For Kids, Budget and Allowance Go Hand in Hand

Parents have many approaches to giving their kids an allowance.  We see the allowance primarily as a budget tool to teach kids about money, and secondarily as a way to eliminate all of the whining that would otheBudgetandAllowancerwise  make our lives miserable.


How does it work?

  • An allowance isn’t their money, it’s ours; we’re just giving them some freedom in managing it
  • An allowance doesn’t cost us anything; it’s the same amount we would have spent on them anyway
  • An allowance isn’t tied to jobs or chores; however, if you’re not trustworthy in managing your chores, maybe you shouldn’t be trusted managing my money.

There’s some pretty cool outcomes from this approach: whenever they need to buy something, instead of asking for money, they can ask us for help managing their budget.  Need to register for an expensive activity?  Then let’s talk about allocating more of your personal budget to activities, and less to shoes.  It’s amazing how resilient they are in managing their incomes when they see it as “their” money, rather than asking us for money whenever they have new needs.

The last bullet above is important, too: if they’re not pulling their weight around the house, or if they’re being disrespectful, dishonest, or irresponsible, then we reserve the right to take over their personal budget.  We’ll still give them an allowance, but now we, the parents, get to manage it.  That means I get to pick out your jeans.  We’ve found that this really encourages personal  responsibility around the house!

Someday, we hope to see our kids move out on their own – and this means there will be no more allowance. If, starting at the early teen years, they can start earning a bit of additional  income, I can gradually start weaning him off an allowance, and by the time he leaves home, he’ll be working and earning the lion’s share of what he needs to survive. More importantly, he’ll already be proficient at managing that income, so that he’s not starting off life by relying on debt just to put food on the table or gas in the tank.

I love seeing my kids’ joy in working, earning their own money, and having complete freedom in how to spend it. Our daughter just turned 14, and has been dreaming of buying a smart phone for the last year. We’ve talked quite a bit with her about it, and made it clear that it would be her purchase, and her responsibility. We weren’t putting any money in her allowance for a luxury item, or to pay for a monthly smart phone plan. The plans she was able to find for the phone she wanted started at $40 per month, with most being $50. A two-year commitment was out of the question – we weren’t about to sign her up for that, so a no-contract monthly prepaid plan was her only option.

In the end, she settled for an “almost” smart phone, for just $29.99 (which she paid for with birthday money) and the monthly top-up will be $30.00 – which she will pay for out of her babysitting jobs. The way she sees it, that’s just three babysitting jobs per month, and she will have enough to buy the next month’s top-up. The way I see it, she now has motivation to go out and beat the bushes if the babysitting jobs aren’t popping up.

She has a clear line in her mind drawn between “work” and “reward” – and she doesn’t come to us asking for $10 or $20 for the latest thing she’d like to buy.  Life is good!


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