Dear Dave,

My wife and I are trying hard to get out of debt and start controlling our finances. We’ve always given our kids allowances in the past, but we’ve been considering putting their allowances on hold until we pay off our debt and get in better shape financially. What do you think about this idea?

Cody

 

Dear Cody,

I’m glad you two are making smart changes in your lives, but I wouldn’t stop what you’ve been doing where your kids are concerned. It can be a series of great teachable moments for them. I would, however, stop calling it an allowance. In my mind, there’s a victim mentality attached to word “allowance,” and that’s not something you want taking root in their minds.

Kids should learn at an early age that money is connected to work. Even a kid who’s in kindergarten is old enough to begin doing some age-appropriate chores around the house. So, let’s start calling it a “commission” instead of an allowance. Why? Because in situations like these shouldn’t be viewed as “allowing” them something. It should be looked at—by you and by them—as rewarding success.

My wife and I did this very thing with our kids as they were growing up. Each of them had a list of chores that were expected of them each day. If they did their jobs, they got paid at the end of the week. If they didn’t, they didn’t get any money.

Some people may look at this method and call it “tough love.” But it’s really not. It’s just love. It’s something you do when you’re trying to teach your children, and guide them toward becoming independent, responsible adults.

— Dave

 

Dear Dave,

I was wondering if you recommend including future purchases, especially major purchases, into your monthly budget. If so, how far in advance should you do this?

Andie

 

Dear Andie,

When you wait until things go wrong or something breaks down, you’ll find yourself in a mess and the victim of your own poor planning. That’s why I’d start putting money aside in my budget as soon as I saw signs there would be a need for whatever item it may be.

Let’s say you’re pretty sure you’ll need a newer vehicle in a couple of years. Go ahead and start putting the money aside now. Decide on a reasonable, affordable ballpark price, then do the math to see how much you’ll have to save every month to make it happen. And if you can make it happen faster than two years? Great!

And remember, this kind of stuff is a whole lot easier when you don’t have things like car loans and credit card payments hanging around your neck!

— Dave