The best investment you can make is an investment in yourself. It's taken me nearly three decades and far too many penny-pinching regrets for me to start to believe this statement.
Books, software, website hosting, courses, computers, phones, and certifications cost money. But these expenses also allow you to massively increase your productivity and profitability. Sure, you can make bad choices when you spend money on software, hardware and educational materials, but that's not my overall point. Rather, my point is this: When you invest in yourself, the money you spend will allow you to make your money hundreds or even thousands of times over.
I'm a classic underbuyer. That means that I'm slow to whip out my wallet, even when it's in my best interest to do so. I don't know how to fix myself. But my friend Cary just told me about a brilliant scheme that she's using so her kids don't end up like me.
She calls her scheme a "book and money management allowance" which is an accurate description of the allowance. But isn't life better with a fun name? Instead of explaining her idea, I decided to give it a snazzy name: the independently navigated valuable educational software and texts allowance. INVEST for short.
Here's the nuts and bolts of the INVEST allowance.
Cary's basic INVEST allowance
I should mention, Cary used to be a child advocacy lawyer, and now she teaches preschool. She's up to date on all the things related to children, education, and how to not screw up your kids.
Anyways she gives each of her boys $15 per month. I think they get the money in one dollar bills. They give $2 to church. They get to save or spend $3, and they spend the remaining $10 on books. They get to pick any books they want.
Cary started this method to teach her boys about money and to encourage a love of reading. Basically, Cary and her husband wanted their boys to develop a habit of giving, so they built the $2 giving budget into the allowance. They wanted their boys to learn to save, so they kept the "pocket money" part of the budget small. The boys might blow it on stupid toys, but they may learn how to save. But most of all, she wants her boys to love reading, so she gave them a lot of money to put towards books.
She cited a study about how kids who build their own library love to read more than kids who don't get to choose their books. I didn't actually fact check her on this, but Cary is an expert.
The new INVEST framework
Part of the reason that I respect the INVEST allowance so much, is that Cary is guiding her boys towards age-appropriate self-investment. They don't need to buy gear to run home-businesses. They don't need computers or trucks or college degrees. They are in early elementary school. They need to learn to love reading to set themselves up for a lifetime of success.
I think giving $10 for book-buying each month is a perfect idea. Personally, I plan to make three slight tweaks to this part of the allowance.
First, I'll adjust the amount downwards to $8 to start. Essentially, I'll encourage my kids to put half their money towards their personal development.
Second, this part of the allowance won't always be strictly for books. If my kids start to express interest in a "creative" endeavor (as in one where they create something), I'll allow them to direct their allowance toward other resources. For example, if they want to do Lego Animation, I'll allow them to buy animating software, a camera (maybe), and some lego heads. If they want to make soap, I'll allow them to purchase the raw materials. They get to choose (hence independently navigated), but Rob and I will confirm the value of the purchase first.
Third, I expect that later on (maybe in the early teenage years), the amount of money that my kids will want is grow. I reserve the right to change the amount of money (or maybe go halvsies on big purchases).
Building giving into the allowance
Cary did a great job building basic money management into her allowance design. In particular I like that she emphasized the $2 monthly gift to church. Growing up, my parents always encouraged us to give generously, and I think this was important. If you can't give $2 out of $15 as a child, how can you give $20,000 out of $150,000 as an adult?
I plan to retain that basic structure. Perhaps, when my kids are old enough to have a full conversation about money, I'll give them options about where to give, and the amount to give. Kids often want to give more, and I would love to encourage that.
Separating saving and spending
I've taken one further liberty with the INVEST allowance. I'm splitting spending and saving into two groups. My kids will get $2 to save (a bit over 10%), and $3 to spend (20%). Kenny is already a spendy-McSpends-a-lot, so he needs practice saving for things he really wants. For example, he wants a drone. With dropping prices, he could have bought one, but he's spent every dollar he's ever earned/been given.
I think the idea of specifically separating the spending and saving accounts will help him develop some level of long-term perspective.
When to start the allowance?
Kenny is just now able to count beyond 10, and has started to identify less than and more than. Those were the milestones I wanted in place before we started an allowance. So we start the allowance as soon as I get my butt to the bank.
Need a technological assist?
In the first few months, I plan to use one dollar bills to teach Kenny about money management. I think cash is king early on. But as soon as seems reasonable, I would like to switch Kenny's allowance over to a prepaid debit card tool called FamZoo. I've heard tons of parents give the product great ratings. Plus it makes this "bucket" approach to allowances easy to implement.
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.