Rachel Cruze: Give Your Kids a Commission Instead of an Allowance
Written by
Katie Wudel
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Financial expert Rachel Cruze has always been passionate about helping individuals, including kids, understand the value of money. Drawing from the principles taught by her father, Dave Ramsey, Cruze offers a fresh take on a familiar parenting topic: kids’ allowances. She suggests parents give their kids a commission rather than a straightforward allowance. Here’s what Cruze had to say about kids and money.
The Concept of ‘Work Equals Money’
The core principle behind giving kids a commission instead of an allowance lies in the message it communicates, said Cruze during an episode of The Rachel Cruze Show. An allowance might be given out regularly, regardless of whether the child does anything to earn it. On the other hand, a commission is earned based on completed tasks or chores. This distinction fosters a clear connection in a child’s mind: work equals money.
When children understand that money is earned and not simply given, they start to appreciate its value. They also grasp the basic principle of work ethic, which will serve them well throughout their lives.
Building Financial Responsibility Early On
Incorporating a commission-based system teaches children the concept of financial responsibility, according to Cruze. During her show, she talks about the benefits of using this method.
Teaching value. By offering a commission system, you’re not just rewarding your child for completed chores; you’re teaching them the worth of their efforts. If they want something, they’ll need to work for it, and this lesson in value is a priceless one.
Developing a saving mentality. When kids earn their own money, they’re more likely to think twice before spending it recklessly. This can be a stepping stone toward teaching them about saving, budgeting, and even investing.
Encouraging entrepreneurial thinking. Kids might start thinking of other ways to earn money once they understand the commission system. They could offer to do additional tasks, sell crafts or lemonade, or even start a small neighborhood service. This entrepreneurial spirit could set them on a path to greater financial independence in the future.
Implementing the Commission System at Home
Implementing a commission system is easier than you might think. Here are some steps to get started:
Set clear expectations. List chores or tasks and assign a monetary value to each. Ensure these chores are age-appropriate.
Be consistent. Pay the commission regularly, whether it’s weekly or monthly, based on the tasks completed. This consistency reinforces the work-reward relationship.
Discuss and review. Take time to discuss finances with your child. Review what they’ve earned, how they plan to spend, save, or even give a portion of their earnings.
Offer guidance. While it’s essential for kids to make their own financial decisions, offering gentle guidance can help them make wise choices.
The Takeaway
Cruze’s idea of giving a commission instead of an allowance is about more than just money–it’s about imparting life lessons. By adopting this approach, parents can instill values of hard work, financial responsibility, and the significance of earning in their kids from a young age. It’s not just about how much they earn, but more importantly, how they think about and manage what they earn.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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