Allowance

Kids need to have some money because they need to learn how to spend it responsibly. We used to give our kids about $1 a year per age. We would save $1 and give a $1 at church, until they got to be teenagers.

At that point we figured out what we were spending on our kids and decided to increase the allowance to include clothing expenditures. So we took an allowance that was about $20-$30 a month at the most, and turned it into about $120 a month, so they got a budget that included their clothing responsibility. Then our kids were responsible for taking care of and providing for their own clothing.

We gradually started adding other expenses because they loved the freedom of being trusted to be responsible for their own behavior. They made a few mistakes along the way and spent their money irresponsibly once or twice, but actually trusting them to make their own decisions about their expenditures was really the key for them succeeding.

Every year we would renegotiate their contract and figure out what their budget would be by tracking expenses and we kept expanding on that allowance until it finally became their entire budget. In their later teen years, their entire budget was over $1,000 because they were paying for private school, their car insurance, their clothing, their school supplies and all of their personal expenses. If they were frugal with their expenses, they would have more mad money at the end of the month.

The result was that both of my children turned out to be good savers, hanging on to their money and spending it very cautiously. This in turn made them in control of their environment and in control of their choices. It all starts with allowance.