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 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 (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 big 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?
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We had a similar system to yours. Chores were not tied to pocket money although the kids could choose to do extra. When H turned 16 and wanted a little bit of extra money, she took over sorting all the clean washing into baskets for each person —a job I was glad to get off my plate. She passed that on to S, who then passed it on to E. E also mowed the lawns for a while, which we had been paying for anyway. Kids paid for their own outings and anything else extra they wanted other than clothes (they wore school uniforms so we were ahead there) and food at home, toiletries etc. We would buy them something special for their birthdays and Christmas, so if there was something they wanted during the year, we told them to add it to the list, and we would see. My eldest says it was a good system. A collegue from her work was complaing about her son who wanted all these things and H was like, “Why are you buying him things when it’s not his birthday or Christmas? LOL.
Melissa, we have A LOT of overlap.
I had to laugh at: “Why are you buying him things when it’s not his birthday or Christmas?”
This sums things up for me. Generally if my kids don’t need it or they want something beyond what seems reasonable to me… it waits for a birthday/Christmas, or they need to save up to get it!
Sounds like a nice system for the kids to learn how to handle money.
I never had an allowance. We did have little savings accounts ( with a passbook) to which we deposited quarters? Not sure where the money came from ( we’re talking a long time ago. 5.25% annual interest-I do remember- I loved the idea I got free money!) My dad also modeled charity by giving us quarters to put in the collection each week at church.
We mostly saved our money once we started working. We would by treats ( a drink or chocolate at the mall) or occasional junk but parents paid for necessities.
With my own kids, no allowance. Kids got their birthday or Xmas gifts to spend or save. Once they got jobs, they are expected to save some and clear big purchases with us. ( college tuitions , we pay half, they pay half, after financial aid and all is calculated.) But a few of my kids have a hard time spending on necessities, most are thrifty, and one went off the rails in college and got into debt. So I think we did something wrong.
I think how you’re structuring giving, saving, and spending will serve B and I very well as they grow.
Wow! Those interest rates are a thing of the past (for a basic account!)
My mom also had a change purse (red leather) and it was filled with quarters and she would give us a few each week to put in the collection plate at church. We’re twinsies on that!
I hope our system serves them well. Ultimately, how they end up choosing to save and spend as adults is up to them. I realize we could do this now and they’ll abandon fiscal stewardship, but I figure we’ve given them the best foundation we can think of and the rest is up to them.
I’ve often that I could have done a complete 180 as an adult, based on my parents’ rigid savings requirements, but I didn’t. So I’m definitely conscious that while some of it relates to parenting, a lot comes down to personality!!!
Oops. I posted too soon!
You didn’t do anything wrong. Kids are their own people and get to make their own choices. You also have a very large family so it only stands to reason you’re going to have a range of money tendancies!
T gets £3.50 a week – it’s a UBI so not contingent on chores. It goes into his Monzo account and he’s got a debit card for it (which we hang onto). We don’t quite savings b/c it’s not a huge sum, but he will make a donation using his card. He does get a bit spendy after he’s accumulated £100 or more and I find the fact he sometimes makes silly purchases a useful lesson. I feel like I’ve made him quite cynical about brands, trends, etc, so he mostly spends it on fossils and Lego 🙂 We cover outings, etc, as he’s not earning any money obviously. He can earn money with extra chores – our chores aren’t super structured but we do expect cheerful compliance with requests for help.
We get £25 a week in child benefit (although I think we make over the threshold, and I keep waiting for someone to ask for it back) and just put that in an ISA for him – he can have access at 18, and should have a fairly sizeable sum towards uni housing costs, etc, as relatives do sometimes add cash. My grandma also puts money in a US savings account in lieu of gifts – with fairly strict terms that it’s to be used towards education.
