Paying your kids, especially teenagers, for good grades, is a trend I find so disturbing my fingers can barely slow down enough to write intelligibly.

Here’s the most elemental theory I subscribe to when it comes to money lessons for teenagers—and I believe in this philosophy both as a professor, and as a trustee of a school. Two things money lessons should never interfere with: Lessons of intrinsic satisfaction, and systems where there’s a non-monetary award already in place that has value–in this case, grades. If you pay your kids for good grades, you interfere with both these things by trumping them. And the kids will lose out in very profound ways. Here’s how:

1. Killing a sense of intrinsic satisfaction. It’s bad enough that standardized testing, intense focus on grades, and conditioning like assessments makes learning so pragmatic that curiosity can get squashed. Learning should expand exponentially: Curiosity gets piqued and a kid goes on a journey to discover, uncover, find answers, satisfy questions, find more questions, make sense of man’s relationship to the world.

If you pay kids for good grades, it places even more emphasis on just the grades, just learning what will ace the tests, all the pragmatic parts of our institutionalized education. They will not develop a taste for a tough challenge just to find an answer, or seek to invent, because it’s not part of the reward system you’re aggressively conditioning them to obey.

Curiosity is a natural. We must nurture it in our kids. Encourage them to follow their questions. By the time kids are 6 they have a sense of competition among peers, wanting to please teachers, wanting to do well. Don’t squash it. It’s a gift, keep up intrinsic satisfaction and one day you’ll have adults who can find satisfaction and joy in their work, not just be slaves to a paycheck. Ultimately, people who enjoy challenges of work do better anyway. You could argue they’ll be better earners if they’re focus isn’t always on money.

2. The all-they-care-about-is-money syndrome. When you trump a non-monetary reward system, like grades, which have their place in motivation and getting competitive juices flowing, you create a monster. These are the kids who think the only thing that matters is money and material goods. These are the kids who are conditioned, by parents, to think they should be paid for waking up in the morning. These are the kids you find yourself screaming at that you put a roof over their head. They don’t start out ingrates. We condition them by breaking the above two rules of money lessons and what money should never interfere with.

And it’s really unfair to them. They’ll get conditioned to be under-stimulated by the small, simple pleasures in life. They’ll want to keep up with the Joneses as they age.

Reward teens with good grades with privileges, not money..

Here’s the theory behind these ideas, and please send along more privileges if you’ve found they work. The theory: Robust curiosity and good grades means your kids are tuned in to their sense of dignity, personal goals, sense of responsibility, self worth, and often their sense of community spirit. Kids who do well in school tend to help other kids, and have a developed sense of social conscientiousness. Feed those wonderful qualities with more freedoms, which enhance their sense of intrinsic satisfaction.

1. Let them borrow the car if they have a license.

2. Let them have a later curfew.

3. Let them hang out with friends, even if it’s a school night.

4. Let them buy a car at age 16, not 18, or even older. (Since this one intersects with money, you can also set up a savings and investment plan with a responsible teen to put allowance and side job money in CDs, savings accounts. Help them open these accounts).

5. Treat them to a weekend away with a friend.

6. Treat them to concerts or other special events that interest them.

7. Let them make more decisions about their lives. Let them choose what they want to do with their summer, instead of imposing strict rules. Let them opt out of outings such a visiting your friends. Let them decide when and how to do their homework, even if it means they choose to watch TV first, or during. If their grades slip, revisit freedoms.

And of course, the final question all of this begs? What do you do if they’re not getting good grades, which is what led to payment to begin with?

I say a little old fashioned negative reinforcement by taking away privileges if they don’t do their best. Well, that’s not entirely negative. Show them this list of privileges, and explain that they could be getting all of them. Tell them they won’t get these privileges if they don’t get good grades because privileges are for people who take responsibility.

And if at the end of it, you still really think that only payment for grades will work with your kid, then consider opening a savings account in their name for the money, or a 529 college account, and tell them that the money they earn won’t just be for tuition, but for spending money at college.

