Steve Collison

Had I been brought up differently, I’d be rich right about now. Instead, I’m scraping the pennies from the very bottom of my bank accounts in hope of a Big Mac Meal. This leads me to conclude that I need a plan for my child(ren?), to help her achieve financial health.

Originally, my wife didn’t seem too enthusiastic about this idea, but just the other day it came up in conversation and she announced that it was a good idea.

And so, it looks as though we’ll be pursuing the child financial responsibility plan as I have spontaneously dubbed it.

The main aim of the CFRP is to give a child a ‘real world’ experience of finances. The common child gets pocket money, and gets to spend their pocket money on whatever they want. A child doesn’t have to worry about paying bills, or making sure they have enough money for rent. As generations have passed, many new parents don’t even introduce their children to chores. Chores may seem like a past time, but they’re as important now as they were fifty years ago.

You can consider the CFRP an ‘emulation’ of real word finances. Here’s what you’ll need:

• Electric meter(s). These sit between the electrical outlet and an electrical appliance, they monitor how many Kilowatt Hours are consumed. A Kilowatt Hour costs approximately 9 cents, but you can find the true cost from your bill.
• A list of household chores that can be repeated weekly. Split the chores into two groups – ‘mandatory’ and ‘other’.

Our house consumes 500 KwH of electricity per month, we make sure we turn off lights and other devices to help reduce that figure. Check your electric bill for your monthly figure. (the gas bill is much worse, but there is no feasible way to gauge your child’s gas usage, and leaving them cold isn’t an option!)

Some children are very forgetful when it comes to turning off lights – if you’ve ever wondered why, here’s the answer: It is of no benefit to them! There is no consequence if they don’t turn off lights, you can’t really ‘punish’ a child for not turning off a light because many children just won’t understand your frustration, they really need to feel the consequences to understand why turning off a light is important.

Instead of giving your child an allowance, consider cutting the allowance completely and giving them a list of chores with earnable income associated with each. For example, vacuuming the house might earn your child 30 cents in a day. Cleaning out the litter tray might earn your child 20 cents.

In the real world, you can’t always make ends meet, you should avoid creating chores just to help your child make theirs meet. Part of the plan is to teach your child that saving money is wise, because sadly, sometimes it rains.

Here’s an example plan based on a weekly rotation.

• Room rent is $4.50.
• Electricity is charged at $0.10 per KwH.
• Breakfast is $0.10, lunch is $0.10, dinner is $0.10.
• Each snack costs $0.05.
• Borrowing money incurs a 20% charge, but no interest. (best not to overcomplicate things!)
• A negative balance incurs a $0.15 charge every day it is overdrawn.

Note: Although meals costs 10 cents each, a child should not be allowed to skip a meal to save money. This would be irresponsible.

You may want to adjust the plan to what you feel is appropriate. But the point here is that having a plan allows you to be fair to your child and also represents real life- it gives you something to refer to, and it gives them something to look at and learn from. If your child wants a snack – that’s fine, but deduct $0.05 from the balance sheet. If your child considers that unfair, refer to the plan.

To work out how much money your child needs to earn to balance his/her expenditure, we will have to work out how much energy he/she consumes. You’ll definitely need an energy meter if you want to include energy usage in the plan. Use the energy meter over a week, and use the final reading as your base line.

Our child has a light bulb in their room, it’s a 60 watt light bulb. If she had the bulb on for 8 hours everyday, it’d use 3.36 kilowatts (60 x 8 hours x 7 days = 3360) – that’s 33 cents of electric. So, on top of room rent at $4.50, and meals every day at $1.50 (30 cents a day for three meals), to balance her expenditure she’d need to earn $6.33 every week.

The chores that you believe to be mandatory are the chores your child will do to earn their keep – or in our child’s case, these chores will earn her $6.33. Any other chores will earn her pocket money.

At the end of the week, if your child doesn’t have enough money, then he/she needs to find a resolution to the problem. There are two options. They can either pawn something they have in, for example a computer or laptop, or they can borrow money. To teach them that borrowing incurs loss, you must charge 20% of the amount they borrow as a borrowing fee. (eg. to borrow $2.00 you’d charge a $0.40 borrowing fee) Alternatively, if they choose not to fix their balance, they should be charged an overdraft fee of $0.15 cents every day.

As your child grows older, you can make the plan even more realistic. In life there are penalties, if your child’s room is messy at the end of a day then deduct 15 cents. If they get a detention, deduct 50 cents. One day it may not seem like much to them, but a few dollars later it’ll hopefully weigh down on them and help them realise that they need to keep order in their life.

Your child may very well detest these penalties, and you should listen carefully when they voice their opinion. Allow them to plead their case, if there is a reason they didn’t do what they were meant to, then perhaps reversing the penalty this one time is a fair option. If they simply complain that the fees are unfair, tough luck. What they consider unfair is only relative to their opinion, and they’ll need to learn that consequences are fair when what they do (or fail to do) is unfair.

As a last resort, grounding a child to reduce a balance owed is reasonable. If your child manages to build up ten dollars in debt, grounding them shows them that there is a consequence to being irresponsible with finances. For every day grounded, reduce their balance owed by an amount you feel appropriate. Note though, that grounding doesn’t just mean they have to stay indoors, it also means they’re limited as to what they can use. Many children these days use online messengers to talk to their friends – disable the internet connection in their room. If they think it’s okay to talk on the phone – tell them it’s not. If you’re in debt, you simply can’t afford these luxuries. Hopefully, with your child on the edge of boredom, they might actually take a renewed interest in their chores.

That is the jist of the plan, I hope to update this page in the future as the plan evolves.

Here’s other things you might consider including in expenditure:

1. Cell phone costs.
2. Landline phone costs.
3. Internet subscription.
4. Television subscription.

Penalties you might consider applying:

1. Loud music beyond a reasonable hour.
2. Gone to bed later than bed time.
3. Arrived home late.
4. Failed to complete homework before its due date.
5. Failed to complete mandatory chores.
6. Failed to keep room tidy.
7. Exceeded weekly electricity quota.
8. Exceeded daily computer usage quota.
9. Exceeded cell phone allowance.
10. Failure to inform parents of important events. (such as friends coming over, or events at school)

Chores you can give your child: *note that some of these would require a minimal age*

1. Vacuum carpets.
2. Sweep floors.
3. Do the dishes.
4. Clean the kitchen.
5. Clean the litter tray.
6. Walk the dog.
7. Clean the bathroom.
8. Clean the windows.
9. Make beds.
10. Tidy rooms.
11. Empty trash.
12. Dust house.
13. Water plants.
14. Pull weeds.
15. Rake the leaves.
16. Cut the grass.
17. Shovel snow.
18. Tidy garage.
19. Load the dishwasher.
20. Do the laundry.
21. Fold and put away laundry.
22. Change blown light bulbs.

If you have any ideas, please leave them in a comment and I’ll append them to the list.

Note: Any posts relating to this post will be tagged CFRP.