What’s a No-Cash Allowance?

The No-Cash AllowanceHere’s allowance day for a family using The No-Cash Allowance. One kid opens his account, adds the weekly allowance and records the new balance. He announces that he has enough to buy a new basketball. His sister updates her  account and asks to stop at the bookstore. Mom takes the kids shopping and pays for their purchases using her credit card. When they get home the kids subtract their shopping expenses and update their balances.

Throughout this experience no cash has exchanged hands yet everyone knows exactly what happened.

  • Deposits were made
  • Account balances grew
  • Purchases were made
  • Account balances got smaller

Also, neither child asked  for more money or asked the parent to buy something for them. The children took responsibility for their own spending decisions and the resulting change in their account balance.

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

Money management training must include actually making real decision with real money. One of your responsibilities as a parent is to help your child make the transition to the adult world of money where financial pitfalls are many.

You can do this by setting up a system like the no-cash allowance and providing the resources they need (money), giving them control (while you bite your tongue), and assigning responsibility for appropriate child-related expenses, “Yes, Johnny, you must pay for your school supplies with your own money.”

Benefits of a no-cash allowance for a child

  • Ownership Children want to have the power to control money just like they see adults doing. “This is my money.”
  • Responsibility “I have to pay my phone bill this week and remember that my school activity fees are due next week.”
  • Decision-making “If I don’t buy that game today I will have enough next week to buy that jacket I want.”

Benefits of a no-cash allowance for a parent

  • No more asking for money Your child will know when, what for and how much money he will have.
  • No misunderstanding “Yes, Suzy, you did get paid for mowing the lawn. It’s in your account.”
  • Money becomes a neutral topic When you child has ownership of his funds it becomes easier to talk about money as a separate entity.
  • Expenses become real Something as simple as buying school supplies takes on real meaning. When the money comes out of your child’s account, she makes the decision about what to purchase, based on her available resources (account balance).

Parents can help children understand that each money decision affects their total money resource. Kids need to see that there is a bottom line. By setting up a system as explained in my book, The No-Cash Allowance, your kids will learn that managing money is all about making decisions.


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Helping parents teach their kids how to manage money as a number.