Money and kids seems to be a tough topic

imgres-1I am on a listserv and one of the questions someone asked the other day was around allowance.  Their kid was going off to college and they were not sure what is the right amount to give every month.  I chimed in because it is a topic that I think is as important as talking to your kids about sex, drugs and alcohol.  I probably have written about this before but am going to take an opportunity to do it again.

How do you teach your kids to understand the value of a dollar and learn how to budget.  When I grew up I got a paid job at 15 and was juggling 3 paid jobs at 16.  Making money was never a problem, now it is not so easy for kids that age to get a job.  Babysitting is one way but the options are slim.  Many of them end up in unpaid internships to beef up their resumes and that continues through college.

I see many parents just give cash to their kids all the way through college and then expect that miraculously they will know how to budget their income when they get a job.  Everything is a learning experience and education about this starts at home.

We began in high school.  Every month a certain amount (that was agreed upon) went into their debit account.  It was up to them to get through to the next month.  That money was for miscellaneous things at this point such as a movie and pizza with their friends.  The amount got a little bigger by their junior years because they could go out for lunch every day if they wanted and we were fine with it.  We also live in NYC and walking down the street costs money.  Every family is different.  Certainly they each learned at the beginning when they couldn’t make it to the next month they were screwed.  It only takes once.

Then when our oldest daughter turned 18 I went back over two years of expenses to see what we had bought for her from clothes to books, etc.  I added it all up and divided by 24 and estimated what she needed every month to live on. We agreed on a number.  When we travel it is all on us but otherwise it is up to them on what they use that money for.  If they choose to blow it all on a great coat and go without other things for a few months then that is their choice not ours.  They have to learn how to live on that budget.  Many lessons learned with that money but once they slipped they never slipped again.  You can carry the money over each month and build up an overage but you can’t over spend your wad before it comes into your account.

Fast forward we have two kids graduated and one still in college  We have not pulled the rug out from underneath them.  We want them to still live in a way that they are accustom to.  It is different for everyone.  The two graduates work and make a salary but they still get a monthly budget from us that just drops into their account.  At one point they won’t need that cash.

What is relevant is they have all learned to live on a budget and they understand the value of a dollar.  They manage their own money and do not have to come back to our well for more every month or weekly.  I am really glad we did this.  It empowers them just as much as it turns then into responsible adults early on.