Tween and Teen Allowance and Income: Our System for Giving, Saving, and Fun Money

A few weeks ago, in a Happy Things Friday post, I mentioned wanting to come up with a more robust savings plan for Belle.

She’s been babysitting fairly frequently, and while I love that she’s earning her own spending money, it suddenly felt like time for a better system. She can earn a fairly significant amount over the course of a month…and that will likely only increase over the next few years.

When I was growing up, basically every dollar I earned went toward my future education. Thanks to my parents’ rigid forced-savings system and some scholarships, I made it through a university and grad school without any debt. I even managed to come out with money in the bank! This was an enormous gift.

But, I had also developed a tendency to feel guilty about spending money, even when I could afford something and the purchase was perfectly reasonable or even necessary.

We don’t want that for our kids. John and I want them to learn how to save money, but we also want them to learn how to spend thoughtfully and give generously. (Ideally, they’ll figure out how to balance all three while the stakes are still relatively low!)

A few people asked me to report back once we settled on a system and we’ve now done that!

We opted to handle earned income and allowance money slightly differently, so I’ll break that down below.

How Much Allowance Do Our Teen and Tween Get?

Both our kids started receiving an allowance at age 10. (I never had an allowance growing up, so this is new to me!)

From ages 10 through 13, their monthly allowance matches their age: at 10, they get $10 per month, at 11, they get $11 per month, etc.

At 14, the amount jumps to $50 per month.

Indy is still receiving the age-based allowance, while Belle is now in the $50-per-month stage.

Why the increase?

Teenagers have more social plans, stronger preferences, and more opportunities to spend money independently. The larger allowance also comes with greater responsibility for covering certain discretionary expenses themselves (see below).

Is Allowance Tied to Chores?

In our family, regular chores are not tied to allowance.

Both kids have household responsibilities because they live here and are part of our family. We don’t get paid to empty our own dishwasher or clean our own bathroom (if only!), and neither do they.

We occasionally pay them to complete extra jobs that fall outside their usual responsibilities. But regular chores and allowance are separate things in our house and that will never change.

(I’ve written before about some of our family rhythms in You Asked, I Answered: Chores, Choices, and My Childhood, but our allowance system has evolved a bit since then.)

How We Divide Allowance and Job Income

For Belle’s $50 monthly allowance, it shakes out like this:

• $5 for charitable giving
• $10 for long-term savings
• $35 for spending

For Indy’s $11 allowance:

• $1 for charitable giving (I just accumulate this over a series of months and then he can give a lump sum donation)
• $2 for long-term savings
• $8 for spending

For income, we use a similar system, but with a higher emphasis on saving since the dollar value is higher.

For example, the last time we sat down to sort her money, Belle had $445 in new income.

• $45 went toward charitable giving
• $200 went to long-term savings
• $200 went to fun money

The long-term savings go into a high-interest account she doesn’t currently have access to. That money is earmarked for future bigger purchases—like university tuition or a car, or something else Future Belle will be very grateful Past Belle helped fund.

All the rest of her money is available for her to spend however she chooses.

Why Don’t We Make Her Save Everything?

As I said above, when I was growing up, virtually everything I earned went toward education. That system helped me enormously, and I’m very grateful my parents prioritized saving.

But we want Belle to learn how to manage money herself.

Saving every dollar for her would teach her how to accumulate money. It wouldn’t necessarily teach her how to make decisions with that money!

*Her Aritzia hoodie was her own splurge; ditto the Adidas special edition sneakers (purchased on sale!); she needed a new pair of jeans on the trip, so we paid for those. And the hair is free genetics…

I want her to experience the pleasure of buying coffee with a friend! I also want her to experience the disappointment of realizing she spent too much on something that wasn’t really worth it.

We figure it’s better to learn those lessons at 15 when she has a strong safety net than at 35, when rent is due and her account is empty.

