Allowances are a hot topic in the world of personal finance, and for good reason. While we’ve had this debate before it’s one that many parents are new to year after year (which is why it’s a popular post). It’s not just a topic you think about once and forget though. I find that our allowance system (much like our budget) needs flexibility and the flexibility to change as both our children grow and their needs change.
While I’m hosting a series on making over your money in 2013 (Centsible Money Makeover), I thought it’s also a good time to explore how and what we pay our kids for allowance.
To start you have to consider if you have your ‘oxygen mask’ on first. If you are struggling to pay bills, and living paycheck to paycheck it can be tough to use an allowance as a teaching tool. However it can help decrease the occasional kid related splurge, and allow you to save more yourself if your expectations are more clearly defined.
Questions to Answer about Allowances
- How much allowance is the right amount for your kids?
- What requirements of your children have to meet to get their allowance? Should you tie allowance to chores? Require that extra work around the house equals funds? Or tie earnings to schoolwork or grades?
- Will you allow your child to have full control over their allowance? Do you plan to teach them the value of saving? What about giving back?
- How will you give your children money? Cash? A savings account? Track it in a notebook or online?
- Where will they keep their money? A wallet? A piggy bank? The bank?
What about Teens?
As your kids get older allowances don’t exactly cut it for their increased spending needs, and your need to not dig out $5 every time they ask for last minute lunch money. That’s where a prepaid card can help. The SpendSmart prepaid MasterCard from BillMyParents is a great option for parents and teens alike to take their money management skills to a new level without worrying about overspending or allowing your kids free reign over your credit card.
SmartSpend Features & Benefits
The SmartSpend card has many great features including the following:
- Reloadable: Add funds to it anytime and from anywhere.
- Prepaid card: It is not a credit card or debit/bank card
- No risk of overdraft: No debt can be incurred, they can only spend what’s available.
- No credit issues for teens or parents: A huge benefit since many teens head into college and immediately go into debt.
- For users 13 and over
- MasterCard: The MC logo means it can be used anywhere MC is accepted.
Parents can get instant purchase alerts via email or text to monitor your teen’s spending. If you have an older teen you can set spending limits higher (say $50 purchases). You will also get alerts about the account balance so you can add more funds if your child is away from home and needs money as soon as possible.
Family & Friend Contributions
Family and friends can contribute to your teen’s SmartSpend card anytime. Whether it is holiday money, birthday cash, or even babysitting earnings; others can add to account without a login at anytime.
Allowance In Our House
In our house we’re adding a few tweaks to our current allowance system.
- All 4 kids are finally getting their own savings accounts. This will make it easier for them to track their funds and stay motivated.
- The younger kids get paid weekly an amount half their age.
- Saving %s were discussed and we opted to split it 50/50.
- The oldest now gets $50/month which should be sufficient to cover all his expenses as well as leave him funds for saving.
More Reading on Kids and Money:
- Teaching Teens About Money
- Kids and Allowance
- How NOT to Tach Your Kids About Money
- Teaching Kids to Manage Money Before They Move Out
- Teach Children to Be Charitable