but I'm comfortable with that. For comparison, the interest paid in Dec would be just under $20, which better fits the goal I think.

We have 3 children, ages 5, 5 and 2.  Even the youngest is getting the same system, although his math skills aren't quite caught up yet (counting to 10 or 20 is about his limit at the moment).  Interest rates will drop considerably once they're a bit older and the initial effect is achieved.

Anyone have suggestions or warnings?  First crack at doing allowance - don't want to accidentally cause problems.

PharmaStache

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #1 on: March 05, 2017, 12:48:48 PM »
We're just starting this too.  I was also wondering what exactly "save" meant…it seems weird to tell a 4 year old to start saving for something 10-15 years down the road!  He doesn't seem to want to buy little treat, just saving up for a $130 lego spiderman set right now.

GizmoTX

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #2 on: March 05, 2017, 01:17:45 PM »
In our family, 'save' meant a goal that cost more than what the weekly (later monthly) allowance would cover. DS learned that anything he spent meant he had to wait longer to reach his goal. I agree that it is weird to tell a young one to save for something years away -- it's as if the money isn't theirs at all. Our initial objective was to teach the value of money, how to make wise choices, & allow mistakes.

We stressed community service hours more than donating money. DS did this mostly in Cub/Boy Scouts & school projects, which included serving food at a homeless shelter, canned food collection, walking dogs at a pet shelter, assembling personal toiletry kits, & helping at a local arboretum.

Learner

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #3 on: March 07, 2017, 06:17:23 PM »
We stressed community service hours more than donating money. DS did this mostly in Cub/Boy Scouts & school projects, which included serving food at a homeless shelter, canned food collection, walking dogs at a pet shelter, assembling personal toiletry kits, & helping at a local arboretum.

I like that idea (I often have trouble finding time myself).  Where they all through school/scouts, or did you actively find organizations to help volunteer at?  I'm wondering around what age they would be a help to the volunteer effort vice a hinderance.

What kind of criteria was used to select the cause (e.g. soup kitchen vs arboretum)?

plherrin

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #4 on: March 07, 2017, 08:13:59 PM »
We just started this and "save" is a category where the child must wait at least 1 month to withdraw the money. It's not tied necessarily to a saving goal, but rather a period of waiting between desire to withdraw and the actual withdrawal.

GizmoTX

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #5 on: March 07, 2017, 09:49:02 PM »
We stressed community service hours more than donating money. DS did this mostly in Cub/Boy Scouts & school projects, which included serving food at a homeless shelter, canned food collection, walking dogs at a pet shelter, assembling personal toiletry kits, & helping at a local arboretum.

I like that idea (I often have trouble finding time myself).  Where they all through school/scouts, or did you actively find organizations to help volunteer at?  I'm wondering around what age they would be a help to the volunteer effort vice a hinderance.

What kind of criteria was used to select the cause (e.g. soup kitchen vs arboretum)?

Most were through school/scouts, which meant they were also geared to an appropriate age for the tasks.
The homeless shelter task involved the Boy Scouts picking up sandwiches, fruit, & milk prepared by church volunteers, & serving them to the homeless who were staying at the shelter that night. DS did this monthly for a number of years; a number of the homeless at the shelter were regulars, which was eye-opening. He also worked on friends' Eagle service projects as well as his own, which was to construct an outdoor 'classroom' next to a creek by his middle school. DS volunteered at the arboretum weekly when he was a senior in high school; he did docent duties & helped with the plantings. He & I volunteered at a local thrift charity sorting clothing donations. The food bank is an option but here they are swamped with helpers.

dreaming

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Re: Opposite of Spoiled - Implementation of Allowance and Interest
« Reply #6 on: March 08, 2017, 10:35:13 AM »
Thank you for writing about this book.  I have put it on hold at my library.  I have been trying to come up with an allowance idea for my kids and I hope this book will have good ideas about it.  I also want to incorporate the share bucket as I feel they need to learn to be a little more generous.   My kids are 11 and 9 and have no problem saving for the far off future.  They already have a CD at a credit union where their grandmother lives and when she comes to town, they give her the money they have collected for that account.  The funny thing about it -  one time when my son was 4, he handed her the money and she said "Thank you".  He replied "no, thank the piggy for your money."  She laughed and told him that the money was still his, she was just putting it in the bank for him.  All along he thought he was giving his money to her for her to use.