I can’t wait to hear your stories about what besides money works.

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Regardless where we stand on how much privacy and leeway teens get with their allowance, some parameters must set or you’re going to be nickeled and dimed to death before you know it.

Teenagers are master manipulators when it comes to money. That’s why it’s such a good age to teach them sophisticated money lessons. When I watch those crafty little wheels spin I know there’s no need to wait until college to teach kids finances.

Here are 4 decisions we all need to make. It’s less important what those decisions are than the fact that they’re made, and put in writing. Make the decisions with your teenagers, have them take the lead, have them write it down. You can both sign it. They’ll take ownership of the contract, and you won’t get into arguments later.

1. Depending on your household economic situation is, decide if allowance is purely spending money, or if it must contribute to the household. If it’s affordable, I would encourage that it’s just spending money. If they earn it, having a certain freedom associated with it is a great motivation builder for being a good earner.

Make a list of what they’re expected to pay for with their allowance. This will also help you set the price of allowance. For instance, if you still pay for activities—movies, concert tickets, going to a fair—and they only pay for products they want, then a dollar for each year they’ve been alive might be okay. But if they have to pay for the movies, or entry fee to a special event, then they need more money because it’s expensive to do those things.

Make a list. Have them come up with the list once you decide the parameters. For instance, tell them that they’re responsible for all the products they want to buy and are constantly asking for. Having them make a list of them makes them really take a look at what they want so badly. Their priorities might change.

2. Rules for what parents pay for. Same drill as #1. You write down, while they witness it, what you’ll continue to pay for.

Danger zone: You can include food, water, shelter if you want. I actually advise against that. It can hurt their feelings and create distance to send teenagers the message that they’re all grown up and it’s a burden to house them. To reduce your cohabitating relationship to a business arrangement with an adult is quite a comment on intimacy. I hear this advice and, honestly, guilt trip, a lot, and I think it’s dangerous, even if the intention is good—to not coddle, to teach them hard lessons about the realities of the world and what things cost; to keep them from being bratty and demanding.

But there are other ways, and here’s what scares me about the “I put a roof over your head” approach: The reality of our world is that there’s a lot of danger to teenagers. We all know this: drugs and promiscuity cause disease, among other things. They’re at an age where they must rebel—must go through a stage of antithesis, in order to grow. Early childhood is the thesis statement of life; you are a product of your parents. Teenhood is the antithesis, where you rebel to see the world differently, to test your independence, which is vital to self care later. In adulthood, we reach synthesis, which is who we end up being. It’s probably a mix of where we came from and what new things we took on.

If, as a parent, you create too much distance during antithesis, then you run the risk of teenagers never confiding in you. When they rebel, they might run to extreme decisions to feel independent. I’m not saying that there’s a direct corollary between the roof over your head speech and teens doing drugs. But I do think that they are far from grown up when they’re teens, and the message that they owe you as if they’re adults will prevent them from coming to you for emotional parenting when they need it the most.

I want my daughter to confide me when she’s thinking of having sex with a boyfriend, or if she wants to try something potentially dangerous, or if she’s not in any shape to drive home and needs help.

So I have to say go easy here to teach lasting, productive money lessons. Money is something so many adults have anxiety about, and I have to say I think some of the anxiety comes from lessons they were taught as teens. Start out small, with the discretionary stuff, see if they are becoming more responsible just from this approach.

You can’t really go wrong arguing about who pays for concert tickets and who pays for the ridiculously expensive jeans your daughter must have. If you make the lesson about the goods and services the teenagers are interested in, they’ll be interested in the money lesson. And that’s more than half the battle.

Try at least to save the roof over your head until all else fails.

3. What is the division: spending, saving, giving to charity? Please do check out my posts on Spending Wisely and Saving Wisely for tips on how to spend allowance. But before that, do decide if all the money you give teenagers is for spending. If you can afford, up the amount each week—at at least $25-$30 and use the opportunity to really teach some money lessons that include investing and helping others.

