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Beyond Allowance: Teaching Teens Money Management

Beyond Allowance: Teaching Teens Money Management

By Mir Kamin

I happen to believe in giving kids an allowance. Not everyone does, I know—and I’m certainly not saying my way of thinking is the only right way—but to my mind, allowance done right functions as the training wheels of money management. The goal is for our children to grow up and become productive adults with jobs, right? I think there’s inherent value in starting them from a very early age with basic money concepts and a steady (if small) stream of income on which to practice. If you do this from a young age, by the time the kids are teenagers, you can seamlessly help them grow their relationship with financial matters as they prepare to (*gulp*) leave the nest.

Of course, everyone is different and some people are natural savers and some are natural spenders. If parenting (and parenting teens, in particular) has taught me anything, it’s that there is no foolproof way to “get it right” when it comes to kids. You do what you can and hope it works. (Clearly I missed my calling as a motivational speaker.) And if you haven’t started yet, it’s never too late. I promise your kid(s) will be excited if you start offering them money. Let’s break it down:

Pick Your Payday And Allowance Rate

In our house, allowance is paid on Sundays, at a rate of $.50/year of age. Half of you are now thinking that this is not nearly enough money, and the other half think it’s way too much money. It works for us, and the key here is that it removes any angling, either in terms of amount or day. On your birthday, you get a raise. Hooray! The rate is otherwise non-negotiable. On Sunday you get the next week’s allowance, but the Bank of Mom doesn’t offer loans. We’ve been doing it this way forever, which means my kids know better than to ask for an advance or argue about how much they get. Also, in our house, allowance is not tied to chores. You do chores because you’re part of the family, not because you’re getting paid.

Pick Your Allowance Guidelines

You’re trying to foster your child’s developing relationship with money, and that means achieving a balance between rules and freedom. I could give my kids less money and tell them they’re free to do whatever they want with all of it, but part of what I want them to be doing is thinking about where there money goes and how. This is why, in our family, a set percentage of allowance is set aside for charity, another percentage is set aside for the savings account, and the remaining money the kids can blow on whatever they want and I’m not allowed to say a word. (It should go without saying, here, that these guidelines need to match up with your own observable money-handling if you don’t want an argument.) And remember how I said I don’t pay for chores? Actually, I do pay for exceptional chores. So on the rare occasion when a child bemoans their lack of funding, perhaps a project-for-pay will be offered. (The flip side is that I may also charge you a quarter for leaving the lights on. Consider yourself warned.)

Pick Your Allowance Management System

When my kids were little, we used 3-compartment plastic containers and actual cash to deal with their allowance. It worked… sort of… but as they grew and the money increased and the percentages got more complicated (and, possibly, children may have been known to move money around in sections or take it out and lose it…), we abandoned actual cash. I, personally, use a credit card for everything possible (paying it off every month) and do all of my banking online, so the transition to online management made perfect sense for us. Now I share a Google spreadsheet with each teen where we can do their “banking:” every Sunday I put in the weekly payment, and a formula automatically removes the charity and savings amounts and keeps a running total of everything. When the savings total exceeds $10 or so, I transfer those funds to their bank accounts. And when the kids choose to donate their charity money someplace that speaks to me, I match their donation. We can track all of that in the spreadsheet, as well as mark withdrawals as needed.

Adjust Allowance Handling As They Get Older

My son very rarely wants cash; he’s not often in situations where he’d need it, and like his mom, he prefers to research and make most of his purchases online. He also likes to come grocery shopping with me and pick out a pack of gum. (1950 called, and they want my child back.) My daughter, on the other hand, is much more likely to want to have money for the vending machines at school or to go out with friends for pizza and such. We discuss what parents cover and what we don’t (if we go for ice cream as a family, sure, we pay for that; go with friends, and that’s your money), and I’ll grant cash withdrawals and mark them on the spreadsheet. (But if that money gets lost, oh well.) I used to provide birthday presents for their friends, for example, but at this age, they purchase those items themselves. My daughter pays a portion of her cell phone bill, too.

Talk About Your Money

I grew up in a household where money was, for the most part, not discussed. This doesn’t do kids any favors. My teens know how mortgages work, and they know because the last time we refinanced, it ended up being that night’s dinner conversation. Another night was devoted to tax brackets and the difference between my husband’s paychecks having the tax money already removed and my freelance paychecks where I have to figure it out and pay the government their cut quarterly. They know that my husband prefers to pay in cash and that I prefer using my credit card, but they also know that we never, ever carry a credit card balance. We talk about saving up for larger purchases and the difference between “needs” and “wants” and how much we typically spend on groceries. As one of the kids remarked one day, “Geez, stuff is expensive.” Yes, it is. Better to find out now, before you have to pay your own rent!

