Keeping Tabs on Your Teen’s Allowance

Once you’ve started handing over cash every month, your next goal should be working out how to keep track of your teen’s allowance.  Don’t worry, we’re here to help with some pretty simple ideas.

(Don’t worry, this will be fun!)

AccountabilityIf your teen receives an allowance, you need to have frequent accountability conversations to ensure everything is going according to plan.  These conversations will help you accomplish several important goals:

  • You will know where your teen is spending money, and if she’s sticking to her budget
  • You will have conversations with your teen about money – talking about what’s going well, and where she’s having problems
  • You will have the opportunity to discuss upcoming life events which are going to impact her budget, and give advice or make revisions to the budget and the allowance if needed
  • You will rest easy knowing that you don’t have to worry about your kid’s finances; she’s got it covered (at least for now)

Keeping Tabs: The Monthly Reconciliation

Honestly, this is probably the single hardest part of giving your teen a monthly allowance: tracking the income and expense.  Thankfully, it’s a task that you will be giving your teen to manage, so it shouldn’t be too hard for you once everything is up and running.

Here’s how it works:

When you hand out allowance, make sure you and your teen agree on the distribution of cash by category.  For example, a $160 allowance might break out into:

  • Clothing $40
  • Shoes $30
  • Food $10
  • Activities $50
  • Savings $20
  • Charity $10

Your teen will enter these amounts as “money in” to an envelope.  This can be done on a paper register, with six separate accounts, or it can be done electronically, using Quicken on the PC, or an online service like .  The important thing is that all of this income is recorded, and it’s put into budget categories.

Record All Expenses

Next, as your teen spends money during the month, she records how much is spent, and from which category.

At the end of the month, she adds up all of the expenses within each category, and subtracts this from the starting balance.  This is really easy (automatic, actually) using Goodbudget, and just a little more complicated using pencil and paper.

Finally, she will add up the amounts remaining in each of the budget categories at the end of the month.  Then she’ll add up all of the cash ACTUALLY in her envelopes.  Those two amounts should be the same.  If they’re not, then there was some money that got spent somewhere and not recorded.  If so, just go back and look at the balance by envelope to see which envelope is off-balance.  Usually this is enough to trigger a memory:  “Oh yes!  I bought a scarf at a kiosk in the mall!” and the off-balance can be fixed.

Don’t Worry: It’s Easier Than It Sounds

If that sounds complicated, don’t worry, it’s not. Keeping track of a teen’s allowance is something we go through in a lot more detail in our book, as well as in our webinar programs. We’ve also got some help on our downloads page.

This isn’t just busy work, it’s really an important life skill to learn: tracking expenses and keeping a budget.  I wish that I had learned to do this when I was a teen, instead of learning to do it in my 30s.  I would have saved myself from a lot of financial mistakes if I had.

We offer our kids a couple of incentives to do this reconciliation every month:

  • You don’t get next month’s allowance until we see last month’s reconciliation
  • If everything is in balance, we’ll give you a $5 bonus – fun money that goes into your pocket cash. (Pocket cash is “fun” money, that’s not budgeted, and not tracked.  You’re free to do whatever you want with it, as long as it’s not immoral or illegal.)

What happens if the reconciliation day rolls around, and things are out of whack?  And by that I mean, not just a little off, but totally messed up – that’s a topic for next time!

Coming up: Teens Behaving Badly: Allowance Disaster

Did you miss the previous article? Check out Your Kid’s Allowance: Five Secrets for Success

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