Saving with Albert: Teaching a Four-Year-Old the Value of Money

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.

This is Lisa's third article at Get Rich Slowly. Previously she offered career advice for new college graduates and explained how to find great deals on eBay.

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etw
etw

What a great idea!! Even though my daughter is only 8 months old I’ve already been trying to think of ways to introduce her to money, how its used, and how to respect it. I like how you use the clear glass jars and I agree it would help him visualize how his money is growing. My mother would just occasionally show me my savings passbook when I was little and that did NOTHING to motivate me to save. I think your plan is wonderful and let us know what amount you finally decide on. Thats something Ive been debating… Read more »

Shirley
Shirley

This post is a nice, cheerful one to start the day! Love all the pics. Hopefully, we’ll get an update a bit down the road to find out how Albert is doing with his allowance and how the system has evolved. 🙂

Sean
Sean

His allowance is not tied to performance of chores? You say that like it is a good thing. I’m not sure I agree. I don’t get paid just because I’m me – I have to accomplish things in order to keep getting paid. It seems risky to teach a kid that money just comes from above and doesn’t have any particular reasoning behind it’s arrival. *shrug* But then I’m not a parent yet – my wife is only 3 months pregnant. 🙂

Joel Falconer
Joel Falconer

Sean – certainly understand your point of view, but disconnecting allowance from household chores, I think, is a good thing. My son’s not quite old enough to have an allowance, but when he does, he’ll have to achieve something for it. I’m not sure what that will be, but it won’t be the kind of housework that he’ll be expected to do on his own when he has his own place. The reason I don’t believe associating an allowance with chores – specifically, anything involving household hygiene and cleanliness, or personal hygiene – is that I’ve seen kids raised like… Read more »

Cairsten
Cairsten

I’ll agree with Joel and Lisa here — when you teach a child that he should be compensated just for contributing to the daily chores, the minute the money stops, the work stops too, and you’ll never again be able to disassociate “you must pay me” from “I must do chores” in his head. Worse, the kid becomes an employee, you become an employer, and the money and the chores become things to *negotiate* about (or bribe each other with) instead of contributions that you make to each other just because they’re important in and of themselves. If you must… Read more »

fivecentnickel.com
fivecentnickel.com

Sean: To each their own. I see this counter-argument all the time, but it almost always comes from non-parents who (no offense intended here) have no experience, and don’t actually know what they’re talking about. As you yourself pointed out, you’re not a parent yet. We have four boys ranging in age from 3-10 and use a very similar strategy. — “I don’t get paid just because I’m me – I have to accomplish things in order to keep getting paid.” — That’s at work. At home, you do things that need to be done because they need to be… Read more »

whitney
whitney

My parents always expected me to do normal chores without getting paid, it was just part of life; but, if I wanted any sort of allowance, I had to earn it by doing *extra* chores (beyond normal household stuff)–things like washing the car or deep-cleaning all the bathrooms. I always thought it made sense. You don’t get paid for normal household jobs, but you do have to earn your spending money.

curt
curt

Excellent article. It gives me hope that I’m doing something right. I grew up in a spendthrift household and am trying to teach my four year old the lessons I was never taught. We too have four glass jars. On the inside of his “short term” jar he draws a picture of the next monster he wants for his collection. (We live in Japan and the boy is nuts for Ultraman). As Cairsten pointed out I was worried about conditioning our son to only respond to pay. He has seperate “chores” which are non-negotiable and extra “jobs” that he gets… Read more »

Starving Artist
Starving Artist

Wow! Reading these responses, I’m just amazed. You guys get up before 6:00 on a weekend???? 😉

A sidenote–my niece gets so many presents for her birthday, I stopped buying toys and now get her savings bonds. She probably doesn’t understand them, but then, she didn’t understand which toy I’d given her in the huge pile of gifts she receives. By the time she’s in college, my hope is she’ll have enough cash built up for a plane ticket abroad.

fivecentnickel.com
fivecentnickel.com

Starving Artist: We don’t all live on the West Coast, but the GRS clock is set to Pacific time.

Roshan
Roshan

It is said that “the morning shows the day”.well ! i like the idea of Albert’s parents. the habit of saving and investing right from the childhood will lead him to become financially strong in the future.

Don
Don

I highly recommend “The First National Bank of Dad.” I just read it, and he has thought pretty carefully about this. Short, short summary: Offer to “bank” their savings for them and pay them 5% per month; even a kid weak in math will see the benefit of saving. He also agrees that you don’t pay kids for chores. If you want kids to learn money sense, then that means 1) letting them buy crap and learn the hard way, and 2) letting them go cheap if they want. If you pay a kid to empty the dishwasher, then it… Read more »

Starving Artist
Starving Artist

Nickel: thanks–I don’t feel bad for getting up at 8!

layoffsean
layoffsean

Lay off Joel people. I agree that opinions can change when you have children but NEVER tell people they don’t know what they’re talking about (no offense doesn’t cut it here sorry.) Maybe as a “non-parent” he grew up taking care of his 3 younger siblings when mom and dad died in a car accident. That comment just came off as very condescending. People have different experiences, let them and DON’T JUDGE! Alright, that being said, I’m done with capslock and I agree to separate chores from allowance is a good idea.

Liz
Liz

My kids do chores because we all function as a family and everyone has a place and job to make the family go. I give a base amount according to age. Then above for other help around house. The kids put half of it in the bank. They have to fill out the deposit slips and take them to the bank. Then the other half they donate and have spending money, which they can save for something or spend as they like. They figured out on their own what they wanted and how to save for larger purcheses.

