The following column from Phoebe Venable, CapWealth President & COO, appeared in The Tennessean on August 24, 2017.
The most common way to begin teaching financial responsibility to our children is by giving a weekly allowance. It’s a direct, effective approach that empowers children to make financial decisions for themselves.
Once a child must make her own decisions on whether to spend or save her own money, chances are she will begin viewing money very differently. If parents just dole out cash to pay for things the child wants, it’s easy for a child to see money as an abstract concept at best or an unlimited resource at worst.
Ownership changes the game. When it’s their own money, children begin to learn the difference between wants and needs. Making choices and prioritizing financial resources is a fact of life, and this is a child’s introduction to it.
Allowance no longer has to involve parents handing cash to their children once a week. Like almost everything else, there is now an app for that! Actually, there are many smartphone apps available to help parents and children manage their allowance. These apps can actually send the allowance, track spending, teach budgeting lessons and even monitor chores.
Do you have a list of chores on your refrigerator that your children can do for extra money? You can incorporate those chores into the app and get rid of the fridge list forever.
Unless your bank offers an app for children that is tied to an actual bank account, most of the allowance apps will create a virtual allowance for your child. Think of it as a “store credit” that your children have with you.
Every week, their allowance is added to this credit and with your permission, they can buy whatever they want. Parents still have to actually complete the purchase transaction but after that’s finished, the parent simply deducts that amount from the child’s virtual account by logging the transaction into the app.
There are a lot of choices for parents that want to use web-based software or a mobile app for managing allowances. Here are just a few that you might want to check out:
This app is more appropriate for teens than younger children but it was actually developed by an 11-year old and her father. This virtual bank allows a teen to track their savings as well as what mom and dad owe them for chores. It also has tools for learning how to set goals, budget and even do some basic accounting. One nice feature not found on every allowance app is the ability for parents to remove funds so kids had better make sure they make their bed every morning!
While most allowance apps are free, iAllowance costs $3.99. It’s another virtual allowance tracker for parents and kids with some nice features that we didn’t find in other apps. iAllowance can send reminders to the children about household chores or other responsibilities around the house. Parents can add extra money or rewards for good deeds or when the kids meet certain goals. When a child wants to spend some of their allowance, the parent simply taps their account to purchase the item and the amount is deducted from their balance.
This app is designed for kids ages 6 to 8 and not only tracks allowances and spending but also can show youngsters how much more they need to reach their goal and how long it will take to get there based on the child’s spending and savings habits. Using this app, kids can add pictures of the things they want and create a slide to show off the things they’ve already purchased. This can help teach the concept of goals and rewards. The app also has a feature where a child can share some of their money with a sibling.
It is important to remember that the role of allowance in a child’s life is to give them an opportunity to practice managing money—and that is all.
Joline Gofrey, author of “Raising Financially Fit Kids,” suggests parents repeat this mantra to themselves regularly: “An allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.”
Allowance apps can be a great way for our children to practice managing money.
Phoebe Venable, chartered financial analyst, is president and COO of CapWealth, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.