If you do, definitely get a reloadable prepaid card for your kids. Load the money on each week, and then have them deal it out to spending, saving, and charity. I’m personally a fan of the triumvirate. My daughter has donated to saving animals with at least some of her allowance since she was 6.

Now she thinks about others, is the first one in the house at Christmastime to go in search of clothing and games we no longer use to give to Toys for Tots, Salvation Army, Goodwill, and the local shelters. Very important money lesson hidden here. Take your kid to churches or other donation spots when you donate. Show them what it’s like to live without means.

4. When do teens get extra money?

I’m a sucker for certain things, I admit it, so when it comes to things like proms I not only agree to pay for the dress or suit, but all the acoutrements—the jewelry, the gas for their car if they have one, money to go out with after, the corsage.

I actually think you don’t tell the kids this part. Surprise them on special occasions. Treat them when you feel like it makes sense, or when you can afford it. My daughter recently went to a charity dance for the SPCA (Society for the Prevention of Cruelty to Animals). She not only gathered up her allowance that week, but dug out everything she had hoarded in her “spending purse” and was prepared to bring every cent she had on her person to that event. In the car, I told her to put her money away, I wanted to make the donation on her behalf. She donates a lot. She agreed to let me pay half, but she wanted to give some, too.

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Allowance is inevitable. And it’s a minefield. Your teens are going to share with all their friends how much they get and what they have to do for it. They compare notes and you’ll hear about it if your rules are unjust. And you’ll pay for it in other ways if you’re too lax.

After many complaints, and many times being taken advantage of, I’ve come up with 5 key criteria for giving allowance. And I would love to hear other approaches. The more ideas we have on this teenage paycheck, the better!

1. How much should they get? $1.50 for each year they’ve been alive, if you can afford it. A movie can cost $10, and if you’ve got an older teen who wants to go on a date, anything less is very frustrating. You do not want them to work for money and then not be able to do anything. I’m open to comments here, because you could easily argue that that’s exactly what adult life can be like. But we want to encourage good earning habits and they need to see reward to develop positive habits.

It’s especially important to give a healthy allowance if your teens are involved in a lot of extracurricular activities that are really enriching. Then they truly won’t have time to supplement their allowance income with a part time job during the school year. You don’t want grades to suffer in the name of earning money. You don’t want them stressed with too much to do. Defeats the purpose of school.

2. They must earn it. It is not a given. If they don’t do their jobs that week, they don’t get it. I include “without being reminded” to that credo. If they have to be nagged to do a job, they’re not taking responsibility. Teens are old enough to do it on their own.

Some people believe that kids work hard enough in school and should just get an allowance without additional burden on them; and the focus should be on how that allowance is spent. (I’ll do my next blog on rules for allowance once it’s in their hot little hands. But also check out my posts on Spending Wisely and Saving Wisely). I’ve heard this philosophy for older, as well as very young kids. I’m interested in hearing stories about how that works. What’s it like to get those same kids to do jobs around the house, clean their room, etc. if their allowance is automatic?

I never tried that, I have to admit. From the moment my daughter got an allowance, age 6, she had to earn it. Until that point I paid for everything. The whole point was I was tired of her asking for crap and expecting it without any sense of opportunity cost. If she also got the allowance for free, what would be the difference, except for her counting it out at the store? The free lunch concept, and maybe some good math skills, would be the only lessons to sink in.

My experience with trading allowance for jobs has been nothing but positive. And not just for me, of course. My daughter was always proud to earn her money. Now she is confident she can earn money, and as she gets older, her expectation to be a good earner is all set. That’s such an important goal, and I didn’t even see that one from the outset.

Look at the adults around you. The confident ones are the good earners. I really don’t believe we burden them by asking that they do jobs. I think it boosts their confidence and sets them free.

One more thing: If your kid does a great job and your economic situation allows for it, I’d up the dollar-per-age deal a bit, especially if they agree to invest some of their money in savings and investment vehicles. If you have a savings plan for their money, I’d go with $20 per week at least. $25 if you can afford it.

