Teens and Money: Should they have a limit?

Teens and Money: Should they have a limit?

Teens and MoneyHow can I stop the incidentals [for] my teen daughters and their wants at the drugstore for makeup and shampoo, etc? [Should I] Give my girls an allowance/budget for misc. items and clothing?

I received this question on teens and money from a reader a few months ago (sorry dear reader, I’m a little slow!).

I’ll share how we handle this in the second half of this post. But it’s funny how this simple question made me think about financial education. So, I felt the need to go on a little tangent before I talk about that.

A little disclaimer here: You may not agree, and that’s okay. Since every family, and every teenager, is different, what works for me won’t necessarily work for you.

The Best Financial Education

I think there is a dire need for financial education in schools because most kids don’t learn important money lessons at home. I know it’s not a topic many families are willing to talk about.

But this is unfortunate. It’s much easier to learn from real life situations than a textbook. Breaking the money-talk taboo and having real-life money conversations as a family is one of the best ways to provide your kids with financial education.

You don’t have to manage your finances perfectly to teach your kids the lessons they need. And you may still be trying to figure things out for yourself. That’s okay. Even if you’ve made mistakes, admit them. Discussing why they were made and how to fix them is an interesting and effective way to teach your kids about money.

As for my kids, they have learned about money, not through a formal system of financial education, but by us keeping it real. We share our financial situation, why we make the spending and saving choices we do, how we budget, and what things cost. We talk about the trade offs – for example, if we spend money on new cars, we couldn’t take that family vacation. On our vacations, we set a budget and have them make decisions on how to spend it. Last summer, I had them pay the household bills for a month to allow them to see what comes in and what goes out.

If I had to take a stab at it, I bet money/finance comes up in conversation with them at least 3 times each week (probably more). We talk about it often. Money is not a taboo topic in our house, in fact, it’s quite the opposite.

I think every parent approaches this differently and what works for one family may not work for another. As I did some research, I found most advice for parents pointed to helping teens develop a budget and track their spending. And I think this is great. Especially if your teenager is on board with learning and implementing it. But I’m pretty sure mine would not want the “help” if I were to offer.

Though we do require our kids to save a certain amount and encourage giving, I’m certain I’d be met with resistance if I asked them to set up a budget. Sure, they have savings and checking accounts, they use a debit card and track their balances. And they do budget money in a way that makes sense to them (though it sometimes doesn’t make sense to me!).*

Teens and Money: How We Operate

With teenagers, or any age child, for that matter, it can be hard to place limits on purchases, especially when they see their friends (or their friends’ parents) buying things they want too.

(That brings up the issue of needs vs. wants. It’s hard for us as adults to distinguish between the two, but it’s even harder for kids. I’ve had the needs/wants discussion with my kids so many times, they could tell it verbatim. And, though they completely understand my take on it, they don’t always agree with it. I tell myself, one day in the future, they will get it. Right!???)

How we handle spending

We provide food, shelter, clothing, personal care (within reason) and other needs for our kids. That said, there are things within those categories that I don’t see as needs. Take the food category – in my book, soda and candy are not needs, so I don’t purchase them. If my kids want to buy soda, they can do so with their own money.

The same goes for clothing. For example, I have a set budget for shoes when we go shoe shopping. If they want a pair that goes over budget, they are responsible for the amount above and beyond my budget.

As far as incidentals, such as shampoo and makeup go, it’s the same thing. I don’t spend any more on their personal care items than I do on my own. If my daughter wants the salon shampoo, she is responsible for the difference in cost.

As I write this, I hope I don’t come across as a scrooge. I’m not stingy and cheap, but I am frugal and intentional. Alan and I explain why we make these spending decisions – we value the time we spend doing things together more than the sugary drinks, salon shampoo, name brand jeans, and latest shoes. We would rather be able to take a vacation than have a closet full of designer clothes. And they know the difference, even when they don’t want to admit it.

Our kids are polar opposites when it comes to their money (one is a saver, one is a spender). No matter how much we try to convince our son to save, he consistently spends almost everything that comes his way (thankfully he doesn’t like the idea of owing anyone and we discuss the consequences of debt often). We have instituted a savings rule to get him to save a decent percentage of his money. While I’m not a big fan of forcing the issue, I can’t just sit by and watch it all disappear on ice cream from the gas station.