Talk About Their Money

Be careful here; letting the kids make their own spending decisions means you may disagree with their choices, but get heavy-handed with disapproval and they’ll stop listening. Let decisions go without comment in the moment, if possible. After the fact, an off-handed question about whether they’re happy with their purchase decision might spark a conversation (or at least some reflection). It’s possible I’ve remarked when a child didn’t have enough money for something, to gently wonder if future spending should be more mindful. Ahem. Look, it’s good and healthy to want something and have to wait and save up to get it. Plus, a teenager with a a hankering for a pricy item means my kitchen floor is really clean for a while. (No, I don’t feel guilty about this.)

Still, for all my efforts, I can say I have one “saver” and one “spender,” so I don’t know how much influence I wield. Darn kids and their own unique personalities!

About the Author

Mir Kamin

Mir Kamin began writing about her life online over a decade ago, back when she was a divorced mom trying to raise two regular little kids and figure out what she wanted to be when she grew up. Now ...

Mir Kamin began writing about her life online over a decade ago, back when she was a divorced mom trying to raise two regular little kids and figure out what she wanted to be when she grew up. Now her life looks very different than it did back then: Those little kids turned into anything-but-regular teenagers, she is remarried, and somehow she’s become one of those people who talks to her dogs in a high-pitched baby voice. Along the way she’s continued chronicling the everyday at Woulda Coulda Shoulda, plus she’s bringing you daily bargain therapy at Want Not. The good news is that Mir grew up and became a writer and she still really likes hanging out with her kids; the bad news is that her hair is a lot grayer than it used to be.

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  • Sarah B.

    September 10, 2013 at 8:10 pm

    This sounds close to what we do.  I don’t currently do a spreadsheet, but I’d been planning to start one soon.  My kids get quite a bit of money each week (~$1.25/year of age), but in addition to the stuff, big and little, that they purchase themselves, they’re also required to budget for and purchase their own clothes – ALL their own clothes, from underwear and pajamas to dress clothes and shoes.  My price-tag-oblivious son and my Justice-enamored daughter have both benefitted from this arrangement… and so has my pocketbook.  Lots of good lessons for everyone.  

    • Mir Kamin

      September 11, 2013 at 9:40 am

      Oooohhhh, that’s interesting! I’m not sure I’m ready to make them responsible for their own clothes; I’d worry they’d just skip underwear rather than pay for it (ha). But I bet watching them figure it out is fascinating. Thanks for sharing!

  • […] My latest post at Alpha Mom is all about teaching teens to think about money, even though mostly what my teens think about money is, “Mom should give us more of […]

  • Monica

    September 11, 2013 at 1:00 pm

    We did a hybrid, we had their allowance with which they purchased items they wanted, they had a monthly book allowance that they could spend only on books and twice a year we came up with a clothing allowance.

    Each clothing allowance came with a list of items they were required to have at the end of the process.  If they wanted designer jeans or shoes it required them saving money on tshirts and other items.  By disconnecting this from their regular allowance there was no temptation (or ability) to spend the money on video games but they learned a lot about shopping around and investing time to save money.

  • abbeyviolet

    September 11, 2013 at 1:02 pm

    My kids are younger (6,4,1) but the 6 year old is clearly ready for the allowance.  I very much want to implement the portion to charity portion to savings plan and like the spreadsheet idea (he would too as he likes computers/numbers). What I’m less sure about is what the right percentage to suggest for those is? In looking at our own spending, savings is clearly getting more than charity, but I’m not sure what the right balance is? Any ideas for resources on this? 

    • Mir Kamin

      September 11, 2013 at 1:15 pm

      I think this is very much a personal decision. Back when I started with the kids I just gave them each $1.75/week, having them put one quarter in charity, two quarters in savings, and that left 4 quarters for discretionary spending. Once we moved to the year-of-age multiplier and a spreadsheet, we switched over to 10%, had some conversations about the origins of the concept of tithing, etc.

      Both of my kids have (unprompted) opted on different occasions to donate more than when they had available in their mandatory charity money. 10% seems to work as a good jumping-off point for us, but to each their own, of course.

  • abbeyviolet

    September 11, 2013 at 1:30 pm

    I think the 10% makes sense for charity, although it may be complicated math for someone as young as ours, but hooray for spreadsheet formulas, right? Thanks for this post as it is a thing we’ve been pondering and clearly needed another push. 

  • Rachel

    September 11, 2013 at 1:35 pm

    I use mostly because it was easy (and free) to set up and manage. It handles allowance automatically and we can track birthday gifts and spending. The key is having the info available on my phone when we’re out and they find something they MUST have.

    • Jill W.

      September 18, 2013 at 12:24 pm

      Thanks for the tip. I love Mir’s ideas about this, but I am clueless about spreadsheets. I definitely need an idiot-proof method to manage this!

