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PAUL W. LERMITTE 

Subject: Allowances for working teens?

I've been trying to come up with a fair plan for my daughter, who just turned 16 and is now working about 15 hours a week a local shop.

We've very successfully negotiated the allowance issue, and have all felt good about it. She's a responsible kid, who has always done her chores, usually cheerfully, and has taken on additional tasks as needed or asked. Now that she's working, I'm wondering if her allowance should change or cease. Between school, work and her social life, she's often not home to take care of her "family" chores.

She now has plenty of spending money (she hasn't started saving). In the past, she has used her allowance to buy lunch (if she chose not to make her own), and whatever else she needed or wanted. We gave her extra money only for special things (school trips, etc.) and then, only to supplement her savings. I don't want to be punitive, but my instinct tells me that there should be some sort of change at this point. What do you think?

Thanks!

Thanks for your great question! There are not always clear answers in these situations, but I would like to give you some recommendations.

1. Keep on giving the allowance, and continue to encourage savings. Giving an allowance should not be attached to the completion of chores (see Chapter One of my book for more ideas on this). However, I do believe it's important for everyone in the family to be helping out. Perhaps you could sit down with your daughter and talk about what jobs she would be able to do in light of her busy schedule and when she will do them. Perhaps there are other jobs she could be doing that would not require as big a time commitment but would be helpful all the same!

2. If your daughter is working, she should be starting to put money into long-term savings (I recommend Mutual Funds) on a monthly or quarterly basis. I give more info. about this in Ch. 10. At her age any mutual funds she buys will have to be in trust with her parent. You could contact any reputable bank or financial institution for more information.

3. Another idea I suggest for older teens is to begin giving them budget experience. In Sept. talk with her about what needs she has for clothing, shoes, etc., what that will cost and what you can afford. Any extras she wants can come out of her own work earnings. Then, you can give her a lump sum that she will use to make her back-to-school purchases. If she spends the whole amount on 2 pair of shoes, don't make judgment, but don't bail her out either! She will have to make do with the amount she was given. This is a great teaching tool!

Some parents give the whole year's budget out at once; others give a monthly or bi-monthly amount. The important thing is that your daughter is learning to budget her funds to purchase the things she needs. There is a downloadable form on budgeting on our website.

Good luck! If your daughter is as responsible as she sounds, I'm sure she will rise to this opportunity very well!

Have fun making allowances!
Paul W. Lermitte

Subject: Will Grandma's generosity spoil my kids?

I'm reading your book dollars and sense and I would like to know your thoughts about a very generous grandmother who also gives the kids a $5 or $10 dollars each week? Also ,when is time to stop giving an allowance, 16, 17, 18? Should a 16 or 18 year old still get an allowance once they have a part time job? Hope you can advise. Great book! Thank you.

Regards, Mike.

Dear Mike,

In terms of your questions, my response is as follows:

Generous Grandmother situation:
I would recommend that you thank Grandmother very much for her generosity, but ask if she would consider giving larger amounts on a more structured basis (such as quarterly) for special needs, activities or investing. For example, this money could go into a savings account that is being used for a specific thing, such as a CD player, horseback riding lessons, or a long-term savings vehicle such as a GIC or Mutual Fund. This way the money is less liking to be frittered away on junk food and make-up or movie passes. Also, your children are able to learn about saving and general money smarts.

Allowances for older teens:
When teens get older, I recommend moving from an attitude of giving allowances to one of teaching about budgeting. (For more detailed information, see chapter 16, Making Independent Choices)

As long as your teen is living at home and going to school, I support giving them an allowance, but I also suggest you start to give them larger amounts of money to cover the costs of such things as school supplies and clothing. By doing this, you create opportunities to talk about budgets and responsible spending. Perhaps you could start by giving a monthly sum that they are responsible to look after. As they become more confident in their money management skills, you can start giving a quarterly or even yearly lump sum that is meant to cover the costs of their clothing, shoes, personal hygiene products, and any other expenses you want them to handle. The tough part of this is letting your child make mistakes. If they spend half their budget on a fancy coat, and then can't afford new underwear, don't bail them out! That's what learning money management is about!

Should a 16 or 18-year-old still get an allowance once they have a part time job?

Yes! The money they earn should go to long-term savings or investments. It can be included in the lump sump that is given monthly or quarterly (mentioned above) but make sure your kids are aware that you are doing that (mine keep lobbying to continue with a weekly payment because they like the regular cash!) The same principles of saving apply: the kids should be able to use their long-term savings for special purchases (such as a car or vacation spending money).

Hope this helps!
Good luck.

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