Chore Bank


Chore Bank is a virtual bank that tracks allowances. It's designed to make it easy for you to know how much money you kids have saved up, and keep a record of where they got it and what they've spent it on. With Chore Bank, an allowance is just an amount tracked electronically and there is no cash to get lost or stolen. When your child wants to make a purchase, you pay for it and simply deduct the amount from their electronic balance.

Earning Interest

In order to encourage savings, some parents pay their children interest on the balances in their accounts. Chore Bank allows you to turn on interest for any account and set an interest rate.With small balances typical of young children, a realistic interest rate may produce so little extra money that children don't find it an incentive to save . To combat that, Chore Bank will allow you to set high rates with frequent payments (e.g. 3% per week), but limit the maximum payment to a fixed dollar amount so you aren't bankrupted by compound interest payments to your child.

Give Allowances

Without an allowance, kids ask their parents whenever they see something they want. That approach rewards kids who ask a lot and pester ("persuasively argue") for things. There is also no consistent, predictable consequence to their choices. Having asked for and gotten one thing doesn't necessarily mean they won't get the next thing they see. It all depends on which adult is with them at the time, how that adult is feeling, and what they remember of past requests. Usually this also results in a situation where parents have no idea how much kids are spending.

Borrowing Money

For many young adults, the lure of credit cards is irresistible and they soon find themselves mired in debt they can't afford to repay. For children who are old enough to understand debt and repayment, Chore Bank allows parents to enable overdrafts and charge finance charges on money their child chooses to borrow. This enables a child to learn about investing (e.g. buying a hedge trimmer to increase their earnings cutting lawns), or to make mistakes and get themselves into debt in a situation where the consequences are limited and their credit rating isn't tarnished.

Savings & Charity
Some parents believe that having their children save some of their money for the long term and give some to charity teaches better long term habits. If you want to follow this approach, Chore Bank makes it easy.If you're setting up a new child in the system, login and then click the 'Add a child' button to start the Create Child Wizard. In the initial accounts section, select the Three Accounts radio button and everything will be setup automatically.If you've already got a child setup and want to add additional savings and charity accounts, select that child and then click 'create an account' to setup a savings account (and repeat for charity). Click the settings link under the child's allowance account. At the bottom of the settings for that account, you should see a Splits section that shows the new savings and charity accounts you just created. Fill in what percent of each deposit to allowance should be diverted to savings and charity and then click Update Account.Fred would have freedom to spend the money in his Allowance account however he wanted, but the Savings account would have more restrictions and maybe pay interest. With the Charity account, Fred should sit down every 6 months and research a charity to make a donation to.

Remeber Points
Once your child learns money buys things, they start asking and asking.Without a fixed budget, they don't learn to prioritize and they have no incentive to save.To your child, getting stuff is at Mom or Dad’s whim, and saying "no" often leads to confrontation.An allowance is the time-tested answer. With a fixed amount of money they control, they have to prioritize, and saving now gets them bigger things later.
A virtual bank that always knows your child's current balance and what chores they've completed.Make deposits & withdraws and track chore progress from your computer or mobile phone.Your child develops the financial smarts that come from managing their own money -- without the problems of cash.
When your child’s ready, add:
  • >>savings accounts with interest
  • >>charity accounts
  • >>borrowing and finance charges
A cash allowance has problems. Cash gets lost, stolen, or it's at home in the piggybank when your child is at the store. Real banks have fees and minimum withdraws that kill small balances.If you decide to "be the bank" it’s hard keeping track of balances, especially with Mom and Dad out separately with the children.Chores are a great way to teach responsibility, but it's hard to keep track of who did what when.
The arguments for tying allowance to chores are based on the recognition that, in the real world, if you want to earn money, you need to perform work. Some people consider allowance for chores a way to get kids used to the idea of having to contribute in order to get the money for the things they want. In addition, the effort it takes to earn their allowance will make them value the things they buy with it more highly.