Our daughter, on the other hand, is as frugal as they come. She always has a stash of cash on hand and is reluctant to part with it. In addition. she has a significant amount in the bank. She budgets her spending and discerns what spending provides the most value to her. My only hope is she doesn’t take her frugality to an extreme.

We’re willing to let our kids learn some lessons the hard way. While we’ll always make sure their basic needs are met and they are safe, we are big believers in natural consequences. If you spend all your money on a video game, you don’t have money to go out to eat with friends. If you run out of gas, mom gets to drive you to school. (So far, I haven’t had to drive him to school.) Those are the choices and trade-offs you make.

How do you handle spending on your kids? How did your parents handle spending on you when you were a teenager?


*If they run out, it’s on them. No handouts from mom and dad!

38 thoughts on “Teens and Money: Should they have a limit?

  1. I usually got an allowance to buy things I wanted growing up. It was never a crazy amount and always cash (no credit card shopping sprees here!) When I got my first job at 16, I was hooked! I bought whatever I wanted the moment I saw it and never looked back. Reflecting now, I wish my parents would’ve coached me a little harder to be responsible with that money, it might’ve saved me thousands on college instead of having more junk in the closet.

    1. I don’t really remember exactly how my parents handled money with me as a teenager. I know I didn’t have a set allowance (though I did in college), but I also didn’t ask for much, if any. I do think it was offered to me – especially gas money, but it was never any crazy amount. I think I must be a natural saver, because even when I earned my own money, I didn’t spend it that much. In fact, I clearly remember a friend and I driving through Hardee’s (frequently) and the only thing we ordered was a large ice water – because it was free and we were thirsty! 🙂

  2. Our girls are just little so we haven’t started an allowance yet but that’s something we intend to do. At that point we hope to discuss budgets and saving too. Up to now we just try to be a good example. We sometimes get treats when we go out, but not always. We don’t just buy things for the heck of it. We make lists and only buy whats on the list. They notice way more than we give them credit for so I hope they notice this stuff too.

    1. I like that you mention sometimes you get treats and sometimes you don’t. We did this when they were younger and still do. For example, sometimes we go out to eat, but not so often that we get used to it or it’s expected. Being a good example is the best way to educate them!

  3. No kids here but I love the idea of having them pay the household bills for a month. My parents NEVER talked about money and I do think it had a significant impact on my view of money.

    1. Luckily, I saw my mom balance the checkbook and pay the bills each week and I witnessed how my parents carefully weighed spending decisions. I truly think this made an impact and carried over. It’s sooo important to talk about it, no matter what your situation!

  4. I think you’re right on the money with what you’re doing, Amanda. I kinda wish my parents had done as well. Money/budgeting rarely came up aside from the “we don’t have any money” followed by “we just bought a new (luxury) car.” To say the messages were mixed is an understatement.

    Right now, I still let Little Bit pick out treats at the grocery store within reason. I buy her clothes up to a point, though she’s been known to buy a t-shirt when I said no. And she’s volunteered to help pay for a Y membership because she really wants to join. I’m tempted to say yes and have her pay $5 a month to help fund a family resource. Even though that’s a minimal percentage of the cost, it’s 25% of her spending money.

    As she gets older, I plan on moving more money onto her plate, but also more responsibilities. If she has to budget some of her allowance for things like clothes, toiletries, etc, she’ll have much better idea of money management and costs in general. But seven isn’t ready for that much responsibility.

    1. Thank you so much, Emily! I felt like a meanie as I was writing the post. 😉 I have tried really hard not to say “we don’t have the money” and instead, say “we choose not to spend our money on that because…” Such a huge difference. I could see how you got mixed messages from your parents.

      Seven is pretty young, but I bet she’s learning some great lessons just by watching, listening and talking to you and Jon. And I think it’s awesome that she’s paid for her own t-shirt when you wouldn’t. That meant it was really worth it to her. I think that’s a good measure of how much value they do place on something they want. If they aren’t willing to pay for it themselves, how badly did they really want it? I’ve sometimes asked my kids if they would pay for an item themselves just to gauge if they will actually use/wear it. It works – we put stuff back more often than not.

