Karl Eggerss was on CBS discussing ways to teach kids about money and the proper way to think about allowances.
Sharon Ko: All right, parents. What lessons can you teach your kids today to get them money smart? This morning, quick tips to get allowance started and how to encourage that entrepreneurial mindset.
Karl Eggerss: I think you need to think about that term, allowance. I mean, are parents required to give their kids money on a regular basis? A lot of people say, “It’s not an allowance, I’m paying you for chores. I’m already teaching you about how it’s going to work in the real world where you’re doing a task and you’re getting compensated for it.” So, I would develop a list of things to do around the house and then the child can be compensated for those. That’s a good way to do it. Some people do allowances and just give their kids money. I personally don’t do that. I make them earn it because that’s how the real world’s going to work. That can really start at any age. And you can even come up with a formula. It could be a dollar per month, per year. If they’re five years old, they’re going to get $5 a month to do these tasks. If they’re 12 years old, they’re going to get $12 a month. Some formula that works for your family and that way the kids all know there is some seniority. The older kids are probably getting harder tasks to do around the house, but they’re also getting compensated more. I think that’s a good way to start the process of, “I work for something and I get paid for that.”
Sharon Ko: What if the child is interested in maybe earning their money outside of chores? In your experience, what has worked for you with your kids?
Karl Eggerss: Yeah, so I found two things that each of my kids were passionate about, one thing apiece and we turned them into income production. My son’s a music fanatic. He’s going to be an audio engineering major in college. So, for him, we invested in DJ equipment and that’s what he does to earn income, through primarily word of mouth, a little bit of advertising. That is his job. My daughter loves to bake. So, same thing. She is selling cakes online, mostly to friends and family. It doesn’t have to be a full-blown business, but we’re teaching her about the costs of how much it costs to do that, and the profits and all of that. Even if they’re putting a dollar in their savings and they’re spending a dollar and they’re giving a dollar away, they’re doing things that they’re going to do as an adult with bigger dollars. It’s teaching them those habits. That’s where talking about debt comes into play. There’s a lot of little lessons in there when they’re going through some of that, that you can teach them, and say, “Nothing changes as you get older. It’s just more expenses and probably more income as well. If you learn to do those things now, it’ll help you a lot in the future.”