Starting your teen on an allowance
Would you like to start your teen on an allowance, but don’t know where to start? Or is your teen already on an allowance that’s not working, and you want to get it back on track? I’ve got some good news here that should get you on the right path.
Here are the five things you need to know to find success with your kid’s allowance:
1. An allowance is a teaching tool.
2. An allowance should cost you zero dollars.
3. An allowance is YOUR money, not the child’s money.
4. An allowance needs to come with accountability.
5. Your kid is going to mess this up.
A kid’s allowance is a teaching tool
In my previous article on teens and money, I wrote about the importance of the allowance as a teaching tool. Essentially, the idea is that the only way kids are going to learn about money is to practice with it. They have to have money to manage, to spend, and to make mistakes with if they’re going to learn financial lessons. For more color on this, go ahead and review the basic intro from last week.
A kid’s allowance should cost you zero dollars.
This is an important consideration for many parents who are reluctant to begin giving their kids an allowance. It seems like it’s going to be really expensive to be giving kids $20, $50 or $100 every month. But it’s not. This is money you were going to spend on them anyway.
Over the course of a year, how much do you spend on clothes, shoes, sports activities, school supplies, and other necessities for your teen? I’m guessing that for most families, this is easily a thousand dollars, or two, or more. So what if, instead of YOU spending this money, you gave your teen $150 each month instead, and let them manage it? This is the core idea behind the “zero cost” allowance – you’re only turning over to them money that you would have spent even without an allowance.
I’d go even further to say that if you’re giving your child an allowance which is “free” money with no strings attached, you might be doing more harm than good. They’re not learning any responsibility here, just that Mom and Dad are sources of free money.
So the first step in giving out an allowance is to figure out how much you’re spending on your kid right now. Start tracking. And when you’ve figured that out, start giving it to the kid to manage. Money for school lunch is an easy place to start. Then maybe you start paying out a “shoes” allowance: they get $30 each month to spend (or save for later) for all of their footwear purchases over the year. From there, move on to clothing: another $30 to $50 each month, and now they are responsible for all of their clothing purchases. (Socks and underwear, too.)
The important thing is, that each time you’re increasing their allowance, you’re increasing their responsibility, and decreasing yours.
A kid’s allowance is YOUR money, not the kid’s money.
This should be pretty obvious. When you hand over $100 to your teen, you expect them to spend it responsibly, on clothes, shoes, and school lunch. Not on a new iPod. Anything they buy is yours, because they were using your money. If they’re not using your money wisely, feel free to take it back: no more allowance for a while. Instead, you get to make the buying decisions. You’ll be surprised how quickly a teen will turn things around and start making responsible decisions when they lose the freedom that comes with getting an allowance.
A kid’s allowance needs to come with accountability.
You’ve got to know how things are going with the allowance, right? It’s important to know how your kid is spending the money you’re giving every month, to know whether or not it’s being spent responsibly. To do this, you’re going to have your teen track income and expense. We use Goodbudget.com with our kids to do this, and it works really, really well.
1. Using either the website, or a phone app, kids keep track of all money spent
2. When allowance is paid, every dollar is put into a virtual “envelope”
3. Everyone knows how much money is available to be spent, and how much was actually spent
4. If spending is going awry, you’re going to know about it at the end of the month, hopefully before too much damage has been done.
Your kid is going to mess this up.
Occasionally, of course, your kids are going to mess this up. This is not only expected, it’s necessary. They’re not going to learn the valuable lessons they need unless there’s a little bit of pain every now and again from mistakes made. Just know that it’s coming, and be ready to roll with it. We’ve found, particularly with teens that it’s important not to be a teacher when this happens. Experience itself is the best teacher. Trust me, your kid is going to get the message.
Instead of teaching, just make sure that your kid has to deal with the consequences. Don’t bail him out by giving him more money to fix the problem! Did he blow all of his shoe budget on an Xbox game? He’ll have to figure out where his next pair of gym shoes is going to come from. Maybe he’ll have to live with hand-me-downs, or his ratty old shoes for a while longer, or a bargain-bin Wal-Mart off brand.
Be empathetic. “Oh, man! That’s a shame! What are you going to do about it?” Don’t offer up easy solutions, instead let him figure it out. The pain and frustration he feels are the ONLY things that are going to help him learn to manage money better in the future.
Next time up, I’ll dig a little deeper into accountability. How to use a checkbook register or an online service to track spending and make sure everything is going according to plan.
Coming up: Keeping tabs on your teen’s allowance
Did you miss the previous article? Check out I See a New Allowance in Your Teen’s Future