3. They must do jobs for the common good, not just taking care of themselves and their own space. I don’t like to give money to kids for cleaning their room or putting away their things. Self-care is about personal dignity and sense of organization. No one will ever pay them for those things as an adult, and they should take care of themselves as part of growing up.

The idea of a job is to contribute to something that includes more than yourself. Besides, can you imagine what kind roommate or spouse you’re raising if they expect to be paid for picking up their dirty clothes off the floor? Yikes, I don’t want to field slob complaint calls from a son-in-law, and there’s no doubt my husband would hand the phone to me.

4. They must come up with their own 2 jobs, and when they get a raise—commensurate with experience, which we’ll call age—they need to add a new chore.

I’m not entirely sure where I came up with two jobs as a starting point. Maybe so there’d be room to add a lot more. Maybe to make kids successful without overload—especially since they need to remember their jobs without reminding. Maybe just because that’s what my mother and father did.

Another idea, which a teenager gave me, is to make the two jobs increasingly difficult as the kid ages. So maybe they start out with gathering and taking out all the trash in the house (including bathroom and den wastepaper baskets) and cleaning the kitchen, and the following year they have to mow the lawn and weed. Not a bad approach. Probably better than mine. Maybe suggest to your teens that they can choose one option or the other: make the jobs more difficult, or add a new job.

One warning label here: Be careful about making childcare for a younger sibling count as a job. There are lots of pros and cons, and once you make that decision, you’re stuck with it. (I’ll do a separate blog on whether babysitting should be a paid gig, or considered hanging out. Huge tradeoffs, tough decision, and there might be differences between daytime and nighttime rules. Bonding is key without pay, but teenagers do get taken advantage of.)

5. Do not revoke allowance for bad behavior—even if they really deserve it. I’m now a firm believer in not revoking allowance for any other reason than failure to do their jobs. I have to admit I’m a recent convert to this way of thinking. I used to yank allowance for misbehavior, even if my daughter did her jobs. But once, when I was just furious with my daughter for lying—I still get angry just thinking about it—I told her that she wasn’t getting allowance that week.

Then, what the conniving kid did, thanks to too many lessons in negotiating, is call me on breach of contract. Yes, she used that term, threw it right in my face.

“I lived up to my part of the agreement. You must give me my allowance, or I could sue you. Well, I could if this were the real world. You’re a hypocrite. You have to find something else to punish me with.”

I opened my mouth to add more punishment for mouthing off to me, but…but she was right. The point of allowance in trade for doing a job is to show kids what earning money is like, what sustaining a job with responsibilities means, relying on the reward, and using the reward wisely. Revoking allowance because of a behavioral infraction that has nothing to do with the agreement, is like a restaurant manager docking a waiter’s pay for saying something rude or accidentally breaking a plate, after that waiter just finished an eight-hour shift serving people well. There are laws against those sorts of things.

All was not lost, though. I opted to ground my daughter for lying, so she didn’t have anywhere to go to spend her allowance.

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I hate to say what I’m about to say. I really do. I’m not the Benedict Arnold type. I think my close friends would say I’m a loyal friend. But you won’t believe that after you see what I have to say about teaching teens to spend wisely. Still, I have to say what I think works best. Just know I’d much prefer to say, “Do as I say, not as I do,” but that won’t work with a 7-year-old, much less a teenager.

Without further defensive preamble, here are the first two steps, which subscribe to two learning theories: One, we learn most and best from mistakes. Two, kids love nothing more than when parents are wrong.

1. Let your kids interview you about your spending habits. Make it focused and simple. Tell them your budget for discretionary spending money per week (that way you don’t have to reveal too much about your overall financial picture if you don’t want). So, you tell them an amount, and what you think you spend on different things. They should write all this down. Call it the Estimate.

2. Then let them track your habits over one week. Give them all your receipts. Each evening, report to them what you spent. They should write all this down. Call it the Truth.

