Kids and Allowances
I have a 15 year old step-daughter who lives an hour away from us. While going out school shopping with her over Labor Day weekend, we encountered an all too familiar attitude that I remember from when I was a kid. I endearingly term it “The Gimmes”. We were in line at Sears when she asked if she could have these cute little hair accessories by the register. Sure, ok, they’re only $5. Why not, right? Then we’re in The Deb Shop and she wanted earrings. We rushed through the line and I was able to escape out of that corner. Onto The Coffee Beanery and she wanted a little angel magnet with her name on it, to which I flatly said no.
I felt very awkward saying no to her because we really could afford to buy her these little things, but it just felt wrong to buy them all for her simply because she asked. I started thinking it over and wondering why it all felt so wrong. Then I realized that by her age, I was mostly past this phase because I had an allowance. With my allowance, I was able to decide what to buy based on what I could afford and I didn’t need to ask at every corner if my parents would buy me something.
This was my Eureka moment. My step-daughter had no allowance. This also scared me a little. With no money of her own and with her being too young to work, how was she going to learn how to use money? What if, like many kids in high school, she wasn’t able to get a job before she left for college? An allowance is a great tool to learn budgeting and money management skills so I spoke to my husband and he liked the idea so I ran with it.
So, what do I know about allowances? Um. I got one when I was a kid. That’s about it. How much should we give her? I had no idea so I did some online research and ended up buying Raising Money Smart Kids by Janet Bodnar. After reading the section on allowances, I not only was able to come up with an appropriate amount to give her, I also decided to go a little further. We’re going to have her sign a contract with all of our responsibilities set out on paper. The contract will expire in June of every year and at that point, we can renegotiate based on her pending age and her needs. I couldn’t find a contract that I really felt served my needs so I wrote one of my own.
Things I wanted to address in the contract:
- How much money she will receive
- When she will receive it (still testing out the EFT to determine how many days are necessary to make our Monday deadline)
- How she will receive it (we live an hour away so a bank local to all of us was necessary. It’s not my ideal choice, but it’s the most convenient one that is free with no minimums.)
- What is expected of her for this allowance
- How the money will be allocated (saving vs. spending)
- An out in case of financial hardship
- An end date meant for renegotiation of the contract terms
We will be presenting the contract to her on Sunday. I’m actually excited about this. Mom looked over the contract and approved, as well, so we have full support from all involved adults.
Something else that I want to do that’s not in the contract is little money lessons because not everything comes naturally and since she’s never had an allowance, she might not be exposed to things that I consider basic. I’ll save that for another post, though.
Below is the contract I’ve written. It’s obviously not meant to be a legal, binding contract. It is meant to set up guidelines and expectations. I’m very happy with the how this all turned out and I look forward to seeing how the step-daughter will handle these new responsibilities.
Allowance Contract
Parties to the Contract:
1. Step Daughter (herein referred to as “You”)
2. Dad (herein referred to as “We”)
3. Step Mom (herein referred to as “We”)
4. Mom (herein referred to as “Your Mother”)
Valid until 06/30/2007
Purpose
This contract is to help define your new allowance system, how you will receive money, how much money, and what everyone’s responsibilities are in relation to the allowance system.
The purpose of an allowance is to help you learn the basics of good money management and the value of money.
Our Responsibilities To You
• We have opened a PNC bank account for you. Since you are a minor, this is an account in our names. As soon as the bank allows, you will be added on as an authorized user of the account. Ultimately, this account will be transferred over to be solely in your name once you are of an age where this is allowed.
• You will receive $15 every week. This amount was chosen after much research. It is based upon your age. The amount will be re-evaluated upon the end of the contract terms.
• We will deposit your allowance into your bank account via electronic transfer weekly.
• We will have your allowance available to you on Mondays. In the event of a holiday, your allowance should be available the next banking day.
Your Responsibilities To You and To Us
• At least $5 of your allowance must be saved towards a goal (Christmas presents, birthday presents, school trip, etc). You must declare to all parties involved in the contract when you plan to withdraw your savings and your planned goal prior to withdrawing the money.
• $10 of your weekly allowance may be used for miscellaneous expenses (movie tickets, snacks, jewelry, etc).
• You must keep track of the balance in your account. You can use PNC’s online banking website to monitor your account and review your statements.
• Your balance must never reach $0 without prior approval.
• You must not share your ATM PIN number with anyone.
• You must be responsible for the money in your account and the money you withdraw. If you lose any cash, it is gone and will not be reimbursed.
Conditions
• In case of our financial hardship, the terms of your allowance may change. We will inform you of any need for changes due to financial hardship. Examples of a financial hardship include job loss and wage decrease.
• Your allowance is independent and not in any way contingent upon grades or chores. Good grades and chores are your normal responsibilities and are expected of you regardless of your allowance. Your mother does, however, have the right to not take you to the bank to withdraw money based upon whatever criteria she sets forth. Bank visits are to be negotiated separately with your mother outside of this contract.
• While we will not ask for a detailed accounting of every single thing you have purchased to see if we approve, if we find out you are spending $10 a week on soda and chocolate, this contract may be revised to specifically exclude purchases that will drive your mother crazy.
Details of the Account
• PNC Free Checking Account
o No Monthly Service Fee
o No Minimum Balance Requirement
o Free Automated Telephone Service
o Unlimited use of PNC ATMs
o Each withdraw at a non-PNC ATM will be charged $2 by PNC in addition to the other bank’s ATM fees
-Wawa’s (local chain convenience store) ATMs are usually PNC so they would be free to use.
-When using debit at a cash register (where you enter your PIN number), you can usually get cash back with no associated fees.
I agree to the terms of this contract and will do my best to honor them. I will not try to find loopholes or in any way dishonor the good intentions of our agreement.
Please sign and date on the line by your name.
x_____________________________ Step Daughter
x_____________________________ Dad
x_____________________________ Step Mom
x_____________________________ Mom
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