Allowances: teaching teens how to manage their money
My husband is an excellent financial manager. This has proven important in our marriage since I’m partial to words, not math or anything remotely associated with budgets. Charlie’s excellent Warm and Fuzzy Budgeting post was preachin’ to his choir.
As is often the case in marriage, the way we were raised informs the way we parent. For instance, I received a weekly allowance as a child but my husband didn’t. It’s understandable, then, that when we had children of our own I was in favor of an allowance and Tad wasn’t. After considering the pros and cons, we decided it wasn’t in keeping with our general parenting philosophy (perhaps another topic for another time), so we didn’t implement an allowance.
Last year, when our children were 12, 15 and 17, we had a change of heart.
With the goal of them learning how to handle money, we began paying them a bi-weekly allowance.
Our intent was not to compensate them for chores or link payment to behavior. I’m excited to share how we arrived at the amount and the surprising results of instituting an allowance.
Finding the “right” amount
Every family and each child is different, so this is not “one size fits all.” For an allowance to be an effective tool in learning how to manage money, take time to come up with a realistic amount. Take into consideration your child’s age, maturity level, and activities when determining the amount.
1. Decide expenses you’ll continue to fund.
From the outset, we made it clear what expenses we’d continue to cover to avoid future confusion or frustration. Included in our list for Parent’s Responsibility:
• clothes and shoes
• school field trips
• summer camp
• sports uniforms and equipment
• basic car-related expenses
2. Identify recurring, on-going expenses.
What are the regular daily or weekly costs you’re currently funding? For us, school lunch money was at the top of the list.
3. Determine expected, upcoming expenses.
With pulled out a calendar out and wrote down everything we could think of that typically happens over the course of a year:
• Youth group outings
• Birthday parties
• Fast food and snacks
• Entertainment (movies, music, video games)
4. A little extra for unexpected, miscellaneous expenses.
While we continue to pay for clothes they need, they’ll have to cough up the bucks for that Fun Run t-shirt; while we cover school field trips, souvenirs are up to them.
5. Make provisions for giving.
While we didn’t require them to tithe to our church, we encouraged them to support organizations or causes they deemed worthy and in need. Their choices range from organizations with global impact such as Compassion International, to their friends raising support for mission trips.
6. Plan for saving.
We chose to do this “on paper.” We created a spreadsheet where they could account for their spending by category. Once we determined their bi-weekly rate, we set aside 10 percent for big ticket items. Though those dollars never literally changed hands, they could see this amount grow every two weeks.
Photo from shutterstock
The remarkable results
I’m not sure what my husband and I thought would happen as a result of instituting an allowance for our children, but we’ve been pleasantly surprised.
1. Altered spending habits
Because it was now their dollars to spend, they were more careful about their choices. Before allowance, my youngest would easily spend our money for a weekly lunch card ($20). When it was his money to spend, he elected to take his lunch most days, reserving school lunch for only his favorite meals. It was also amusing–and very telling–to see their choices for friends’ birthdays. For those closest to them, they were willing to spend more than I had previously!
If there was something another sibling might enjoy, they pooled their money to make a purchase. Also, if one ran out, they’ve loaned money to each other until the next payday. They keep each other honest and honor paybacks.
3. Weighing the real cost
They’re thinking more carefully about their spending choices; now that the onus is on them. They are thinking beyond “today.” Their restraint has been a paycheck back to us!
4. Personalities confirmed
One of our children is a natural saver and will do without; another is a natural spender and will jump on any bandwagon. Implementing an allowance spotlighted these tendencies. While they’re still under our roof and direction, we help them find a middle ground that will serve both better when they’re living in the real world.
This is the part I’d rather not tell you. But I’m willing to share our reality check in hopes you’ll be encouraged and realize perfection isn’t the goal — the goal is to help your children learn how to manage money.
We’re not doing so well with the accountability part. Great in theory — tracking expenses on a spreadsheet is a marvelous tool for visualizing where money is going. But after the first few months, we were no longer diligent to make sure the kids kept up with it (they aren’t).
The bottom line is certain, however. They are learning how to manage their money!
Their spending has become more thoughtful and intentioned, and although allowance was never tied to household chores, they seem to do those more willingly now (or maybe that’s just my imagination).
I had worried we waited too late to begin an allowance, but the timing–and their response–indicates it’s never too late.!
An important note: In my opinion, allowances stop when our teens find outside employment.
I know there are helps out there for teaching younger children (Larry Burkett’s My Giving Bank or this piggy bank from Money Savvy Generation) about money — but what has worked in your home for tweens and teens? Are you a proponent of allowances? Why or why not?
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