  5. We also have two opposite teens – the boy is a spender and the girl is a saver. A coincidence, I’m sure, but I like your approach of giving them choices, while guiding and protecting them when necessary. They definitely need room to make their own choices and enjoy or suffer the consequences of those decisions.

    1. Thanks, Barnaby! 🙂 How interesting your boy is a spender and your girl is a saver. Coincidence? Probably. But what if someone did a study on teen spending habits according to gender –
      wouldn’t that be interesting? (Maybe it’s been done!?) It’s hard to watch sometimes when you see them make the choices you know they will regret. You know, like when you spent all your money on a disc for disc golf and don’t have any left to go out to eat with all of your friends and have to stay home all weekend. But that’s the best way to learn (that only happened once!).

  6. It’s interesting that your two children don’t share the same money habits! My friend is the frugal but her to siblings are absolutely bonkers with their money. I saw a question on Quroa asking if it’s OK to give a 13 year a $16,000 allowance for the month. I thought this was a troll questions (could be) but they were well off and could afford it. Most of the answers were no.

    When I was teen, it was only on a “only when asked” basis. No allowance, I go to Mom and beg each time! 😉

    1. Oh my goodness, Lily! $16,000 allowance!!?? Whoa Nelly! At least most of the answers were no!? I mean, that’s doing them a huge disservice, in my opinion, no matter how well off you are.

  7. Thank you so much for sharing your approach Amanda! I especially like your approach to items that cross needs and wants (such as shoes) – covering a reasonable amount and letting them pay for the “premium” of a more extravagant option. Seems like an effective way to keep them responsible while maintaining the necessities.

    1. Thanks, Chris! 🙂 It’s interesting to do this and to see if/when they change their minds on certain items. I’ve noticed in the last year or so, my son hasn’t even wanted any new shoes. For about 2 years, he wanted new ones every 6 months. The hope is it helps them discern value.

  8. No, you’re not a Scrooge! When I was a teenager Herbal Essence was a salon brand and it was probably just a few cents more than the less fancy shampoos. I don’t even recall shopping for hair products — I’m sure I just used the Prell my mom picked up. Now the choices and prices are endless. Good for you for setting the boundaries. I like your approach.

    1. Awww, thanks so much Mrs. Groovy! 🙂 I remember Prell! My mom used to buy it too. Like you, I used whatever was available. But, then when I was in my early 20s and went to a salon to get my hair cut, the stylist convinced me the salon shampoo would completely transform my hair. And that $20 didn’t seem to make a bit of difference (though it smelled amazing). I only did that once!

  9. Great tips, Amanda! We are just starting out with a 3- and 5-year-old, giving them a bit of money each week in exchange for doing regular chores, and letting them know they are responsible for any extra treats or toys they want to purchase. They also have opportunities to give money to kids in need. Anyway, I can see this getting a lot more complicated as they get older, deciding what to pay for, what’s not covered, and what the budget is for needs like shoes and clothes. I love your suggest of having them cover the difference if they want an “upgrade” on a need.

    One question–how much do you cover school-related incidentals like field trip costs, school dances, yearbooks, etc.? Is that all on them or does it depend on the event or item? I’ve heard that stuff can add up and I wonder how we’ll handle it when the time comes.

    1. Thanks, Kalie! I love that you are giving your young children opportunities to use and give money at such a young age. It does get a bit more complicated as they get older, but it’s never been much of a battle in our house because our boundaries were always set and clear. That said, I do remember being called “cheap” a couple of times – though that usually led to a 10 minute “discussion” of the difference between cheap and intentional, so they don’t say that anymore. 😉

      I cover most school related expenses – all field trips (I usually go too), dances and sports activities. But, I don’t cover any extras related to these events – like food at the ballgame or breakfast after prom. Sometimes it depends on the situation and we make those decisions as they come – sometimes I’ve split some costs with them. I have paid for my daughter’s dress for a dance but, like everything else, I set a budget (and she stays within it so far). We haven’t run into the prom dress issue yet – I know many girls are paying hundreds of dollars for their prom dresses. We have discussed this, though, and talked about alternatives to getting a nice dress without the cost (buying used, having it made).

