I was introduced to the idea of a family economy last year by my friend, Ralphie, of Simply on Purpose. After hearing her talk about it a few times, and the benefits of it, I decided it was something I really wanted for our family. We’ve now been doing it for about six months and have adapted it to fit our lifestyle and family needs.
I’ve been getting tons of questions about it, so I’m sharing all the answers today!
WHAT IS A FAMILY ECONOMY?
It’s basically a work and pay system where the kids earn money within your home and learn how to save and be accountable.
WHAT IS THE BENEFIT OF IT?
I want my kids to grow up with a real understanding of money — how much things cost, how we have to work for things we want and need, how to set goals and save for bigger purchases, the difference between a savings and checking account, the difference between a debit card and credit card, how to invest their money, how to pay a bill, how to build their credit, and so much more.
Obviously we’re starting very small and very basic, but the plan is to have them leave the house at 18 years old with a very clear understanding of money on all levels, and to be financially independent.
WHAT DO YOUR KIDS GET PAID FOR?
Many of the items they’re paid for are their day to day things they already do. It’s helpful because adding extra things to their day can be a big commitment for both of you (them to find the time, and you to nag them to get it done).
We originally started out out with this really simple chart that you can see here.
Under “zones” the P stands for Playroom and the B stands for Bedroom.
Under “Homework,” the T stands for Typing. They turn their homework in on Friday morning each week, so they don’t have homework from school. We use TypingClub.com for their typing.
HOW DO YOU KEEP TRACK OF THEIR DAILY WORK?
They each have a chart with their daily work printed on it. They are responsible for checking off each item after it’s completed each day. Once it’s checked off, they need a parent to sign it off for them. They don’t get paid for it if it’s not checked off and signed.
We keep these sheets in the kitchen where they’re easy to see and sign off throughout the day.
Just a tip: I print off a bunch of these sheets and keep them in the cupboard so it’s easy to put up new ones each week.
HOW MUCH DO YOU PAY THEM?
We do payday every two weeks, and they get paid their age. So $5 for Fos every two weeks, and $7 for B every two weeks. Each year their earnings will increase $1 with their age.
At some point we might also go to payday every week, but not now.
WHAT HAPPENS WHEN THEY WANT TO BUY SOMETHING?
If they see something in a store or online that they have to have, they tell me and I pay for it with my credit card and then withdraw that amount from their digital checking account. They are not allowed to withdraw from their savings account.
HOW DO YOU KEEP TRACK OF THE MONEY?
We use Google Sheets. I have the app on my phone, and Google Drive is accessible from any computer, which makes it so easy.
Each of them has their own sheet and they are divided up into Savings, Checking, and Donations. We donate 10% of our income to our church, and then divide the remaining money into their savings and checking; 60% into Checking, 40% into Savings. They also always have the option to put more in their savings account.
I’ve linked to a blank spreadsheet you can use for your family — just click FILE > MAKE A COPY and then save to your Google Drive so you can fill it in for your family.
WILL YOU EVER USE REAL MONEY?
Yes, absolutely. We’ll “transfer” their virtual money to a real bank account when we’re ready to give them a debit card so they can learn about different accounts and how banks pay out interest.
We haven’t decided the specific ages, but at some point after that they will get a credit card, so they can learn how each of those works and learn how to pay a bill. Learning about investing will also come sometime in high school as well.
But that’s all still pretty far away, so for now we’re doing only virtual money in their accounts, which makes it so easy to transfer and pay them. If they receive money for a birthday or Christmas, they “deposit” the money into their spreadsheet and then I keep the actual bills.
WHAT ARE THEY FINANCIALLY RESPONSIBLE FOR NOW THAT THEY’RE EARNING MONEY?
Right now, while they’re still young, they are only responsible for purchasing their “wants.” But at some point in the future they will be responsible for paying for their own clothing, gas, insurance, etc, in addition to their wants. We haven’t decided the specifics quite yet, but I think the more responsibility you give them, the better.
And before you think it’s crazy to make them pay for everything on their own, remember…it’s actually your money. You’re just re-routing it through them and teaching them to be responsible with it. And trust me, when they learn how much things cost, they instantly become so much more frugal that you as a parent can be.
HOW MUCH WORK IS INVOLVED FOR ME AS A PARENT?
Your work load will definitely depend on which jobs you decide on as part of your family economy. I spend maybe thirty minutes a day helping them with their afternoon educational things, and then we do pay day every other week on Sunday afternoons after we get home from church. Payday takes about ten minutes total.
WHAT AGE IS BEST TO START?
Every child is different, so I’d say there’s no specific age and you should just gauge as a parent. I think B would have been ready at age three, but Fos is definitely just barely ready at age five.
WHAT IF MY HUSBAND IS SUPER UNINTERESTED IN PARTICIPATING IN THIS?
So was mine! And that’s ok – don’t pressure him to be involved. My husband wasn’t against it at all, he just wasn’t interested in being responsible for it. But after about a month, he started to see the benefits and he gets involved here and there and is very supportive since he sees the changes it’s making in the boys.
We’ve talked about how he will be much more involved as the boys get older and we open real bank accounts for them, give them credit and debit cards, and start investing. But for now, when it’s basically pretend money, I’m handling pretty much everything and since I knew this going in, I’m totally fine with it. It doesn’t need two parents to keep it running.
DO YOU FEEL LIKE YOU’RE CONSTANTLY NAGGING YOUR KIDS?
At first it was definitely a transition, and I felt like I was constantly reminding them. But it gets better!
I also took a cue from Simply On Purpose who, instead of nagging, just calls to her children, “Does anyone need me to sign off on their chart?” It’s a great way to remind them without having to nag, and it works every time for me! It always gets a positive, happy response instead of the frustrated response I get from nagging.
WHAT IF THEY FORGET TO MARK SOMETHING OFF?
They’re still pretty little, so I am often lenient about this — especially with Fos since he’s only five. We’ve had a few weeks where he’s missed something, so I usually just make him recite a few memorized scriptures to earn back the point.
WHAT IF THEY DON’T WANT TO DO IT?
There are some days that my boys really don’t want to do it, and I tell them that’s fine, but to remember that they don’t get paid if they don’t work. We treat it as a real job and hold them accountable. Usually after a little time, they realize they do want to get paid and they do their work with only slight complaining 😉
HOW DO YOU GET STARTED SETTING UP THE FAMILY ECONOMY?
As soon as I learned about it, I started thinking through it and decided to just go for it. I created their spreadsheets and daily check off sheets, and then sat them down over the weekend and told them we were starting this the following Monday.
I explained that this was a way they’d be able to save for their college and LDS missions, and also earn money so they could buy whatever they want.
I tried to have everything in place and ready to go before introducing it, so it was easy to launch as soon as we discussed.
HOW DO YOU FEEL ABOUT IT AFTER SIX MONTHS?
I love it more than when we started! The biggest change I’ve seen is their perception of money. Like I said above, they are much more frugal than I am now that they understand how much things cost. Like that a medium sized LEGO set would wipe out their six months of earnings in their checking account in one fell swoop.
I also love that when we’re out and they beg for a bag of m&m’s or an ICEE, I can say, “Yes of course you can have it! But you’re responsible for paying for it.” And suddenly that neeeeeeed becomes not quite so important.
It definitely is a change as a parent, and requires a little more of your time and effort, but personally I think it’s worth every single bit of effort. This one system impacts so many areas of their life in a positive way and is teaching them invaluable skills that will benefit them for the rest of their lives.
If I left anything off, or if you have additional questions, leave them in the comments!