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.

Comments (Archived):

  1. awaldstein

    Yup, learning to live on a budget is a life skill.My parents gave us almost nothing monetarily as they didn’t have it but they prepared us well.

  2. Ella Dyer

    Budgets can apply to all resources; it is really about prioritizing and choices. Kids need boundries and budgets are one of those boundries that are very helpful. The children in our life are also encouraged to consider the phrase “give first, save next and enjoy the rest” when it comes to cash and other gifts they may receive. #ThanksForBeingAParent.

    1. Gotham Gal

      i like that. great phrase.

  3. Brandon Burns

    My parents were extremely diligent in how they taught me about money and budgeting. It’s a life lesson I take for granted, but also benefit from everyday. I’ve had many friends ask me for money to help the out of a rut, but I’ve never ever been on the other side of that.Except when it came to raising money for a business. Ha.

    1. Brandon Burns

      I wonder if never needing to ask anyone for money in your personal life makes it harder to raise funds in business? We’ve all seen the reports that show that most startup founders come from high income homes — I wonder if those parents were as good about teaching their kids how to live on what they’ve been allotted as you and Fred have been.Hm…

      1. Gotham Gal

        good question. my guess is most of those kids have the luxury of taking risks early on

        1. Brandon Burns

          True.In other news, I’ve taken a risk and moved to Portland and taken a full-time job. I certainly didn’t see either of those coming, yet here I am! More on that here:

      2. LE

        Safety net (whether real or perceived) is a big factor in risks that you can take.

  4. Pranay Srinivasan

    In a perverse way, living middle class helped mevalue money a lot and running a startup helped me think about goals independent of money.Your post however is a great lesson about building responsibility without “manufacturing hardship” or creating entitlement.I believe that is so much harder than when you really have no choice about how much to offer as an allowance.

    1. Erin

      Yes, “manufacturing hardship”- what a phrase. My dad paid us 25 cents a week for — at least what we thought was– a lot of work every Saturday, and I still very much struggle to understand that my work is worth anything. You could have the worst, dirtiest, scariest chores and you’d still have to save up for two years to buy a cabbage patch doll- like why even bother at that point? Mind you, my siblings learned different lessons from that experience- I think what you take away from your chores-to-wage ratio might be personality-based.Then when I dated a wealthy guy a couple years ago, I was aghast that he would spend money on me- I was like put that wallet away! What do you think you’re made of money? When he bought me things I got so emotional- it gave me anxiety. It opened up a lot for me to process.This was such a great post- there are certain things I’d like to do differently with my future kids and this helped!!

      1. Gotham Gal

        What seemed like an insane amount to you was probably not to him. It’s all thru someone else’s eyes

        1. Erin

          True, true. I live down the street from my childhood home- where the garden we had to work in was- and sometimes I want to peek over the fence to see just how big that garden really was.

  5. Mario Cantin

    A lot to be learned from here…When you say it costs money just to walk down the street in NYC, I take it that you’re figuratively referring to the high cost of living there. It couldn’t possibly be that the city has found a way to monetize pedestrians, ha ha!

  6. TamiMForman

    I started my kids with allowances at 5! They are tiny — $5/week and they get a “raise” on their birthdays of $1. The impetus for it was the perpetual “can we buy a toy this weekend?” question. I didn’t have a good way to answer that that didn’t feel random. Now it’s up to whether they have money. They are still a little too little to make fully reasonable choices, but that’s okay for now. As I read somewhere, better to make a money mistake with $5 than with $5,000! Part of the allowance goes to tzedakah which they decide what to put toward (with our help, of course). Trying to instill the concept of giving back, too. My children are growing up with WAY more privilege than I had, so I struggle with finding the balance.

    1. Gotham Gal

      I found at too early an age it’s a tough one.

  7. LE

    now it is not so easy for kids that age to get a job.If anything it’s much easier for kids to earn money (whether a job or not) than it was back when we were growing up. You could do something as simple as selling things for people on ebay (I had a nephew that did and does that) or you can simply go door to door and cater to any number of things that suburban homeowners need done (replace light bulbs is only one example) and learn valuable business skills at the same time. (I did car waxing was as easy as going to a nice neighborhood and knocking on doors. I did legal photography was as easy as giving out business cards to personal injury lawyers. And a bunch of other things. All with no competition since nobody else was doing that type of thing.)For getting a job they can simply take a walk through any office park (if in the suburbs) or small office (if in the city the large ones don’t let you walk through) and offer to do office work or any other help needed. I have had offices in several office condos and never ever once (over the course of many years) did I ever have anyone show up and ask if there was any work! Yet I have had neighbors and others in the same complex (medical) (including me) wonder where they can find someone to help out on a part time (or even full time) basis or during holidays. All it takes is a bit of knocking on doors which is something that I did when I was back in high school and college (and where I got the money to start my own business).Now of course, and this is important, if you are going to simply apply for jobs that every other kid wants sure you will have a hard time.Part of the problem is that kids look at college as having fun. They should be thinking about strategies starting in their 2nd or 3rd year for what they will do when they graduate.