  10. Our sons are 18 and 19 now, so hopefully we’ve instilled some good advice. As you mention, money hasn’t been a taboo topic and we’ve discussed the dangers of credit cards (in particular, not paying off the balance each month), what it actually costs to live on your own, etc.

    Our older son is extremely frugal. He hardly spends a dime that he makes and he has already opened up a Roth IRA and brokerage account. He wouldn’t even let me buy him new shoes – he wore the same pair every day for two years. Our younger son is a bit more of a spender, but not too crazy. He knows that he is responsible for the gas in his card, a portion of the car insurance, and any fast food that he wants to eat.

    1. I’m sure you’ve instilled some great advice, Mr. Need2Save! Sounds like both of your sons are getting a great start. I think discussing money openly is a huge part of financial literacy. It’s great that your son has opened a Roth. We haven’t taken this step yet, but we’ve discussed matching anything they put into it – up to a certain age.

  11. Love this, Amanda! By the sounds of it, we have a very similar approach with our kids in that we’re very transparent with money conversations, and we’re always looking for opportunities to teach them good habits.

    We’ve been very purposeful with educating our 16 year old son over the past couple of years, and he’s come a long way. We got him set up with online banking pretty early. He now has an automated transfer to his savings account on payday, is contributing to his college fund (we match his contributions over and above what we were already saving). In addition, he transfers $50 B/W to me, which I dollar cost average into an index mutual fund on his behalf (I’ll transfer back to him when he’s old enough to open his own trading account).

    He’s made some spending mistakes along the way, which has been cause for some healthy self discovery.

    Our middle child (daughter) is a shop-a-holic, by all accounts. Thankfully her access to funds is limited. An afternoon spent at the mall with her leaves me feeling as though I need to join a support group, haha.

    And our youngest seems like a natural saver, but it may be a bit early to know for sure. : )

    1. Thanks, MMM! I love the way your 16 year old is handling his money – I especially like the idea of opening an account for you to invest his money for him. I do think I’ll steal this idea!

      I cringe when I see my son making some less than optimal spending choices, but I also see a ton of progress. He’s finally started forgoing the frequent trips to the gas station for ice cream – and instead buys ice cream at the grocery store and makes his shakes at home. I love that he’s finally seeing the light (mostly)!

      I understand the mall thing. Thankfully my daughter isn’t a huge mall person, but when I do take her, I understand the need for a support group. Every time I go, I get a complete culture shock, feel out of place and have a strong desire to run as fast as I can out those doors. Maybe we should start a support group of our own. 🙂

  12. We plan to teach our children through experience too. Paying the household bills for the month is a great example.

    My brother and I received a small allowance for chores until high school when we were old enough to get a job. We shared a paper route and both worked at McDonald’s to pay for gas money, going out with friends, and video games.

    I have two very young daughters so I have a few years before we encounter the beauty products conundrum like the reader. My wife & I will make a joint decision as she does the shopping, but, I think we would tell our children this is how much money we spend on “____ item” if you want to get something more expensive your have to pay the difference.

    1. When the kids are so young, you really don’t have to deal with it much. Just providing a good example is good enough. But the time to start will come quickly! Once they’re old enough to start asking for things at the store, there is the opportunity to start discussing choices in spending. And, later the limits work. They don’t always like them, but I do think they work. 🙂

  13. Great stuff here. We handle spending much the same way you do: we have set amounts we spend on everything, and if the kids want something more they’ve got to make up the difference. It’s tough for me, especially when so many other parents don’t have limits and give their kids whatever they want, and I think at times that’s tough for the kids too.

    But they do recognize that in the long run our system is much better preparing them for real life, where nothing is handed to you. I think the key is lots of communication. We talk about why we do the things we do, and it helps them to understand the importance of making well thought out choices.

    We do have our spenders in the house too, but every time something they want comes up and they don’t have the money to get it (because they’ve spent it all) we get to remind them of the importance of saving for the future. 🙂

    1. Thanks, Laurie! 🙂 It is sooo hard when other parents don’t place limits on their kids spending. One of my son’s friends had his car paid for and gets plenty of gas and food money handed to him. At first, this was really hard for my son to understand – why we weren’t willing to do the same when we could clearly afford it. It’s never easy. But we discuss it and I try to point out the trade offs. Hopefully it’s working because he hasn’t complained at all in the last few months and I’ve seen more “budgeting” of his own money.