We don’t want to raise kids who are afraid to spend money. We want them to learn to spend in ways that align with their values—on things that bring joy, serve a purpose, or help other people.

What Do Our Kids Buy for Themselves?

There is no right or wrong answer here. (Well, I’m sure there are strong opinions on this, so you’re welcome to think my answer is wrong!)

We will always provide necessities.

There will be food in the house. There will be clothing that fits. There will be toothpaste and toothbrushes and body wash and shampoo. We will pay for school fees and haircuts. We will cover extracurricular fees and pay for all the gas needed to get them to various events and activities.

But if one of the kids has strong preferences about what shampoo they use or wants a specific pair of expensive shoes, that’s where their fun money can come in.

We also allocate a certain amount toward friends’ birthday gifts—generally about $30. If they want to spend over and above that, they have to foot the difference.

Last weekend, the kids went to a movie with a friend. I would have been inclined to pay at least Indy’s way—he isn’t working yet and gets a smaller allowance—but they chose to go on a full-price night instead of Cheap Night on Tuesday.

In the end they both happily paid for their own tickets, and Belle bought herself a drink and popcorn. (If we’re going as a family, John and I pay for tickets.)

That felt reasonable to me. The outing was optional, they chose the more expensive night, and they had the money available.

I will also buy general makeup and skincare products for Belle. But when she decided she wanted a specific Bubble skincare set, she was on her own for that.

Birthdays and Christmas are good times for us to gift more expensive or specialty items. In other words, they don’t have to personally fund every nice thing they own, but they also don’t automatically get every upgrade they want.

How Our Teen Handles Cash and a Debit Card

Belle is often paid for babysitting in cash.

She keeps a bit of cash on hand, but most gets deposited into her bank account.

She is officially old enough to have a fully separate account, and she has her own debit card. There’s a usage limit on it—I think it’s $200 per spend and $200 total per day?—which gives her some freedom while also putting guardrails in place.

The long-term savings are kept separately in a high-interest chequing account (she isn’t old enough to hold one of these accounts in her own name, so until she turns 16 the only way for her money to earn those rates is to be held under our name), so she can’t accidentally spend them during an enthusiastic shopping trip.

Her regular spending money is hers to manage.

What About Education Savings?

Both our kids have Registered Education Savings Plans (RESPs).

In essence, an RESP is a savings fund specifically for education after high school. The money can be used for qualifying programs at universities, colleges, trade schools, etc.

We contribute to both kids’ accounts each month.

The Canadian government also helps through the Canada Education Savings Grant, or CESG. The basic grant adds 20% to the first $2,500 contributed annually, up to a lifetime maximum of $7,200 per child. You know I am very keen on free money and I think it’s a great incentive for the government to support education savings. (Some families will also qualify for the Canada Learning Bond.)

If you live in Canada, it is definitely worth looking into the different options!!!

We use Embark for our kids’ RESPs. (If you’re Canadian and interested in signing up, I have a referral code: ELISAFRO239920 that would net us each $400.)

Beyond these monthly investments on their behalf (which should be enough to cover two years of post-high school education), our kids will likely need to fund part of their own education. That might mean using some of these long-term savings, working during school, and applying for scholarships. Probably all of the above.

Will Our Allowance System Change Again?

Probably.

The current system reflects their current ages, earning potential, and level of independence.

As Indy gets older, starts working, and has more social plans, he’ll make more in his monthly allowance. As Belle earns more, we may also tweak how much goes into long-term savings.

The goal isn’t to find a flawless formula and use it forever. It’s more about giving our kids practice handling money and appreciating the benefits of compound interest!

They’re learning to give some money away, save for a future they can’t fully picture yet, and make decisions about what’s worth buying today.

Sometimes they make choices I would never make, but that’s part of the process too!!

Your turn:

• Did you receive an allowance growing up? Was it connected to chores?
• How do you decide which expenses parents should cover and which things kids should buy themselves?
• What percentage of a teenager’s earnings do you think should go into long-term savings?