Mom, can I buy a $5 app? Mom, I need $10 for the spirit week raffle. Mom, you know the new Soccer cleats we got last week? Someone stole them out of my locker. Mom, we’re having ice cream at school tomorrow for a fundraiser – it’s $3.00, can I have it please?

Teens are a bottomless pit when it comes to money - $5, $10, $25. Just for kicks, I looked it up, it costs around $250,000  to $275,000 to raise a kid (born in the past 10 years) to age 18. I think at least $150,000 of that is for shoes, apps and Reese’s, Oreos and Cheezits

You’re Listening to Speaking of Teens a weekly show delivering science-based insight to help you parent your teen or tween with less drama, fewer power struggles and more emotional intelligence. I’m your host, Ann Coleman – attorney turned parent educator.

I set out in this episode to answer a few simple questions about teenagers and money that have perplexed me for years. When my son was younger, my husband and I seemed to be endlessly doling over money, arguing with him about money, setting allowance amounts, and then changing them, tying allowance to chores, and then changing that, paying for grades and then not…it was a total crap shoot and a complete mess.

So, because all of this confused me so much, I figured you might need a little help with it too. I’ve done the research and I have some solid answers for you to the following questions: Should you actually pay an allowance or not? If so, how much? Should it be tied to performance? How often should you pay? How do you pay? Do you tell them how to spend it? What if they run out? What if they have a job?

Let’s start with the obvious question first – should you even pay an allowance? You may be thinking, well of course, doesn’t everyone? But actually, the answer is no, no they don’t. In the T. Rowe Price 2021 Parents, Kids & Money Survey, a solid 25% of parents say they do not pay an allowance. The survey didn’t get into the reasons why, but based on my own experience, it could be out of sheer confusion, or it could also be based on the inability to pay an allowance, that it’s too much trouble to keep up with or maybe for folks in the top tier, they just dole it over without a second thought. I don’t know but 25% is a significant chunk of the parent population.

However, according to both financial and parenting experts, paying an allowance is the better way to go. The consensus seems to be that allowance should start when kids start asking about money – even as young as age 5. Actually, a commentator from Kiplinger says, “If you wait until the teen years to give your child money-management experience, you've waited too long. Your influence is waning.” But I believe, just like with other parenting tasks, you can certainly make up for lost time if you haven’t started yet.

And, obviously, there’s no moral mandate here that you have to pay your kids an allowance. It’s an individual decision and you’re not going to ruin their life if you don’t go this route. But it does seem to be the best way to teach kids financial responsibility, the importance of saving, budgeting, appreciating what they have and to avoid instilling an entitled attitude. So, even if you have plenty of money to give, give, give, an allowance may teach them much more about how to appreciate that money and insure that they know how to handle it in the future.

Another major question is whether or not a teen’s allowance should be tied to some “contractual consideration”. In other words, just as in the real world, should they have to provide some sort of value to receive that money? Chores, positive behavior of some kind, good grades. In other words, should their allowance be conditional? Should it be decreased if they skip a chore, make a bad grade, or miss curfew?

Looking again to the T. Rowe Price 2021 Parents, Kids & Money Survey, 59% of parents said they give an allowance, but their kids “have to earn it” while 16% said they gave an allowance and the kids did not have to earn it (and as I mentioned earlier, 25% said they didn’t give an allowance at all)

Another survey conducted by phone in 2019 by The Harris Poll for the American Institute of CPAs found that 52% of Americans believe kids allowance should be linked to chores and 27% said it should be only partially linked to chores. And I’m a bit skeptical of this statistic (as I am with all statistics) – their survey says kids are doing about 5 hours of chores a week for their allowance – now, please email me and let me know if your kid does chores that amount to an hour a day – I would love to stand corrected!

The bottom line is that the majority of parents tie allowance to performance in some way.

But what do parenting experts (and even financial experts) say about this? Well, they say it’s a bad idea and is a set up for failure. Experts point out that kids should learn that everyone in the family must contribute to keep the household running properly – cleaning up, taking care of pets, helping out however they can without payment (because hey, mom and dad don’t get paid to do it). Likewise, they should be expected to do their best in school and to behave properly  - all without promise of payment.

I can certainly remember having these discussions with my son. Asking him to do anything there for a while got me the reply, “how much will you pay me” – which, needless to say, did not go over well with me. But this is the attitude we instill when we tie allowance to performance of some kind – which is completely opposite of what we’re trying to teach them.

Research shows that rewards and punishments don’t work in the long run. They may work temporarily but they don’t teach the lessons they need to learn for their future – it doesn’t change attitudes or produce lasting behavioral changes. Well known parenting expert Alfie Kohn says that “carrots turn out to be no more effective than sticks at helping children to become caring, responsible people or lifelong, self-directed learners.”

