When to stop kids’ allowances

We are obsessed with the idea of making kids save their money. A recent article discusses when and how to wean kids off allowance AND still help them save.

Let’s get this straight: As parents we give our kids money and expect them to save some of it, short term, long term. Then we struggle with trying to decide when to stop giving them money yet we expect them to keep saving so they will have a good savings habit as adults.

Our kids know how to spend money; they don’t know how to manage money. Different skills entirely. Where in our allowance experience are we teaching our kids how to manage money for expenses? Are we forgetting that paying the bills is essential to financial stability?

The point is not so much when to wean kids from allowances, but rather how to transfer increasing amounts of spending responsibility to them over the years. For this purpose whether they earn the money or not is not the issue. This is especially true with teenagers.

Surveys show that most of a teen’s money is spent on entertainment (movies, music, games), clothing and snack food. We also know that teens, in general, are not spending money on housing, groceries, insurance, or loans. This creates a huge disconnect that guarantees a rough landing for many young adults when the real bills start piling up.

Parents can help their children transition to the adult world of money by creating a semi-independent stage where by the teen years they assume responsibility for more of their own day-to-day expenses, such as school, transportation, communication (cell phones, mobile devices), and education.

In our family our teens did not have part-time jobs. The sizable amount of money we provided to them to manage was money we would have spent on them anyway; we were simply transferring control and decision-making to them.

Whether the money is through allowances, work or a combination of both, by requiring kids to pay “expenses” they will be better prepared to manage money responsibly as an adult.

Here’s where parents can step up. To give kids hands-on practice managing money parents need to provide three equally important elements: money, responsibility and control. In my book, “The No-Cash Allowance” I provide parents guidelines for giving kids from age 3-18 hands-on practice managing their own money.

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