successful allowance need 2 ingredientsAfter years of teaching my kids about money I know that successful allowances need two powerful ingredients.

My allowance as a kid failed to prepare me for the real world. Adulthood hit me like a hammer with that never-ending stack of bills. Then came parenting, a life-changer that arrives without a guidebook for allowances.

Was not prepared for adulthood

What was missing from my allowance experience? I had money, but not much. Money itself wasn’t the problem.

Money dropped in my hand here and there, now and then. Like any kid I loved handouts–my entitlement. No strings attached until childhood became history.

What was missing? Later, as a mother considering allowance for her kids I finally saw the problem. As a kid, nothing pushed me to manage my money. I had no reason to control my decisions. 

Money simply flowed from my parents through me to some cash register. Of course, I learned nothing about managing money because I had neither responsibility nor control.

Consequently, I was determined to create a successful allowance plan for my kids. How was I going to create something that took them from pre-school to high school graduation? What experience could prepare them to stare down that stack of bills with no fear? How was I going to give them control and spending responsibilities? 

My kids money consisted of a combination of regular allowance, extra for certain chores, and some incentive opportunities. Early on I used a written, no-cash account, where they kept track of their money as a number. But then what? 

Kids need responsibility and control

The solution was quite simple. We would transfer control of money we would spend on them anyway to them to manage. They would have age-appropriate expenses that would grow with their inflow of funds from us. 

They would have complete control to manage their financial resources in the safe environment of childhood. Their mistakes would be educational rather than disastrous. 

In essence our message to our kids put them in charge of their money and their decisions. The speech might go something like this: 

Hey kids, this is your money. You are responsible for certain expenses. And, by the way, if you manage your money well you’ll have more to spend for fun. You are in total control. You will make good decisions and sometimes wish you had made different choices. As your parents, we can offer advice if you want it. But know that we’re not here to bail you out. Learning to manage your money is important.

Successful allowance ingredients

As a parent, you can do this by setting up a no-cash allowance and providing the resources they need (money), giving them control (while you bite your tongue), and assigning responsibility for appropriate child-related expenses, 

“Yes, Johnny, you must pay for your school supplies with your own money.”

When your kids own the money and the decision, they also own the result. If the new toy breaks on the first day they cannot blame you. 

If they ask, “Why did you let me buy that?” your response is, “It’s your money. It was your decision.”  

The ability to control one’s money provides the power to make choices. As in life in general, control without responsibility can be dangerous. Yet responsibility without control is unrewarding and frustrating. 

Managing money is a combination of knowledge and practice. One without the other is ineffective. Create a successful allowance system in your home to prepare your kids to be financially responsible as adults.

Be proactive when your kids ask for money; they are ready to learn

When in your life have you experienced the frustration of having responsibility with no authority to make decisions?