We started paying allowance

What is this doll doing here?  Read on to find out!

It's been a long time coming.  Red is a kid who, like most, is fascinated by money.  She has the eyes of an eagle and always finds the penny in the parking lot, she's the first one to go cushion diving for change, and after any major celebration enjoys surrounding herself on the rug with all her paper and coins.  The Cobbler and I talked about it (motivated by our Dave Ramsey conversation, I guess) and decided it was time to implement allowance.

Even though it goes against the latest school of thought, we decided to tie the money to chores.  Most experts say that you should just give the kids the money because if you link it to chores the kids will think the chores are optional.  I disagree, and after last week's results I vehemently disagree and I'll tell you why.

I know everyone has different ideas on what amount to pay and for what, but what we settled on was the following.  Red has to complete these tasks each day:

• Her morning and evening routines.  These include grooming, dressing, making her bed, bathing, and laying out her clothes for the morning.
• Maintaining the cleanliness of her room.  This includes picking up her stuff daily and dusting and vacuuming as needed.  
• Pick up any of her belongings left in other areas of the house during the course of the day.
• Setting and clearing the table at meals.
• Putting away her own laundry if there is any.  

Tom Thumb has to do the following:

• His morning and evening routines with assistance (similar to Red's).
• Pick up his room with help.  Mom will dust and vacuum.
• Feed the cats (because he likes it).
• Put away his laundry with help.  

We haven't been as strict with him over the years about cleaning up as we have been with her (I guess it's second child syndrome) so we view him as still being in training.

We will pay Tom Thumb $4 per week if he completes all his tasks daily and Red $7.  We chose those amounts because we're monitoring their chores on a daily basis.  If the kids don't do all their tasks during the course of the day, we deduct $1 for Red and 50 cents (well, technically 57 cents ;-) for Tom Thumb.  The Cobbler designed a spreadsheet in Excel with macros that they click each night that tells them how much they've made for the day and how much they've accumulated for the week.  

Red also has the opportunity to earn extra money by helping clean the bathroom or vacuum and dust other areas of the house.  We pay a quarter for each thing she assists with cheerfully.

We've been on this plan for one week --- we go Friday to Thursday and pay on Friday after dinner --- and have had great results.  On pay day, Red and Tom Thumb each have three containers (this is a Dave Ramsey-ism)--- Spend, Save, and Give.  Red puts a dollar each in Save and Give (Tom Thumb 50 cents) and the rest goes in Spend.  Tom Thumb earned his $4 as expected, but Red earned $8.  It turns out that she desperately wants to purchase the 2011 American Girl Doll of the Year Kanani (pictured at the top of the post).  Who knew?  She and I sat down and worked out how much she would have to earn in order to buy the doll before she was discontinued at the end of the year.  Can you believe the doll is $100?!?!?  Each week she'll have to do all her regular chores plus some extra ones in order to earn enough in time.  Her motivation level is at an all time high.  I haven't had to remind her to clean her room for days.  I need to nudge her a bit on the finer details, but overall she's been doing great.  Quite frankly --- it's a miracle.  Linking chores to allowance seems to be working for us.

From what I understand, these Dolls of the Year routinely sell out between Halloween and Christmas.  If it were your kid and you had the money, would you buy the doll now and hide it out for when she has saved enough money?  Do you do allowance at your house?  Do you tie it to chores?  What tips can you share for what works for your family?

So what's the deal with Dave Ramsey?

On The Well Trained Mind forum which I frequent often, people seem to be obsessed with Dave Ramsey.  Any time money comes up it's Dave Ramsey says this, Dave Ramsey says that, or I love Dave Ramsey!  Well, I personally had never read anything by Dave Ramsey or heard of him before.  Before we killed our cable TV, the Cobbler and I watched Suze Orman religiously (I loved her "Can I Afford It? segment) and read all her books.  I can't even tell you how many times I thumbed through her book The Road to Wealth before passing it on to my sister.  I figured I'd check this Dave Ramsey guy out so I checked out two of his books from the library --- Financial Peace Revisited and The Total Money Makeover.


Essentially, these two books contain the same concepts --- Dave's baby steps for eliminating debt, preparing for emergencies, and building wealth.  


His seven baby steps are:
1. Save $1000 for emergencies.
2. Pay off all debt using the Debt Snowball (the snowball is covered extensively in the book, but essentially you make a list of all your debts excluding your mortgage and pay them off one by one starting with the smallest one first so you can have some early victories).
3. Get 3-6 months of expenses in savings.
4. Invest 15% of household income into Roth IRAs and pre-tax retirement.
5. Save money for college for your children.
6. Pay off your home early.
7. Build your wealth and give.


How to complete each step in detail is outlined in the books.  Between the time these books were written, his philosophy has not changed.  If I had to pick one of the two to recommend for you check out, it would be The Total Money Makeover, which includes the detailed steps to "financial fitness",  a huge appendix in the back full of forms to help you get started, and loads of letters from his followers who have successfully implemented his plan.  One letter that stood out to me was from a couple in their mid 20s who had paid off all their debt and were only five years away from paying off their mortgage.  Another letter that impressed me was from the winner of their Total Money Makeover Challenge.  The Total Money Makeover Challenge was a contest they had when the book was first released to see who could have the greatest change in financial position in six months.  The winners took home $50,000.  That family started out with $56,000 in credit card debt and only a $35,000 income.  Their minimums on their credit cards were $1200 a month!  Four years later, they are debt free and own their home outright.  They claim that's 36 years earlier than their financial planner had projected!  Now that's results!


The Cobbler and I discussed after I read it about whether or not we thought Ramsey's plan was sound.  Overall, we agreed with the exception of paying off your house early. We live in an area where home prices are still depressed and falling.  We're currently significantly upside down in our mortgage, even with putting 20% down 7 years ago, as are most of our neighbors.  There's always a chance with his job that we'll have to relocate.  The company will pay the difference to get you out of your loan to move if you're upside down.  In our case, it would make absolutely zero sense to pay off our mortgage; however, for others it may be a good choice.  


What do you think of Dave Ramsey's Seven Baby Steps?  Do you think he deserves all the positive hype he receives?