Researchers have even found, in several different studies, that kids whose parents often used rewards, turned out to be less generous that kids whose parents did not use rewards. Rewards, just like punishments, are considered “extrinsic motivation” because they come from a place outside of someone’s own inner emotional and cognitive decision making. As Alfie Kohn points out, both punishments and rewards “amount to ways of trying to manipulate someone’s behavior–in one case, prompting the question, ‘What do they want me to do, and what happens to me if I don’t do it?’, and in the other instance, leading a child to ask, ‘What do they want me to do, and what do I get for doing it?’ Neither strategy helps children to grapple with the question, “What kind of person do I want to be?” In at least a couple dozen fascinating scientific studies, it’s been shown that people in general just don’t perform well when promised a reward for doing so. The results are the same for the youngest of kids and the oldest of adults. So, you may obtain a short-term benefit from a child who wants to receive a reward, but the long-term benefit is just not there and controlling others in this way has been shown to hurt the relationship as well.

So, if you decide to go the allowance route then, the experts say it’s best to keep your teen’s performance – grades, chores, behavior, etc. totally and completely separate from the promise of an allowance. Remember those episodes where we discussed consequences and how they should be natural or at the very least, logical. Docking an allowance is not a natural or logical consequence of anything.

Now, how much do you pay? How on earth do you decide that? There is simply no hard and fast scientific basis for an answer here. I guess you could say, “it depends”. Parents do a variety of things. According to some experts, you should pay the money equivalent of half a kid’s chronological age each week. So, at age 10, you’d pay $5.00 per week. Others say you pay the equivalent of their entire chronological age, so at age 10, you pay $10.00 per week.

Still others say they find out what other parents in the neighborhood are paying and match that. You really have to decide what categories of expenses that allowance is meant to cover and what are you still going to cover. It’s important to make that very clear up front. According to some, the goal would be to allow them to buy small things and still have enough money left over to save up for bigger items they really want. I don’t know but I don’t see that happening at $10.00 a week – just sayin’.

Another strategy is to determine about how much you spend on them for miscellaneous items like stops for snacks after school, movies and other entertainment on the weekends, impromptu small purchases now and then, average it out over time and pay that as an allowance – so now, they’ll take care of all of those things themselves. As they get older you could add in bigger ticket items like clothes, shoes, things for school and let them take on more responsibility budgeting for these things.

Here's what the T. Rowe Price Survey said about the weekly amounts parents pay their kids for allowance:

35% give between $11-$20

22% give between $6-$10

22% give between $21-$50

14% give $5 or less

7% give $51 or more

Now, they didn’t divide this up by age, so we just don’t know. But roostermoney.com’s” 2021 survey shows the following weekly averages for ages 10 through 14

Age 10 - $9.85

Age 11 - $11.15

Age 12 - $13.11

Age 13 - $14.80

Age 14 - $15.70

14 was the oldest because this is a kid’s financial app brand, but if you look at the trend, it looks like it averages around $1.75 above their chronological age.

But no allowance is going to serve the purpose of teaching them financial responsibility if you end up without clear boundaries about what they will and will not be paying for, how much money they get each week, and then sticking to it, no matter the consequences. We’ve talked about natural consequences in several episodes, and this is one area where it’s easy to let them learn lessons through these natural consequences. If they are mean to pay for certain things and run out of money, if you bail them out, they’ve learned absolutely nothing. If however, they run out and have to skip lunch at school or forgo the movies one weekend, they are much more likely to learn how to budget better. Letting them learn the hard lessons from their mistakes is critical.

And speaking of them running out, we’ve been speaking in terms of weekly amounts, which is normally how people calculate it, but it doesn’t have to be the way you pay it. Some people say it’s better to pay it monthly as kids get older, so they can really work on budgeting for the entire month. This is really challenging for some kids but so much better for them to learn now than when they have a car payment and a house payment due on the 15^th of the month and they’ve already run out of money.

How do you pay the allowance? Well, there’s good old cash, which can of course be lost. You can open them up a bank account at your bank and could transfer the money directly into it – be careful it’s not tied to your account for overdrafts and of course many banks now have special accounts and services just for teens. Of course, they can always lose a card too.

Then there are apps like Venmo or Cash App (but for both, they would need a bank account).

There are also apps just for the purpose of teaching financial literacy to teens. Some have actual bank cards that come with them, and others are used basically like a cash app or Venmo but without a bank account, it appears. Two that looked good to me (that track only – no money goes in) are Bankaroo and Guardian Savings and two that are actually tied to a debit card that apparently, they provide, are Greenlight and GoHenry. Even if you go with a different way to pay them, a tracking and goal keeping app wouldn’t be a bad idea. All of these have great reviews so it’s something worth looking into for sure.

