When using the no-cash allowance, the roles of parent and child create a consistent structure for success. Income and expenses are tailored for each child by age and interests. The home account consolidates money in and out in and boils it all down to a single number.

Roles of parent and child

Imagine you are setting up an apprentice program in your family to train your children to manage money. Apprenticeships generally include curriculum, standards, skills development, and compensation. In such a system there is no additional cost to you because this is money you would spend on your kids anyway. You are simply transferring control to them so they can learn the skill of money management.

• A guidebook such as The No-Cash Allowance
• Standards, being the rules of your allowance system
• Skills development with kids having complete responsibility and control of their money (the tool)
• Compensation including regular allowance supplemented by some work for pay (chores), and incentives

Most parents already know how important it is to teach their kids about money and how to manage it properly. ~ Warren Buffet 

Creating a child-size version of real life

Paying kids an allowance can help them develop their financial skills and enable them to make smarter decisions about money as adults. It can also encourage financial independence, rather than relying on their parents for money. Investopedia

You can do this by providing the resources need (money), assigning responsibility for appropriate child-related expenses, and giving total control (while you bite your tongue). “Yes, Johnny, you must pay for your school supplies with your own money.” Requiring kids to manage their balance along with having certain spending responsibilities makes the no-cash allowance system a child-size version of adult money management. 

There’s a little bit of magic in every mistake. The magic is called learning. ~ Robert Kiyosaki

Your child is now totally responsible for keeping track of the money so funds are available when needed, for both fun and necessary expenses. This is similar to the adult world of money, where no one looks over your shoulder at how or why you use your money

This is the reality of money that your children need to start learning about now. Expecting anyone to learn how to manage the complexities of today’s cashless money world overnight is asking for problems. Yet we expect an 18-year-old to suddenly be able to manage money in all forms (and be legally responsible) with little or no training. 

This is an excellent guide to how to manage very limited resources — both for adults who are trying to make ends meet and for their children, who will face money challenges as they grow up. It has been an inspiration to a number of families who are working hard to acquire a home of their own. – Patricia, Habitat for Humanity volunteer

One of your responsibilities as a parent is to help your child make the important transition to the adult world of money where financial pitfalls can be devastating.

We are all very pleased with the information in this book. Handling money is a complicated process but Lynne presents it in easy-to-understand concepts complete with charts, diagrams, and illustrations. She developed it and lived it as her children grew. This is how she taught her children the concept of money, going through the trials and errors of experimentation with a totally new approach. Amazon Review

In our family we found that this allowance strategy provided a consistent, reliable system, one that our kids were fully vested in. In fact, they needed accurate records to document their account because initially I was the banker. Obviously, their record keeping wouldn’t pass an accountant’s review, but it provided all the information needed.

Many parents tell me when kids control their own money they see positive changes their behavior. I knew that I was relieved that my kids did not ask for money or beg in stores. Surprisingly, we didn’t argue about money. They learned to negotiate with us, presenting well-thought ideas for discussion. As parents we treated money as a learning tool, while trusting our kids to make good decisions. In return, our kids trusted us to let them.

Allowance anecdotes

Cash or not? A mom told her 4-year-old daughter that she had  $30 for selling some of her toys at their rummage sale. The girl said, “I want to buy an umbrella, I’ve always wanted one.”  They went shopping. Mom paid with her credit card. At home they subtracted the price from her account and updated the balance. Just like a debit card.

Buy something better  A 5-year-old girl was shopping with her mom. She pointed at a toy, “Can you buy that for me?” Mom told the girl she had money in her account and could buy it herself. After a moment the girl says, ”No way. I’ll save my money and buy something way better.”

When your kids track all their money as a number, they become better money managers.

Read more Do kids need cash to learn money management

Watch the YouTube

Next: Why process and principles are equally important in allowances for kids