In this Motley Fool Answers video segment, Alison Southwick and Robert Brokamp are joined by personal finance guru, journalist, and author Beth Kobliner, whose most recent best-seller is Make Your Kid A Money Genius (Even If You're Not): A Parents' Guide for Kids 3 to 23. It offers a raft of straightforward advice for teaching your children the skills and habits that will lead them to lifelong financial stability. But since one podcast can't sum up a whole book (guess you may have to buy it), they'll focus on one fundamental concept: how to get your children into the habit of saving. Well, first, they'll have to handle some money, which is why many of us give our kids an allowance. Now, Kobliner can go either way in the pro versus anti-allowance debate, but since we also like to give them chores, it seems natural to link the two -- after all, mom and dad work to get paid, right? Turns out, though, that this has some unintended negative consequences.
A full transcript follows the video.
This video was recorded on Sept. 12, 2017.
Alison Southwick: Let's talk about elementary school. Where do you fall on allowance? Ron Lieber's school of thought on this shook us up last year.
Beth Kobliner: I love him. What was his school of thought?
Robert Brokamp: Part of it was whether you tie allowance to chores.
Southwick: He says no.
Kobliner: He's right.
Brokamp: And that's what you say, too.
Kobliner: And I actually looked into the research on this. We know from research [that] chores are essential. You have to have your kids do chores. But [as for] those kids whose parents didn't pay them for chores, there was a study done finding that [those kids are] more likely to hit milestones -- like graduating from school or even starting a career -- because of that internal motivation they have by doing their chores [and] being responsible. They're part of a family.
So, it's not only psychologically important. I think what it does is, again, exercise that muscle of "I'm going to be a responsible member of this family and I have to do my chores. That's just what I have to do." I think that's a really vital thing for children in the long term.
And again, people do think, "Wow, that's crazy. I'm not getting my kids to do it." But that's how you start off. Ideally start at three, four, or five [having your kids do] tiny little chores, like put this plate in the dishwasher. You don't have to do it with expensive plates, because that will be the end of that, but you want to make that a rule. You make your bed as best as you can. Or you do something like that.
And [then there's] extra jobs, like one-off jobs, or things you would hire someone to do. Like I am terrible with my photos, so I think, "How can I have somebody put them in some sort of reasonable order?" So every now and then I'll give a small amount, like $10, and ask [my kid] to spend a few hours and fix this for me. That kind of thing is fine, the one-offs, but [don't make] chores tied to allowance. It's really important.
Brokamp: But you still do believe in an allowance.
Kobliner: Right. I looked at more than a dozen research studies on allowance, some international and some in the U.S. The bottom line is it doesn't really matter. Like you can give your kid allowance, and if you do it, you want to be clear. You have to be consistent. Like stick with what you're telling them they're going to pay for. Don't change. And do it in cash. I think cash is really important. There are all these apps and I think actually giving kids cash, which is concrete, makes a real difference.
But I also think you don't have to give allowance. You can just say, "I grew up without an allowance. [My parents didn't have a lot and] when I needed money for a certain thing they would make decisions based on whether they thought it was worthwhile and whether they had it. And if they didn't have it, we didn't get it."
I think that neither one, at least according to the studies out there, is the right way. I meet so many parents who [feel] so guilty. They're like, "Oh, we started allowance in June and now it's like August and our kids forgot to ask, and we forgot to give it." They're all stressed out about allowance. If you want to do that, great, but you don't have to do it to make your kids smart about money.