What about paying kids for “extra” work or chores they do around the house that are not on their usual list. Say they’re responsible for cutting the grass every other time (sharing the chore with a sibling) but come fall, there’s the giant leaf blow-out. You could of course, just consider that part of helping out around the house or you could pay them a bit on top of their normal allowance. Again, so much of this depends on your disposable income and the precedence you’ve already set regarding chores and extra work. But it’s certainly not a bad thing to pay for extra work above and beyond the norm.

Now, what if they have a job? Should you still be paying them their $14.00 a week on top of the $200.00 a month they’re now earning at their part-time job? Well, that appears to be a matter of personal decision-making. Some say kids shouldn’t be penalized for working by docking their allowance while others say, the reason they received an allowance was because they weren’t working yet. But if we look at allowance as something to teach them financial literacy and not something they earn by doing chores, then perhaps they should still receive it – or at least part of it.

This sort of hinges on what kind of guidance we give them on their money. The AICPA survey from 2019 that I mentioned a minute ago – it found that while the majority of Americans said that paying an allowance was to teach their kids about being financially responsible and learning the value of a dollar, that’s actually not happening. The survey found that allowance is rarely if ever saved and mostly spent on “outings with friends (45 percent), digital devices or downloads (37 percent), or toys (33 percent).”

So, our guidance about the money we give them is significant. Using the tracking or banking apps, helping them make decisions about what to buy and what to save for, helping them determine how much to set aside in savings, how much to spend and how much to maybe donate to charity. Teaching them about stocks or bitcoin, interest rates checking accounts and overdraft fees. All those adulting-type things. We’re missing a great opportunity if we’re simply handing over money and letting them blow it as they see fit.

So, the experts say sit down and make a plan with your teen about their allowance. As with anything at this age, remember to support their autonomy by discussing things, not by mandating and demanding. Talk to them about the importance of savings and how it might be used for emergencies. Help them actually open a real savings account with a little passbook and determine how much they should put in each week. It doesn’t have to be much but should be consistent so they can see it grow. Talk to them about whether they will put all their birthday or holiday money in savings or just a percentage of it. I took all of my graduation money and rather than spending it at the beach, I invested in stock that I sold years later at a pretty good profit.

Talk to them about selecting a charity they’d like to support, even if it’s just a couple of dollars a month, giving to charity and learning about that charity will make them feel part of something bigger than themselves. And if there’s a particular thing they want to save up for, help them determine what they can put back and how soon they can expect to have enough for it.

And if you haven’t already, if you have a 10- or 12-year-old, now would be a good time to talk about car expenses, saving for a car or saving for college, depending on the family finances. Even if you can outright buy them a car, having them work and invest in that vehicle with you, is again, an excellent financial lesson.

So much of what you teach your kids will be predicated on your family’s financial situation, your values, what you learned from your family and what you want to teach them about money and how to spend and save it.

My parents were both born during the depression. They grew up seeing their own parents struggle to make ends meet – no great wealth in my family. Neither of them could afford to go to college but they were scrappy as we say now and did very well for themselves. But even after they’re 40’s and were living in a really nice waterfront home, and able to buy whatever they wanted, my mother was still washing used aluminum foil in the dishwasher and saving paper scraps and stapling them together to use for grocery lists. They liked to save money just to see how much they could save – they rarely spent money on anything other than me and my brother. Needless to say, I’m a major bargain shopper and buy virtually nothing at full price and thrift stores are my happy place.

If you want your kids to relate to money the way you do, or even the opposite of the way you do, you’ve got to get in there and start teaching…and an allowance is certainly a great place to start.

So, determine the amount you’re going to pay, base it on their age or what the average is but of course, within your family’s budget. Don’t tie that allowance to performance of any kind. Their performance should be motivated internally, not by money.

Pay them weekly starting out, but then move to monthly as they get older. And, as they get older, add in all the things you buy for them and start letting them handle it, help them decide about savings and charitable giving and all the things about spending and saving that you think they should know. If they run out – don’t bail them out (unless you want to still be doing it 15 years from now). Set boundaries but be sure to include them in all the decision making to support their autonomy. I wish I could say that all your teenager money woes are just going to magically disappear now, but we both know better.

Speaking of Teens is the official podcast of neurogility.com, an organization I started to educate other moms and adolescents about emotional intelligence.

Go to neurogility.com/herewego to find all our free parenting guides and e-books to help you learn more about your teen and how to parent them in a way that increases their emotional well-being and keeps them safe.

You can go to neurogility.com/20 for this episode’s show notes and transcript.

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If you’d like to get in touch, please reach out to me at acoleman@neurogility.com – I read and reply to all my emails and love hearing from you.

Take care and I’ll see you again next week!