  • Cindy

    September 11, 2013 at 1:39 pm

    I’m a big fan of allowances and the financial lessons you can teach from it. My two teenage boys (14 and 16) get $80 a month, paid bimonthly when I get paid. But they have to buy lunches (packing is an option but you have to make do with what is available) and all clothing outside the yearly back to school fund (currently $125/ kid) plus any extra type stuff like going out with friends. We do cash but I love the spreadsheet idea. It would make the charity giving easier because even though they all give, it is not consistent.

    One thing my mom did that I would love to implement is learning to shop for food. My mom did grocery shopping twice a month when she got paid. When my brother got his license, we were given the grocery money and instructed to buy enough food to last until the next payday or suffer the consequences. Mom said she had a car and money to go buy her own food if we screwed it up. We bought all kinds of junk food that first time and ate it up in like a week so it was very slim pickings the next week. We did the groceries once a month from there on out. I learned to bargain hunt and keep a running total in my head as I shopped. Still do.

  • Ally

    September 11, 2013 at 1:58 pm

    My oldest is 6 and is obsessed with money. I mean truly into it. He is a very hard worker and loves to save and discuss money. Last year he wanted to save and take a trip with me. I told him if he came up with enough for a plane ticket I would take him on a trip. He saved for an entire year (he was 5) and we went to Florida for a weekend. Right now he wants a boat. A real boat…ya know the kind that costs thousands of dollars. I don’t want to tell him he can’t, so he will just be saving for a while. He gets $2 a week from us and loves turning them into bigger bills. 

  • js

    September 11, 2013 at 5:02 pm

    I like this idea very much and, I suspect, so will my CPA hubby 😉 I fear in the future that my daughters biological father will throw material things at her in order to win her affection (though she knows better than that now, I remember what it was like to want designer whatever as a teen) and I think this system could save a lot of conflict in the future. Thanks for passing it on.

  • mar

    September 11, 2013 at 7:12 pm

    I had a friend whose parents did the clothing allowance thing. Now, they went to Catholic school, and this was a billion years ago when God was a child … so parents paid for school uniforms, one pair of school appropriate shoes, one pair of sneakers, one winter coat and one bathing suit each year. Oh, and undies. Then each of the kids got $500 for the year to spend on whatever they wanted for clothes. I always thought it made them pretty savvy shoppers, even back in the ’80s when thrift shopping wasn’t as trendy. Also, there were 5 of them, so they did get handme downs, etc. I’ve done that for trips (Disney – I bought them each a X-mas ornament, and then they had $50 to buy the tshirt/souvenir/special Mickey Mouse shaped ice cream daily – of their choice)- it definitely cut down on the negotiation. Not sure I could do the clothes thing – my kids don’t last a year in their shoes – damn growing!

  • My Kids Mom

    September 11, 2013 at 9:21 pm

    There is a book (and website I think) called The Bank of Dad which does this very similarly. We took ideas from him and did 1/3 give/save/spend PLUS his idea of 10% interest on the savings QUARTERLY (and no, you may not join up.) We’ve had to scale back the interest to biannual for the kid who has $300 in his virtual account at this point, but since he seldom spends a penny I’d say we’ve done ok. I’m thinking of getting the boys into Kiva to add “invest” to the mix.

  • Katherine

    September 12, 2013 at 8:13 pm

    We do very similar things on allowance, same pay rate and such. The rule for is is similar, we pay for needs, kids pay for wants. The gray area comes for things like fun stuff with the youth group at church. Do they pay the $20 to play paintball or do we? I often end up getting them to pay part, but I do want them involved.
    We use an online bank (CapitalOne, used to be ING), where the money gets deposited into their accounts automatically, once per week. My 17 yo son has a debit and a savings account and he has chosen to have me split the money, so half goes into savings. He can transfer between the accounts on his own as well. Its great for things like, he needed to put gas in his dads car, but didnt have the money in his act. he called me, i tranferred $ and he got the gas. i love it! 14yo son doesn’t have a debit account yet, but I would let him once he wants it. I like the idea of them learning about debit cards when they are still at home.
    One saver and one spender for my kids too, though the spender is learning to be more of a saver.

  • Autumn

    September 13, 2013 at 12:20 am

    When I was home for after my freshman year in college working at Shopko (think somewhere in between Target and Walmart) and using my parent’s third car (cause my dad didn’t want to deal with the maintenance issues with whatever I could afford, it was worth the cost to him to know he most likely wouldn’t have to get up at midnight cause my car broke down) while in summer school to cover future needed for grad school electives, I was given a choice between free gas or my age in cash every 2 weeks.   I took the gas.  I did have to cover road trips myself, but it worked out well.  And they wanted me at home that summer, (rather than off with the current boyfriend) so I think that helped sweeten the deal