Start saving young

How I streamline my son’s allowance, interest and recurring payments

It’s been a few years that I’ve been working with my son on personal finance. Like with other aspects of life, things have gotten a bit complicated.

  • He gets an allowance — a percentage goes to his FamZoo card and the rest to his savings (it sounds simple, but the latter has an extra step)
  • He earns interest on his savings
  • He’s now paying ME for recurring expenses including his cell phone and Duolingo Plus

Maybe you’ve experienced this with your own finances — you put different processes in place and over time, you can’t remember how the whole process works and are afraid to touch any one thing.

The introduction of the recurring expenses pushed me past the breaking point today. I didn’t know what was going where or if it was correct.

I think it’s good once in awhile to sit down, look for the friction, then try to simplify things as much as possible. So that’s what I did.

The new process

The money

J earns his age every other week. He’s 11, so $11 * 26 weeks = $286/year. Divided by 12 months is about $24/month.

He also earns interest that’s capped at $10/month for a total of $34/month.

The accounts

He has a spending card in FamZoo which is great.

Originally we had a savings card, but the money was just sitting there (not earning any bank interest), so I switched that to an IOU. Now the savings money lives in an account at Ally.

J has specified a 70/30 split between spending and savings.

Allowance split

The breakdown is:

  • $7.20 + $10 (interest) = $17.20 for savings each month
  • $16.80 for spending each month

The recurring expenses

As of last month, J is contributing a nominal amount to some recurring expenses that he has — $5/month for his cell phone and $2/month for Duolingo Plus.

The new breakdown is:

  • $17.20 for savings each month
  • $16.80 – $5.00 – $2.00 = $9.80 for spending each month

The flow

For savings, I can easily set up the automatic transfer from my bank to Ally each month for $17.80. If J ever decides to change his percentages and/or next year when he gets an allowance raise, I can just modify the monthly amount that’s sent there.

Then I need to get $9.80 to FamZoo each month. I just switched to a local credit union that doesn’t have a money transfer option to the FamZoo card. However, I read over the documentation and decided to go with ApplePay.

I tied Apple Cash to the FamZoo bank account and here’s the new (and quick) process. My debit card –> Apple Cash –> FamZoo bank account.

I can’t set this up to happen automatically each month, but I have a recurring reminder on my calendar to do this when I update my monthly spreadsheet.

The moral

What’s the moral here? Make your kid’s allowance as simple and easy to execute as possible. Wherever you can set up an automated process — do it. And heck, do the same for your own finances, too.

February 2020 Update

When something changes, make sure you update your process! It didn’t make sense to keep paying month to month for Duolingo Plus, so we opted in for a full year at half the price. Now J is saving $1/month for next year. And instead of sending $9.80 to spending, I’m sending $11.80.

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