Help your middle or high schooler manage an allowance
An allowance can be much more than a weekly stipend—it can teach kids the building blocks of money management.
If you’re considering giving your child an allowance, you’re in good company: More than six out of 10 parents do, according to a 2012 survey by the American Institute of CPAs (AICPA), the most recent data available.
But having money and knowing how to manage it are different—and most American parents say their kids don’t know how to manage money.
So how can you help your tween or teen get on track toward responsible spending and saving? If you already give your middle or high schooler an allowance, or if you’re considering it, that weekly stipend can be a tool for teaching money management skills, including saving, budgeting and goal setting.
To start, consider having a discussion with your child about what you think he or she should get out of the cash beyond a little pocket money. During that conversation, you can discuss:
- How much you plan to give: The average monthly amount children receive is $65, according to the 2012 AICPA study, but parents often give younger kids much less.
- What you expect your child to spend the cash on.
- Whether your tween or teen must follow spending restrictions: For example, some parents may not want their children purchasing violent video games.
Every family’s payout rate and expectations vary. (Are chores required? Will you also pay for good grades?) And even if you choose not to give your children allowances, having a framework of expectations around money they may receive as gifts or from part-time jobs helps them begin to understand money management.
Once teens understand the expectations, they can think about their goals. Just like parents set financial goals—think retirement, a child’s college education—tweens and teens can make this a habit, too. Age-appropriate savings goals for middle schoolers include the pricey clothing parents don’t consider necessities, and electronics such as smartphones. High schoolers are ready to save for multiple goals, from laptops and the prom to longer-term plans, perhaps future college expenses.
Balancing saving, spending and giving
Just because your child holds the funds doesn’t mean he makes the spending rules: Parents get to determine how that allowance is allocated. Once children hit middle and high school, you can expect the allowance to cover a variety of expenses, including movies and hanging out with friends, after-school activities, certain clothing and maybe gas for older teens. There’s no doubt juggling those varied expenses can be tricky, especially at first. That’s why you may want to suggest your adolescent implement a budget or spending plan.
In addition to setting spending rules, more than half of parents require children to save a portion of their allowance, according to a 2012 survey from Consolidated Credit Counseling Services, the most recent data available. If you don’t, your child may not be learning as much from his allowance as he could. Experts recommend that children save 10 to 25 percent of their funds—and remember, these guidelines can apply to money teens receive as gifts, too.
Where kids save may need to evolve, too: By the time children reach middle and high school, it can also be useful for parents to encourage them to ditch the piggy bank and start using a real bank.
When you’re thinking about your child’s budget, consider the role of giving. Many experts believe donating to charity goes hand-in-hand with financial literacy. If giving matches your family’s values, then you might consider insisting that your child add philanthropy as a budget line item.
Forget the Jonses
When your child gets a raise is up to you, but just because your child’s friends receive more is no reason to upgrade your payments. Joline Godfrey, author of Raising Financially Fit Kids, recommends starting small and increasing the allowance—and the corresponding responsibilities—once your child shows he can manage the funds well. Some of the signs:
- He juggles his current expenses without bugging you for more cash.
- He successfully saves a portion of his funds each week.
- For some families, he still has enough money left over each month to give to charity.
When you do decide to give your middle or high schooler more money, Godfrey recommends you also consider increasing the expenses he is required to cover. If your child still wants more funds, encourage him to earn it by doing extra chores or getting a job—something that’s fairly common as children get into their teen years.
As your child starts regularly bringing in outside cash, whether from a fast food job or babysitting gigs, you can start decreasing the allowance. Some children may initially think this stinks—and tell you so. But you know you’re helping them to mature and become more independent.