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How do I give ‘commissions’ to my young children?

Dear Dave,

I have heard you say that you shouldn’t give your kids an allowance. I have two kids of my own, and they are old enough to do some things around the house to help out, such as clean their rooms, take out the trash and help me with the dishes, etc, but I just don’t know how to go about putting them on a commission. How much commission is appropriate? Can you help?

Donna

Pittsburgh, Pa.

Dear Donna,

There was an idea in the ‘old days’ that you don’t hear much anymore, and that is the idea that you can actually spoil a child. We don’t hear that said much anymore because some people don’t think it is true. The truth is that there is a new form of child abuse in our culture. It is letting our children come home from school, do nothing and participate in nothing. As long as their grades are okay we let them spend the whole afternoon eating Doritos and playing their PlayStation. They do not know the meaning of W-O-R-K. If you turn a kid with those character qualities loose in society, what you may end up with is a deadbeat. W-O-R-K and a sense of industry; a sense of wanting to accomplish something and a go-getter mentality is what we want to cultivate in our children. And that starts very young in children.

At our house we don’t give you money in an allowance, you have to earn your money. Even young kids can pick up their room with your help. Those of us with little ones know that the definition of cleaning the room is that we do everything except for the one or two toys they actually put in the toy box, but the small child gets all the credit for cleaning the room. You can give them small chores with which you assist and give them all the credit. At this stage, pay the commission on the spot. Young kids need the instant “atta-boy” and money for the work. This allows them to make the emotional connection and they will be willing to do the chore again next time.

For older kids, ages six to around thirteen; it is simple: If you work, you get paid. If you don’t work, you don’t get paid. You need a tracking system. Try using a dry-erase board placed on the front of the refrigerator to list the chores that need to be done and how much is paid for each one. In this age bracket I’d suggest $5 per week for five chores: simple things like clearing away the dishes, feeding the dog and keeping their room clean. These are things that you would probably expect them to do anyway, but paying them gives you teachable moments about money and helps to give them an emotional connection between money and work. Now if you miss a chore one week then you don’t get paid, and you have to stick to this one or they will just expect to get paid anyway. Once the work is done have a payday once a week. Then you teach them to keep their money in three different categories: Spending, saving and giving. This will help to develop that habit for the rest of their lives.

Dave


What is a bridge loan and is it a good idea?

Dear Dave,

Yesterday my dream house that is just down the street came up for sale. It is selling for $122,500 and we bought our house for $50,000 five years ago and now we could get about $100,000 for it. The realtor told me to think about getting a bridge loan. I started thinking about what would happen if our house didn’t sell, but I know eventually it will. I don’t want to get into any trouble over this so I am coming to you first. Please help.

Laura

Big Rapids, Mich.

Dear Laura,

A bridge loan is the wrong answer. Think about what happens if your house doesn’t sell. Yes, eventually it will. After you are foreclosed on! Sorry to be so harsh but that is a possible reality.

If you get a bridge loan you are getting into a mess. You’ll have one foot on the dock and one on the boat, and the boat is leaving. Don’t do it. You need to take a cold shower because you have house fever. Just slow down. You should to make an offer on the neighbor’s house, contingent on the sale of yours and put yours up for sale. Then if yours sells you have a deal and if it doesn’t, you don’t have a deal.

I don’t have a problem with you moving up to a more expensive home either if you remember a couple of things. Only do a 15-year fixed-rate loan with the down payment that you have from the sale of yours. Also, you need to create a payment that is no more than one-fourth of your take home pay. The mortgage company will qualify you for a whole lot more than that most likely, but I don’t suggest that. It will keep you very conservative. You will be in an okay deal there. Of course the plan I would suggest would be the 100 percent down plan, but if you can’t afford to do that, just follow these few guidelines. As far as the bridge loan goes, stay away from it. It is a sinking ship and you will go down with it if you play that game.

Dave


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