For the record, my husband outright refused to participate in this teaching project (he’s smarter than you’d think, looking at him). My brother participated. Of course he did. The man still wears corduroy pants he had when we were in our 20s. He denies it, but I remember them! He came out like a stellar example of spending. His Truth was the same as his Estimate. Last time I invite him to participate.

I didn’t do so well. Kids say I’m in denial about more than a few things. How, for example, could I claim that I buy two or three cappuccinos a week when it was at least six. How could I not be aware of something I do every day?

My only choice was to snap back that they should save their money and buy me a cappuccino maker for mother’s day. Last year I got burnt toast and tepid coffee in bed, only after I reminded my family what day it was. Unfair I know, but I’ll swipe the guilt card whenever I can. I’m way outnumbered.

Embarrassing as it was, the kids learned more from me than from my brother. Way more. And they didn’t feel bad when their Estimate didn’t match up to their Truth—which of course is the next step.

I do strongly recommend doing the first two steps with someone who will not look so good. It’s like when you have a small child and they’re scared to do something: ride a roller coaster, or go to a haunted house. You don’t tell them how easy and great it is. They just feel more inept because of their fear. You tell them there’s no way you’re going, you’re too scared.

3. You interview your kid about their Estimated spending habits. Write it down. The key here is to put away judgment. Don’t comment every time they bring up something you think is a waste. They need to remain open in this exercise. Tell them that no matter how this ends up, you’re going to open a checking account for them, and get them a reloadable student debit card at the end of the week. The point of this and step 4 is to raise awareness. That’s it.

Spending what you say you’re going to spend per week without going over budget is a great skill. How many adults do you know with that skill? It’ll take a few steps to get there. Don’t go too fast on the spending wisely lesson, and don’t load them up with too much. Conditioning always necessitates that each step is completely ingested. Awareness. Just stick to that for now.

4. Track their spending for one week. Write it down and call it the Truth.

5. No matter how they do, open that checking account, get that debit card. Don’t put any energy into how they performed. Awareness. Keep your eye on the ball. You’ll notice that you’ve bonded a bit, too. They’ll see you as more fallible, and their own desires as okay. Remember, if you sneak candy bars or whatever, tell them during your Truth, even it flies in the face of lectures you’ve given before. The more human they see you here, the better. Load their allowance onto the debit card and start them off. The great part about this being step 5 is now they’re used to having their spending tracked. With a reloadable debit card, you go online and can see what they’re spending, line item by line item, just like with a credit card.

6. Up the ante with bonuses. For two months, each week their Truth matches their Estimate, give them 25% extra allowance. Just load it on their card. Now, this has variations and stages. If your kid estimates that he or she will spend their whole allowance, and they do, but they don’t ask you for extra stuff, then their Estimate has matched their Truth and they still get the extra 25%. If their Estimate includes saving some money each week, and they do in fact save it in their Truth, give them a 30% bonus. Tell them the more they save, the bigger bonus they’ll get.

7. After two months, only give them a bonus for saving some money, not just making their Estimate and Truth match up.

What I’ve found about teaching spending this way is that they become aware, love the grown up feeling of the debit card, and get motivated by the bonus money that starts to accumulate in their account. What you don’t have to do, using this method, is get embroiled in control battles about what is and isn’t a good purchase. I hate arguing with my daughter item by item. “How many electronic games can one person really use?” “I can’t believe you’d waste money on another clip-on backpack accessory!”

This method sidesteps control issues, instead of forcing a head-on collision. Please share any methods for wise spending that have worked with your teens!

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Have you noticed that the kids in your life whom you most want to veto are the ones you no longer have that much power over? College kids can often be the spendthrifts, while young teenagers have a well developed hoarding instinct.

Maybe it’s because the younger ones don’t drink and don’t have new freedom. They want activity-supported products, hobby products, and collectibles. College kids are more expansive. And when you first have the ability to keep purchases secret, you want to make secret purchases.

