Giving an allowance to your child will only get you that far. If you want to teach your teenage money management you need to set up an allowance that includes financial responsibility. Here’s how you do it:
- Determine your teen’s limit of responsibilities
It’s important to determine at an early stage which of your teen’s expenses falls under his/hers responsibility and therefore is a part of the allowance, and which expenses remain under your responsibilities and are not included in the allowance.
For example, your teen should be responsible for their entertainment, clubs, magazines, cellular bill etc. Their allowance should reflect it.
Lunch at school, clothing budget etc could be included in their allowance or left out, but the allowance should reflect the sum of its components.
- Determine the cost of each item in your teens allowance
Discuss and come to agreement with your teen on the cost of each item on the allowance. Be fair and realistic. Don’t be too generous, but don’t impose a too tight budget on them.
Use your past experience to determine a realistic cost for each item that don’t have a specific price tag such entertainment or clothing.
- Sum up the items
Sum up the amounts of your teens responsibilities. The result is the base amount of your teen’s allowance.
- Determine your teen’s chores list
Discuss with your teen the list of chores around the house. Differentiate between normal home duties each member of the family is expected to perform on a normal basis, and those that are over and beyond and that will entitle them for extra money. Set a price tag for each such chore.
- Let your teen choose their extra chores
Let your teen choose his/hers preferred chores from the list of extra chores. Discuss a schedule for each of the chores they choose and let it be their responsibility to perform these chores.
- Set up the final allowance
Add the amounts your teen will earn for each extra chore to the base amount from step-3. That will be your teen final allowance.
- Set up payment schedule
Discuss with your teen whether the allowance should be paid weekly, twice a month or monthly.
- Set up a schedule for re-assessment
If you’re just starting the allowance, set up a re-assessment after two months. When you are a year into it, re-assessment shouldn’t be done more then twice a year.
Allow your teen to appeal for unscheduled re-assessment in case of circumstances changes.
Before making changes to the allowance make sure your teen uses the money for its defined purposes, and helps them manage it if needed.