Negotiations pop up everywhere in life — at the office, in relationships and when we buy things. But what about in how we parent?
I recently spoke with a father who uses an unconventional method to teach his children about managing money. As a new parent myself, I was intrigued by his approach.
About five years ago, Mark Anders started drafting formal agreements with his two daughters, now 15 and 13. And these aren’t casual spoken promises.
“All obligations must be fulfilled to receive an allowance of $5 weekly, to be distributed no later than the last Sunday evening of each month,” the agreements stated. “Failure to complete all items may result in suspension of the stated allowance.”
The contracts then detail each child’s household responsibilities, how their allowances are handled, and which family member gets stuck with the least popular chores. They also encourage saving via a clever, retirement-style matching arrangement.
Naturally, I asked him about it. Below is our conversation, lightly edited for clarity.
Why did you decide to use contracts with your children?
Part of the inspiration came from those divided saving banks that separate spending, saving and giving. But the contract idea grew out of my years as a labor contract negotiator and my interest in personal finance.
I guess I take the management role in our household. In most aspects of life, I value talking things through, planning and setting clear expectations.
The kids and I have an agreement that the money they earn from allowances is their spending money, earned by them. They understand they won’t receive extra cash from us beyond that.
They’re free to make extra money babysitting for neighbors or doing other jobs outside our home if they want.
How have the agreements changed over the past five years?
We typically revisit the contracts annually or every 18 months. Over time, the girls have gotten pay bumps and sometimes the chore lists shift. Penalties have also been adjusted to match their ages and our expectations.
For example, one daughter had a tendency to leave her lunchbox at school, so that became part of that year’s agreement.
There’s lots of talk about negotiating skills, especially for women. What have your daughters gained from this?
They aren’t hesitant to advocate for themselves. That alone is tremendously valuable. They understand that if they want more money, they should present reasons why they deserve it.
There’s real worth in having candid conversations about what they’re willing to do and how they value their time. Some tasks are tougher to convince them to take on than others. Neither child enjoys sorting and pairing socks.
I’ve also been mindful that not only do costs go up, but children’s expenses increase as they age. So they’ve received both “cost of living” hikes and allowance increases tied to new responsibilities.
Do the contracts encourage the kids to put some money away?
Yes — we match the amount they save each month. There’s been discussion about when and how much they can withdraw, but ultimately that decision is up to them.
Sometimes they want to take money out to go shopping. I encourage them to think long-term about their savings and to view it as money not meant for everyday purchases or impulse buys.
My hope is that one day they’ll look back and think: Wow, that saving discipline really paid off.
How strict are you about the contract, particularly regarding chores?
Enforcement is my responsibility. That’s one of the privileges of being a parent. I’m particular about some things, like failing to take out the trash — that’s an automatic deduction.
Other things I might overlook occasionally, such as forgetting to make the bed for a single day. But if I notice repeated carelessness, I’ll address it. The same as any employer would do.
How do your kids compare this method to how their friends handle allowances?
Our daughters sometimes mention that friends receive more spending money from their parents. We simply explain that’s not how we operate in our home.
The upside is when they check their monthly savings balance. They often realize they have more money saved in their own name than many of their peers.
My older daughter has accumulated more than $2,000 combining her own funds and the amounts we matched under the agreement.
How do you get your children to give to charity?
Each week, the girls are required to set aside 50 cents of their allowance for charity. Every six months, they select a charitable organization to receive the roughly $13 they’ve saved. I add $37 to make it an even $50 donation.
It’s vital for kids to realize there are people in need and many causes worth supporting. I want my daughters to understand there’s a world much larger than themselves.
When it’s time to pick a charity, I ask them to choose a cause they care about and to research nonprofits doing meaningful work.
Why teach your children healthy money habits?
Once our kids become adults, their financial choices will be outside our control.
For now, they’re motivated to earn and developing discipline in handling money. They learn the value of a dollar, the significance of saving and the importance of living within one’s means.
We hope those lessons endure.
Interested in making a contract with your kids? Here’s a copy of Mark’s latest agreement with one daughter.
Also, you might find resources like teaching kids about money music videos and observances such as financial literacy month helpful when building these lessons into your family life.
Your Turn: What would you add to this agreement?