Or maybe it’s personality types. And that’s the problem with a blanket rule about veto power. Some kids will be naturally conservative, rarely wanting to spend, so you can speed ahead and work on more advanced lessons with them, like investing their earnings, keeping some liquid, donating some to charity, maybe even investing in a small side business or personal improvement. Check out these Calculators for assessing how much allowance kids should get at what age, and how much interest they can earn with savings from allowance or side jobs. They can help money-oriented kids do a lot of planning, on their own. I’ll be doing blog posts on Saving Wisely and Spending Wisely, so stay tuned for step-by-step lessons for the kids.

But for those of us with more remedial charges, let’s get back to the decision: veto power or no veto power? First let’s look at the cons for veto power, the argument for a kid’s free reign:

1. We all learn most from our mistakes. So, if your kid decides to buy another pound of makeup she doesn’t need, and then can’t afford a concert she wants to go to, she’ll think twice next time. The key here is you don’t cave in to her begging and pleading for the concert to be your treat.

2. They’ve earned the money, either by allowance or a job, so they should have control. If you take away their control, will they be less motivated to get side jobs, or do chores for their allowances? They want to grow up, and squashing their motivation to act independently can also get in the way of them developing problem solving skills.

I’m at a loss for more cons. If you have any, please send them along.

My mind goes right to the pros, the reasons why veto power is key:

1. The mistakes they make don’t teach them anything. What if they waste their money and the lesson never kicks in? I’ve seen a lot of cases where bad money habits form quickly, kids shrug off the opportunity costs, and their attitude is simply that next week there will be more allowance, so no biggie. Maybe they borrow money from their friends for that concert and pay it back with their next allowance.

There is the argument that you don’t need to make every mistake in order to learn something. There are times when “You’re not old enough to make that decision” makes more sense. A classic example is smoking cigarettes. Do they really need to pick up a smoking habit in order to learn that it can kill them? There’s a reason for the “Just Say No” campaigns for drugs. And if your family can’t afford to waste money on any level, then learning from mistakes might be too much of a luxury.

2. Veto power starts a discussion, and the strategic lesson, of what exactly to do with your money instead of wasting it. If it’s built in that your teens can’t buy that age-inappropriate clothing with their money, then what should they do at least becomes part of their thinking. You don’t want to remove yourself so much from the process that you do kids the disfavor of not training them to use money wisely. It’s our responsibility to teach kids that. We can’t judge them for wanting immediate gratification; it’s natural. We can teach them self control over it.

3. Veto power enforces lessons that are about a lot more than money. Money is a resource that can help them acquire things you don’t permit, like clothing you consider too revealing. If you don’t allow your daughter to wear that clothing, but she’s allowed to do anything she wants with her money, you’re sending a mixed signal.

I remember what I did with that mixed signal as a teenager: I kept my jeans with the cool holes in them, which my mother hated, in my backpack, and changed into them when I got to school. My mother worked until 6 p.m., so I was always home before she was and could slip right back of the contraband jeans.

I think like a lot of answers, the truth probably lies in the middle. We need to give kids enough rope to either learn to swing or hang themselves. Even if we keep veto power, I think we shouldn’t wield it before they’ve done anything wrong. Teach them how to save and spend their money responsibly, give them a checking account and a debit card to keep track of what they’re spending, thereby creating the awareness that translates into personal responsibility.

Give that lesson immediately. Then see what happens. If they spend on something you don’t approve of, make them take it back to the store. Have another discussion about wise spending and also spending in accordance to whatever your house rules are.

One aspect of any approach I think is necessary—and please chime in with disagreements, because it’s a heated issue—is to set up no expectation of privacy with their debit account. Debit cards give us an opportunity to monitor without asking invasive questions and putting kids on the spot. We just go online and look at their spending, line item by line item.

Even if you don’t believe in any veto power at all, be careful before you turn over all power and grant them privacy for their checking accounts. You may regret it. And if you set up the account with the password in your possession as a given, then you haven’t betrayed anything.

Just a training thought: It’s not that you don’t trust them, it’s just that you don’t trust their lack of experience. It’s like learning to drive. The driving teacher sits in passenger, letting the kid drive. But those driver’s ed cars always have a set of breaks on the passenger side.

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