My friend Albert — age four — loves electricity. Ever since he was young (ha!) he's been fascinated by the stuff. His parents have carefully nurtured his hobby. Now that Albert's older, they've decided this might be a good way to teach him about money. In this guest post from my friend Lisa, she describes how they're helping Albert take the financial plunge.
My son Albert loves his collection of colored light bulbs with all of his electrical little heart. One of his favorite pastimes is adjusting the lighting in his room by switching bulbs. Recently he broke the green bulb, ignoring me as I reminded him that light bulbs are fragile. He was distraught, but I wasn't all that inclined to rush out and buy a replacement because he had been a bit of a turkey.
It was blindingly obvious that it was time to implement an allowance for discretionary spending. Starting with an old Get Rich Slowly entry, I surfed around until I found a strategy that works for us. It goes something like this…
Albert gets an allowance once a week, on Sunday morning. He has four glass jars in his room: Spend, Save, When I'm Old (eventually will become Investing), and Donate.
We're still trying to find the right amount to give him, but it's in a form that's easily divisible by four. (Right now we're giving him $2.00 in quarters, but it's not adding up that quickly given today's prices. We'll probably switch to four $1 bills so that the accumulation in his spending jar is more meaningful for a little guy whose concept of time is rather vague.)
Regardless of the amount of money given, people generally seem to agree that clear containers are important for visual feedback when saving, so that's why we used glass, taking the ideas for our labels from the Money Savvy Pig.
Albert's allowance is not tied to chores. This avoids the expectation that household work should be compensated. His allowance is a salary that doesn't depend on performance. (And chores are a topic we'll address sometime in the future.)
Are you wondering what Albert's first independent purchase was? You guessed it: a light bulb, though he went for a rainbow-colored one instead of plain ol' green.
The light bulb store near us is full of funky bulbs and all the supplies for making fixtures. (In fact, Sunlan Lighting is just plain fabulous, with a brusque proprietress, shelves stacked high with unusual bulbs, and rumors of unknown depths of electrical goodness in the basement.) Albert will have no problem spending his allowance there in the future.