Allowance vs. Ellowance
By Alec Lindenauer, Chief Allowance Officer
Allowance. It needs no introduction. We all know what that is. And since you’re already on this website, you have some ideas about why it’s so important.
Ellowance? That’s another story. It’s Greenlight, GoHenry, BusyKid. It’s forgoing the cash allowance routine, and simply using a digital solution to send money to your kids.
Ellowance is faster. It’s easier. It’s neat.
But is it better? Or, at a minimum, is it just as good?
Well, that depends on what you’re trying to accomplish and the age of your kids. As I type this, my daughters are finishing up 6th and 8th grades. I’m trying to teach them as much as I can about being money savvy. I want them to soak up my lessons, and practice them as often as possible. So if those are my goals, then I’m going for the A, not the E.
In fact, only now after giving cash allowance since they were in Kindergarten and 3rd grade am I even considering a regular debit card. And it’s not because I’m just an old fart.
Perhaps the most important part of their financial education is the 45 minutes we spend together during our monthly allowance routine … our COR Money Sunday on the first Sunday of each month. Amongst other things, that dedicated time is spent discussing their spending decisions from the previous month, reviewing their investments, distributing their allowance, and planning a budget. We don’t call it a budget meeting, of course. In fact it’s nameless.
But each month, they lay their cash in front of their four buckets: Spend, Save, Invest and Donate. And I ask them, “Why did you put that much in front of each?” And that starts our dialogue. Each month that conversation differs. Very often, they wind up reallocating from their initial decision. And then sometimes they reallocate again. That back and forth is crucial for their developing habits.
Sending them Ellowance through my iPhone while at the office would certainly be effective. I’d get the money to where it needs to go, but at what cost?
When my oldest daughter asked me for a debit card, I asked her why. In typical teenager fashion, she said, “I don’t know. Because my friends have one.” That answer wasn’t good enough. Only now am I considering it because I’d like her to practice using one. But, she’ll still carry some cash, and I won’t be simply transferring an Ellowance. When the time is right, we’ll take a hybrid approach. We’ll still have the same Allowance routine, but she’ll be able to add some cash to the debit account. It’s not as convenient, but it maximizes the teaching opportunities for my goals.
Remember, Allowance isn’t just about the money. It’s about the ritual. It’s about conversation opportunities. Having dedicated time to sit and discuss money is a crucial part of a successful strategy to raise our children into a money savvy, financially literate adults.
All of that said, it would be easy for someone to suggest that I simply have the conversation, but still use a debit card. For one, the visual use of cash changes the conversation. It just does. And second, I also actually want my kids to physically use cash. Wait, now I actually do sound like an old fart! Here me out ...
So many parents want their child to understand the value of a dollar. What helps them understand more? Swiping a card at the register, or actually handing a cashier money, and receiving value in exchange for their earned dollar?
Let's use a different analogy. What's more valuable, the experience of being liked in person, or liked on Instagram? Just because it's digital, doesn't mean it's better.
All that said, as their relationship with money evolves, I'll be adding digital tools. Soon enough it'll be a debit card. And then sometime later in high school, we can transition almost exclusively to digital. And then, of course, when they're in college it'll be all digital since they'll be living elsewhere. But until then, it'll be a hybrid approach.
Oh, and the investment part of digital? That's for another day ...
Teach centsibly,
Alec
COR Chief Allowance Officer
