The Good (and Bad) Side of Putting Your Kids on Commission


Rather than paying our children an allowance or just giving them money when they need to buy things, we decided to put them on a commission system (OK, I decided and my wife went along with it).  The way it works is as follows:

There is a list of jobs that they can do, each of which has a fair commission attached to it.  In the beginning the list included things like putting a new bag in the trash can for $.25 or putting the silverware away from the dishwasher for $1.00.  As they’ve gotten older we’ve added things like putting all of the dishes away for $3.00, helping with yard work ($3.00 for 15 minutes of work – efficiency must be approved before payment), and sweeping the floors ($5 for sweeping, $5 for mopping).

Note that the wages are what an adult would get to do the same amount of work – no cheating them just because they’re children.  Note also that they don’t get paid for everything (sometimes you just help), and they don’t get paid for taking care of their own things.  For example, there is no pay for cleaning up the room that they messed up.

All in all, the system has been fairly effective at teaching them that 1) money comes from work, and that 2)  it is better to be able to work than to be given money because you can get more by working more, where gifts are controlled by the giver.  It has also lead to some discussions about budgeting and taught saving for goals.  My son has actually been able to save up for an iPod and a 3DS.

While this system seems to work fairly well, there are also some disadvantages:

Your kids may not be motivated enough at the right times. The trash needs to go out when the can is full, but at times our kids were not interested in taking out the trash, at least not at that time. At these times we needed to remind them that people do not get to choose when they go to work (at least not that often), and that you often need to do things you don’t feel like doing. Refuse work too much, however, and you’ll find yourself out of a job. In our kids’ case, they might lose the ability to perform that task or others if they weren’t willing to do the work when needed.

Gifts from relatives can get in the way.  It is difficult to convince your five-year old that he should work for $.25 when Grandpa hands him $20 bills.  Luckily, the gifts didn’t come too often.

Sometimes they are too motivated.Believe it or not, there were times when our son was so into working and saving that it became too much for us. He had figured out that he could make more than $20 per week and started to think about buying some big-ticket items. Luckily these bouts of zeal tended to be short-lived, although it was necessary to go to the bank for extra cash sometimes.

All in all it has been working out well and we will continue on up into high school (my son keeps asking when he’ll be old enough to use the lawn mower.)

Please contact me via vtsioriginal@yahoo.com or leave a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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