The end of October and beginning of November is an extremely busy time in our house – we have two birthdays straddling Halloween. Our oldest son turned seven just a few days ago, and I saw it as a huge opportunity to start a conversation I wish someone had started with me decades ago.
We pay each of our kids $1 per year of age per week. So our oldest goes from earning $6 per week to $7 per week with this latest birthday.
When he was earning $6, we split it up with the following breakdown:
- $1 to “Share”
- $3 to “Save” and
- $2 to “Spend”
With this latest $1 addition to his weekly allowance, we had a dilemma. I want him to have more money to be able to use and learn lessons with…but I also want him to learn good strategies for money management as that money increases.
So I did something somewhat painful – I required him to put the whole extra dollar into his “Save” jar.
The conversation went something like this:
“Some day you’ll be making $30,000 dollar per year.”
WIDE EYES! “Whoa! Really? That’s a LOT of money, Daddy!”
“Yep, it definitely is. But you know what? You’ll be making $30,000 per year and you’ll be doing such a good job that you’re going to get a raise and you’ll be making $35,000 per year.”
“You know what you do with that extra $5,000?”
“You betcha. And one day you’ll be making $60,000 per year and you’ll get a new job that pays you $75,000 per year. Then what do you do with that raise?”
“Exactly. If you always save your raises, you’ll have more money than you know what to do with.”
That’s right: #SaveTheRaise!
Now obviously there are some intricacies to manage here. The biggest one is that he can’t only have $2 per week for spending forever. We’ll need to come up with a strategy for how to raise his spending money slowly so it doesn’t eat into his savings.
It’s similar to someone making $25,000 per year and honestly needing another $6,000 to be able to send their kids to a reputable school or daycare. Or being able to purchase a reliable car to get to work. Sometimes, saving the raise isn’t an option. And I get that. Someday I’ll have to teach him the value of being flexible and not dogmatic…but we’re not there yet.
My lesson here is for him to realize and internalize at an early age that saving any additional income is one of the fastest ways to grow your wealth. It’s a method so many adults miss out on because of lifestyle inflation.
Want to get involved? Ask your kids, “If I were to give you an extra dollar per week in your allowance, what would you do with it?”
Comment with your kids’ answers below!