How Much Allowance Should You Pay Your Teenager?

I bumped into an old friend this week at Starbucks, and he hit me with one of the all-time classic teen parenting questions:

Bill, how much allowance should I give my teenage son?

The short unhelpful answer: “it depends” — of course.

A longer, more helpful response? Here’s what I would suggest when it comes to allowance for a teen. (Note: I’m assuming it’s during the school year and your teen isn’t holding down an outside job. I’d recommend a job during the summer if possible and adjusting things accordingly):

• Decide on the rough categories of things you want your teen to be in charge of buying — weekday lunches? clothing? entertainment? I’d try to keep it pretty simple. Don’t boil the ocean here. If you make it too complicated, you’ll struggle to consistently follow through.
• Throw in a small amount for “random wants” — basically pocket change that your teen can blow on stupid stuff or, if motivated, squirrel away each week to save for that special item. Having to delay gratification and go through the extended act of saving is really key here. (See the famous marshmallow experiment.)
• Have your teen propose a simple high level budget for the above. Review it together and revise until it’s acceptable.
• Base your allowance amount on that budget.

The bottom line: comparing absolute allowance amounts with peers is pretty much meaningless. Families have wildly divergent expectations about what expenses their kids are responsible for covering and what constitutes a wise purchase given each family’s unique financial situation, money values, etc. That’s why I like the “budget-based-allowance” approach vs. the “but Johnny and Suzy get $X” whine-fest. Logical. Easy to explain. Easy to defend. Plus, when teens help come up with the budget, they feel ownership. They’re bought in. You’re virtually guaranteed to have less complaining and begging downstream in my experience.

Sometimes, it’s helpful to keep a few separate allowance buckets. For example, I had a separate use-it-or-lose it clothing allowance arrangement with my daughter. She couldn’t use clothing money for other stuff, but she could apply her entertainment budget to clothing if she wanted to. I also made her clothing allowance annual instead of monthly or weekly. I wanted her to wrestle with managing a large sum of money over an extended period of time. Experiment a bit, and try whatever tweaks make sense for your teens and family situation. Remember, you can always fine tune things over time, so don’t over analyze it.

Another thought: I’ve made several loans to the teens over the years for big ticket “needs” like a laptop. In the laptop case, the loan amount is for the delta between the most basic model and whatever fancy-pants, high end model they think they “absolutely must have.” I “garnish” their allowance to pay it back over a year or so. That way, they really appreciate how much those things cost as they see the payments going out each week and have to cut back on their other spending. The added bonus: they invariably take waaay better care of the things they buy that way. Again, it’s all about ownership and shared skin in the game.

A parting thought: for teens and college kids, prepaid cards are a really good option. I’ve been using prepaid cards with my 16 year old son for the last several months, and I’ve been very pleased with the results. There’s no worry about running up a debt like with a credit card. Prepaid cards are minimal hassle to get and low commitment relative to a full fledged checking account at a bank. All good things when it comes to dealing with the combustible mixture frontal-lobe challenged teens and money.

I’ll leave you with a list of teen prepaid cards to consider:

Teen Prepaid/Debit Cards

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