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Kids & Money: Deciding When to Stop Paying Allowance

One of the ways that many parents teach their children money management skills is by paying an allowance. An allowance, whether a true allowance or payment for chores [3], provides your children with their own money to manage. The idea is to provide children with a way to develop good money habits from a young age.

At some point, though, it is no longer necessary for you to pay children an allowance. You have probably increased the amount of allowance [4] you pay as your child grows. However, as your child begins to make his or her own money, you can start paying less — or even stop paying allowance altogether.

Does Your Child Still Need Money from You?

Your first determination to make is whether or not your child still needs money from you. When your child is younger, and his or her options for earning money are limited, money from you is important. However, older children begin getting jobs, and earning their own money. At that point, you can revisit your allowance policy.

An after school job [5] can be a great way for teens to earn money. In many cases, your teen can earn more with such a job than he or she receives from you. Review your child’s income. Assess what expenses you expect him or her to pay. You can start encouraging your child to cover more of his or her expenses when he or she makes more money.

In some cases, your teen’s after school job may not provide enough money to completely cover what he or she is expected to pay. In those circumstances, you can continue providing an allowance, but explain that you will reduce the amount you pay, since your teen can supplement some of the money on his or her own.

Paying Allowance in College

My parents stopped paying me an allowance when I went to college. They stepped down what they gave me as I earned more from my job as a cashier at a craft store, and from teaching piano, and when I moved out, I was expected to be more responsible for my weekly expenses (I got a part-time job in the university cafeteria). However, in a way, my parents still gave me an allowance of sorts. While they didn’t give me a weekly amount, they did pay for my housing while I was at school. This eased matters for me, and I covered all my other expenses.

Other parents, though, still consider college as a “job,” and provide an allowance to help students cover their expenses. What you do depends on your priorities and preferences, and what you have agreed on with your student.

Bottom Line

At some point, though, you do need to stop paying an allowance. Whether you do this when you teen gets his or her first after school job, or whether you wait until after your child graduates form college, is up to you. If you want your child to become financially independent, at some point you have to stop giving them money, even if they “earn” it through chores.

(Photo: all in green [6])