  8. LE

    My kids are already older (one still in college, one graduated and living in NYC) but I have two step kids. Much of this is a matter of attitude. I just made my two step kids earn money by cleaning the kitchen floor every single night (they are 11 and 13). They also have to take care of a pet and honestly I am not that far from having them come to the office to help out (like I did when I was younger) to earn money by doing office work or whatever I can get them to do. This was tremendously helpful to me (my dad had a wholesale business) and I learned a great deal from doing that.When my wife wanted to get a kitten I said “ok I will agree. However if we get the kitten the kids will be 100% in charge of feeding, cleaning up and doing everything. Additionally they will pay for 1/2 of the food for the kitten as well”. Was the deal I negotiated and demanded. At first I told them 100% they pay and when they didn’t balk I told them they should have negotiated me down and let them go with 50% to be fair. (They learned that lesson so they won’t make that mistake again.) Ditto they wanted a hoverboard (over my strong objections) I said “ok you pay for it then out of the money that you earn.”.

  9. Steve G

    Many children who grow up in Manhattan hang with some very well off kids who have second homes in Hamptons & the sense of entitlement is palpable. When you say you approve post college subsidy to keep your kids living in presumably Manhattan, what amount range are you talking about?

    1. Gotham Gal

      everyone has a different range based on the lives they live. some people might think it is absurd how much we give our kids while other might think it is not enough.what you deem appropriate between you and your kid to manage their lives in a way that makes sense at their age and what their needs are is different for each family.

      1. Steve G

        Well, if the point of your post was a budget, but yet one of your goals is to keep the kids from having to live in a walk-up building on Allen Street, and to be able to travel at will to the Hamptons, perhaps the next GG column about this should focus on what your friends and you have talked about in terms of how much cash subsidies to give to recent college grads for a period of the first 3-5 years. Look forward to reading it!

        1. Gotham Gal

          it is something i do not talk to friends about. it is only a convo with the kids and us. as they start to make more money, we start to give them less. pretty simple

  10. pixiedust8

    Interesting post. My dad’s partner embezzled a lot of money when I was 18, so I was on my own. My husband always says I manage money better than anyone he knows (although I’m not so disciplined anymore, since we have “enough” that I don’t have to worry). I chalk a lot of that up to having to literally survive and budget all my food and housing money. Being that poor then made me “used” to it, and I budgeted to work two jobs and pay off all my college debt quickly. I will probably not help my daughter in early adulthood–I feel like it’s important to know what it’s like to HAVE to live within your means and I honestly think it’s important to experience having limited funds.

  11. pointsnfigures

    We raised our kids exactly the same. We encouraged them to get jobs to pay for expenses. They babysat mostly. Both our kids had some sort of job while they were in college-I didn’t do that. We don’t give them any money anymore. They are both graduated-but we pay for stuff when we go out, etc. They live together now and pay their own expenses. One started her own business, and to support herself, she got a job that allows her to do both. Raising kids with a respect for money and the scrappiness to figure out how to earn it is important.

  12. John Thorbeck

    How I wish money, structure and timing had been aligned to teach my kids about money. The entrepreneurial life, however, imposed a few lessons that I did not anticipate. I told my wife not to bother the kids with our income uncertainty, advice she completely ignored. When money was flowing, we sent our son to China to encourage his high school Mandarin. The next year, we said the money was not there to go back. He said he would look for options, finding a US Dept of State fellowship for strategic language study. He became a finalist, but noted almost all applicants wanted to go to China. He pivoted to Russia, reasoning his chances were higher to pursue intensive summer study in Russia in a language institute. He won. That program led him to a Boren Fellowship from the US Dept of Defense, paying for his 2015 year in China. At 22, he is fluent in both languages, paid entirely through fellowships and as a college tutor. Now that money is not so tight, he says he doesn’t need any extra help, a proud but resourceful cheapskate. Our daughter was also sensitive to income uncertainty, asking, what college can we afford? We said to aim as high as possible since that was where the most assistance might be, if needed. She also said she would take care of all spending money through babysitting, securing a select group of families as recurring clients, plus lifeguarding. She, too, is a budgeteer, and won’t pay full price retail. Her college? Cornell. Maybe my kids would prefer not to be like Dad, or maybe they accept that being an entrepreneur is not steady or secure. In both cases, they lived the lessons, did not complain about wealthier friends, and set budget goals and earned them. Mom and Dad were coaches but were not the teachers.

    1. Gotham Gal

      we had a friend who was in the chinese food business. mega ups and downs. cash in the mattresses.

  13. atg

    i feel conflicted about this post because while I have always admired how open you’ve been with your kids regarding finances and the values you seem to have instilled in them generally, and as, I think its a hard message to sell when you are providing for your kids so that they can still live the way they are accustom to. I don’t begrudge anyone for it. I wished my parents hadn’t cut me off when I started my first well paying job, which after taxes and rent somehow still couldn’t buy me the life I was used to. At the same time, Learning to budget when its your own money and when there are no real cushions in the long run is very different than having a supplemental income that isn’t earned and will always be there. I think the conversation is an important one though and I appreciate you starting it.

    1. Gotham Gal

      Trust me. The supply is not endless

  14. Brian Lund

    Great piece!

    1. Gotham Gal


  15. jason wright

    this post points to why a truly progressive society would embrace Basic Income Guarantee.i have hope that blockchain tech will address regressive economic, labour market, and social structures.

    1. Gotham Gal

      what a concept!

      1. jason wright

        blockchain will take us much closer to ‘perfect information’, and then regulators and policy makers will have the data they need to avoid the excuses they make for the mess societies are in.