Frugal Dad
Frugal Dad

I love the four-jar idea! We do pay our kids commissions for select chores (others are just part of being a member of the household) and they divide the earnings up into three or four similar categories. When my daughter saved up $50 we opened an ING sub-account and deposited her money. She loves watching the compound interest grow each day!

By the way, Albert seems like a pretty cool kid to be so interested in the sciences at such a young age. I sense a future electrical engineer or scientist in his future!

Bree
Bree

Albert, you are a supremely cool kid.

L
L

I’m with Frugal Dad, Albert seems very cool!
I also have to agree with the not tying chores to allowance group, I don’t have children but growing up, chores were something that everyone did to contribute to the household. I never got cash for good grades either.

Alison Wiley
Alison Wiley

Great concept, great post. I’d even take it a step further and teach Albert that LED lights use a fraction of the electricity that normal bulbs do, and hence reduce electricity bills considerably. So do compact fluorescents (CFL’s). Our home’s energy bills are less than half the national average. More at Diamond-Cut Life http://www.diamondcutlife.org/high-energy-prices-good/

TosaJen
TosaJen

I have to agree with the majority here, that kids shouldn’t get paid to do their share of household maintenance. We don’t connect chores with allowance. Chores are part of keeping the household running smoothly and safely. Work that we’d pay another person to do (deep cleaning, self-directed lawn work and snow removal, painting, etc.) will be paid for, but our kids (4 and 6) are too young for that, now. Allowance is the amount of money the child gets to spend or save on his own volition (with some guidance). We like allowances, because it allows us to push… Read more »

Sandeep Goswami
Sandeep Goswami

Albert is in really good hands!

Charlotte
Charlotte

J.D.- Posts with pictures really tell the story. I hope you will use more pictures in the future when appropriate to the topic. Good Post, Lisa! Yes, the selection at Sunlan Lighting will make your head spin…

Funny about Money
Funny about Money

What a great idea! LOL! When d’you suppose a four-year-old thinks “when I’m old” happens? Maybe when he’s six? Actually, y’know what? Some people ARE paid for who (or what) they are, not for what they do. I was introduced to this concept by internationally prominent author Alberto Rios, who remarked that the university where he was serving as director of a creative writing program did not pay him for his teaching or his creative products, but for who he was. On reflection, I realized he probably was right: He achieved prominence because he is the kind of person that… Read more »

Automatic Personal Finance
Automatic Personal Finance

When I was younger my parents never paid me for working around the house. They expected it!

They did get me nice things once in a while, they never associated the items with the work though. I think this was best since I would help with work yet didn’t expect anything for repayment.

Derrick

Kara
Kara

Albert seems like a really neat kid! It’s nice to see a child so interested in science at such a young age! It’d be interesting to find out if he ultimately peruses a career in science, engineering, or another related career.

I like his parents’ idea on teaching him how to save, it’s setting a foundation for a lifetime of sound financial management.

Nottheangel
Nottheangel

We were expected to do regular chores (and growing up on a farm, there were a ton of ‘regular chores’) without it being tied to an allowance. In fact, we pretty much didn’t get allowances until highschool in my family. In 1996 I started getting 20 dollars a month that wasn’t tied to any chores. I sometimes wish my parents had started earlier and had developed a system like the one here, it would have taught me more about money at an earlier age. However, having only 20 bucks to spend a month all through highschool taught me budgeting right… Read more »

CG
CG

Its great to see you fostering your child so well! Its also smart of you to not buy him another light bulb immediately. If you had of done this he might start to learn that breaking stuff is ok

Charles
Charles

I do agree that linking chores and money is a bad idea. When growing up, many of my friends had this done, and have now an interesting way of dealing with money/work relationship. I recieved an income about half that of my friends, and the rest could be made up by being paid relatively large amounts of money for menial tasks (polishing my dads shoes, cutting relatives grass etc).

Lisa
Lisa

These are useful comments. We’re still feeling our way along with the allowance plan for Albert, and the idea of using supplemental work around the house as a way to earn extra money is a great one. I like it in part because it teaches the idea that some types of work does earn money. It rewards motivation. For now, by the way, we’ve settled on giving Albert $4/week. I think it’s rather high, especially since I received 20 cents a week at his age. But given that he receives only 1/4 of that (he still hasn’t figured out the… Read more »

Walter
Walter

I am not a parent, so don’t lump all non-parents together ala #6. I am not sure if #3 was given allowances or not, and perhaps that has been partly responsible for his opinion. Or perhaps he just reached his conclusions on his own. As a non-parent, I can only use anecdotal experience based upon my own up-bringing, and the fact that getting an allowance definitely aided in my learning the use and value of money. When the allowance was gone, that was it until the next allowance. I had to make it last. If I ran out, and went… Read more »

Peggy M
Peggy M

I’m a mom to 3 kids and a co-founder of a preschool magazine, The Tessy and Tab Reading Club. Last year we created a couple of issues covering the topic of money and the response from our readers was so great that we decided to put together a full blown Money Manager Toolkit for preschoolers. We use big bright pictures to help parents discuss the concepts of everything from what parent’s are responsible for buying (basics) to what kids need to purchase for themselves (extras). You can also find tools to help you figure out an appropriate allowance amount. Even… Read more »

Jerry Dill
Jerry Dill

This is a great article. I have a child that is trying to learn the value of money. It was funny tring to watch him spend the money on a candy bar. The real question is how do I teach him what he should and shouldn’t eat?!

Elizabeth Sue
Elizabeth Sue

What a doll! Great post!

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