I earned tons of money babysitting as a teen – and I always appreciated not having to ask for money, and being able to buy stuff my stingy parents would have scoffed at. But even now, we’re not very good budgeters. We make good money and have very low housing costs in comparison to what we might have gotten approved for, but I couldn’t tell you how much we spend in different categories. Like there’s always money leftover at the end of the month, we dont’ have medical expenses, etc. We’re selling the car and I think we’ll put half towards house stuff/mortgage repayments and half towards a 2028 Japan trip.
Agreed that silly purchases ARE a good lesson. We’ve witnessed a few silly choices lately and I feel like they’ve been great teaching moments. For the most part we haven’t belaboured the point, there are just natural consequences to spending money quickly and then discovering there are things you want to do and no spending money to do it!
I love when grandparents designate money for education!
My thoughts on budgets are it’s helpful to know where things are going, but I don’t ever have a specific cap on a category. I know some people need that framework, but I find it stressful. In general, I try to spend wisely and I know I could always tighten up my spending if situations changed!
I think it’s smart to allow the kids to make their own choices. If they blow all their fun money in one go, oh well, they will learn. It’s smart to do it now while they are young!
This kinda happened. Skin care! Aritzia!
And then someone was invited to the movies and had no money left to go. We were asked to front the money and said they could invite the friend to our place for a movie in our basement and we’d provide the snacks. But we weren’t going to cover the cost of a movie ticket (which also happened to be a movie they had JUST gone to see NOT on cheap night).
I couldn’t have asked for a more clear-cut teaching moment.
I think your system is great. I totally get why your parents made you save all your money, and it definitely worked out in many ways. But I think it’s good for kids to learn how to manage their money, and it’s also fun to work and then buy the things you want with your hard-earned cash.
We’re in a bit of a crisis (nothing big, just one in a series of many) with my daughter, money-wise. What worked with my son is not working out with her. She was supposed to have a job this summer but let’s just say it didn’t work out. The one good thing is that we bought the Florida pre-paid college plan for both kids, so her college tuition is covered (as long as she goes to a state school, which she will definitely be doing). Other than that her finances are in a bit of a mess. But- never too late to start over. I think we’ll go to an allowance system like you have with Belle, and if she wants more, she can GET A JOB. Sigh.
My parents’ financial situation was very different from our own. My dad was a Baptist pastor and my mom only worked part-time when we were little. Money was so, so tight, especially for my older siblings. So their tight purse strings were out of necessity.
I won’t say it didn’t come with baggage and it has taken me a long time to not feel afraid of spending. BUT I’ve made great progress and I don’t think any ill toward my parents. They did the best they could with the situation we were in.
Our situation is a bit different and we’re handling it differently, but it works for us. And, like I said in another comment, how the kids choose to apply these current lessons to future spending is up to them. I’m hoping they’ll be fiscally responsible and spend their money toward things that bring value in some form (experiences, deepening relationships, caring for others, bringing delight to themselves). But there will come a day when they’re completely on their own and I think I’ll know we did our best??
Kids are SO different. I get the sense Paul and Angie could NOT be more different in terms of their personalities, so it makes sense your approach to money would have to be different.
Fingers crossed she gets a job!
You’re so right to let them figure it out while the stakes are low, as you said.
We don’t do allowances but our kids start working pretty young and there aren’t many things they need financially before that point. We buy their first phone and they can upgrade with their own money later. They are expected to pay for their fun stuff (outings with friends, concerts, clothes unless they take me shopping with them bc I will happily buy them clothes they need) and then save for half of college, car insurance, and gas for the car. We provide the other half of college plus buy the family cars that they can use until they save up to buy their own (only the oldest has done that so far). It’s a fine line between wanting them to pay towards their future and also having them start adult life broke with college loans. Don’t even get me started on how they will ever afford a house – it terrifies me.
That’s what we did with Belle’s phone. We bought her a second-hand phone. She wanted to upgrade after a year (fair enough), and we contributed something like $200 toward it for her birthday and then she had to pay the rest. She bought it refurbished from Apple so it was less expensive (but still had a warranty).
We’re not to car expenses yet but that’s coming… SOON!!!
Housing—not just buying, even renting, is insane. It’s a completely different landscape than the previous generation.