      You’re right – this is a system that is preparing them for life. You can never count on hand outs. I’ve seen one example, in particular, where the hand-outs continued into adulthood and it became a never-ending cycle of dependence, which becomes a burden for both the parents and the son/daughter. I think this is why I’ve been pretty strict about the hand outs to my own kids. Sometimes we have to struggle to learn the lessons. I know I did for several years when I was out on my own – those are lessons that have served me well.

  14. I think it’s awesome that you’re so open about money with your kids! No teens yet, but these are the same kinds of things I hope to do with them when they get there. Let them “fail” at home so they can learn those not-fun lessons under my roof instead of dealing with the messy consequences in the real world. And have regular conversations! We do that now, but they’re age-appropriate so while they get value-based spending, the whole budgeting thing is a little advanced.

    1. Thanks FF! 🙂 It’s better to fail at home, no doubt about that. I’d much rather learn those lessons when they’re under my roof than when they’re out on their own. It sounds like you have started off early at your house – I truly think starting at their level as soon as possible makes it so much easier as they get older. Consistency has been the key for us.

  15. Very interesting topic…my kids are still young so I have some time to form a plan. Interesting that one child is frugal where the other one is a spendthrift. My parents didn’t have to worry since their frugality was ingrained in both my sister and me. I definitely like the allowing there to be natural consequences. That’s the best way to learn…

    1. Thanks, Andrew! Gotta love those natural consequences. As a parent, you sometimes just want to make it better for them, though that’s not always what’s really best for them. It’s hard to watch. I’ve been frugal for my son’s entire life and we’ve been consistent about our limits, as well as openly discussed everything related to money. So, I don’t know where the spending came from – I’m guessing it’s just a stage that goes along with asserting independence. Because I do see it starting to level off now that he’s had more freedom (driving) for almost a year now.

  16. When I have kids I truly want them to succeed and fail on their own, but if one of my kids (or all!) are spenders I have a bad feeling I will intervene early and often! It’s important to teach lessons but equally important to let kids fail and learn from those failures. I’m not even a parent yet but I can already imagine just how difficult it will be to do that.

    1. I completely understand intervene early and often. I’ve been tempted so many times (and I have imposed a savings rule). But though I do usually say what I’m thinking, I don’t force the issue. I just point out that if one spending choice is made, there will be trade offs. It’s taken actually experiencing it firsthand for the lessons to be learned. And you’re right – it is difficult (but worth it!). 🙂

  17. A great topic. With 2 of our 3 children working now, they are learning first hand how to manage their own money. We, like you Amanda have set budget amount for things. Prom was an eye opener for them and the cost of things. They are learning the trade-offs, priorities, wants, and needs. It has helped over the years that we have shared our full budget with them so they have a good understanding of all income and expenses.

    1. Thanks, Brian! Your kids are doing amazing handling all their responsibilities, including the money they earn! Prom can be sooo expensive. My son chose to just go to After Prom – so it wasn’t much of an issue this year. I think being transparent with the kids about how much is coming in and going out is a great way to educate them.

  18. It’s so much better for kids to learn these lessons while they have a safety net than when they’re out on their own. Your strategy seems like an excellent one.

    1. I agree! Thanks so much for the kind words (sometimes I feel like I’m being too strict). 🙂

  19. James

    Many kids never learn about money, investing, or saving. I think if we could teach our kids financial literacy, they would build good habits and could be really successful. I was fortunate enough to have some mentors that taught me, and I always try to pay it forward and help teach kids about retirement, investing, and managing money so they won’t get in trouble.

    Look at the difference in money if someone waits just 5 years to start saving: https://preparemykid.com/lesson/how-to-start-a-retirement-account/

    1. Isn’t it funny – money is such a huge part of our lives, yet we often fail to teach/learn about it. It’s such a necessity. I was fortunate to grow up in a household where money was openly discussed – and taught. I’m grateful for these valuable lessons! 🙂 Thanks for the comment and for sharing the link!

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