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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As the Secretary of the Board at a private school, of course I’m hearing more and more stories about parents struggling to pay for private school (see Private School Bailout post). But what I’m also starting to hear are creative ways people are coming up with to keep making those private school payments.

It’s inspiring, especially the cases where the teenagers whose education is at stake are proving to be incredibly resourceful. There’s one case so striking that I’m starting to believe we should all set our teenagers to the task of playing treasure chest detective.

Let me explain: The principal at the school where I sit on the Board is an exceptional human being. He took an old Jeep Cherokee in lieu of one student’s tuition, because the math-smart kid was blossoming at the school, after a tough time in a public elementary school. Of course word spread, and the joke on our campus—and it’s a beautiful campus, open fields against a mountain backdrop—is that soon people will be bringing in goats.

So one parent called and said her daughter, 16, had spent the entire weekend in the attic, taking inventory, wondering what she could try to sell on eBay. Her mother didn’t have the heart to stop her; she was so organized and industrious, so mature in her thinking that goods could be liquidated and put to good use.

So the girl finds these gold coins that the mother had all but forgotten about; they had been handed down from grandparents, not wealthy ones. At second glance, and after much prodding from the teenage daughter, the mother called the school. Our principal referred her to another Board member who happens to deal in antiques. One of the gold coins was worth $59,000. And there were several of them. The teenager not only saved her private high school education, but found her college education as well.

This story gives me goose bumps because it’s in the fairy tale realm, but it’s also true. Yet I hesitated telling it to the kids in my life because it could be disappointing to send them on a mission that will never result in such glory.

Still, I couldn’t shake the thought that systemizing what that 16-year-old girl did would be of great benefit to any teenager. First of all, taking inventory of family valuables teaches kids to assess a dollar value for goods— a great skill applicable to so many things, from comparison shopping to being responsible about taking good care of valuables.

Even the act of going online to determine what something is worth by finding comparables that have sold is a great skill. And of course just knowing what things in this world cost, and how quickly they lose value, is important.

Want to teach the kids something? Have them look at what your car cost new, and how much its value dropped to the minute you drove it off the dealership lot. It will help them learn how to spend wisely, assess what they really need versus want in goods and services.

So, I decided to give kids a chance to flex their research muscles while earning a commission. First, they assessed the goods in my house. Then I sent them to my brother’s, and other relatives willing to participate. They were allowed to set up an account on eBay, and they got a commission on whatever they sold.

eBay requires the seller to do a lot of monitoring, so it enforces the lesson of following up and following through on things. Of course the commission keeps them motivated. Teaching them eBay also teaches them how to deal with online transaction settlement, which of course leads to the question of what to do with their commission. I think setting set them up with a reloadable prepaid card is a great idea. In some cases, the stuff they sell on eBay can be paid to their card, and then they can take out cash to pay the seller, keeping a commission. They end up running a business.

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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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It may sound odd, but bear with me here. Get your kid a credit card—a bona fide credit union Visa or Mastercard you’re probably going to have to co-sign. It won’t work just to put them on yours. The point is to help them establish credit so one day they’ll move out of your house and into a mortgage of their own. Keep your eye on the ball. Make sure to get them a rewards card.

What about that little potential disaster, where they could ruin their credit forever if they run up bills you can’t pay? Before you join my husband in thinking I need serious psychiatric help for coming up with this idea, just hear me out:

Get a credit card with a very low limit, so even if the kids royally screw up, betray your trust, and buy a Wii with the card in the first five minutes they’re alone at the mall, it can’t harm you too much. With credit issuers pulling purse strings tight these days, it will be easier to get a low limit card anyway. Seriously, get a limit amount like $250.

Which brings me to the method of training them about what that credit card limit means:

If your kid lives at home (a teen or a college student), put them in charge of grocery shopping. If they live elsewhere, they can do their grocery shopping on the card.

If the card limit is low enough, it will make it a challenge to buy groceries, which is of course the point. Your kid won’t be able to say they tried but the bill was more so they spent more. They’ll have to rifle through items at the checkout counter and put things back, until they get the hang of it.

If you normally pay for your college students’ groceries (they live off campus, they’re not on the food plan, you supplement anyway), then you’re just paying the credit card company instead of handing out money, all the while establishing credit, which is getting harder and harder to establish. What an early advantage for your kids

If you are not comfortable starting out with a credit card, get a reloadable student debit card. Every kid is different, and maybe yours just isn’t ready to be trusted with a credit card, even with strict boundaries. If not, put training wheels on that Visa-logo card. Make it a reloadable student debit card

This card won’t establish credit for them, but consider it the prerequisite training class for the co-signed credit card. It’s great for teens, too, because you can load their allowance on it.

You simply go online, log in to their account, and load money onto the card. So, if your kid is a spendthrift, send them to the grocery store with just $20 loaded, and a list of a few items. Expose them to responsibility gradually.

Gradual exposure is a great phrase to remember for any new experience, and money management is no exception. The reloadable student debit card works anywhere a Visa debit or credit card works, and it’s better than cash because you can monitor what they’re spending. Just go online, their purchases appear the same way credit card line items do.

When you see good behavior, reward the kid with a co-signed rewards credit card. And tell them all about what they will be able to earn with that credit card.

Incentives for both the credit card and reloadable debit card kids. For kids who live at home, give them a grocery list of must-haves, and tell them once they have bought all the requirements, they can get whatever they want with the rest of the budget. Send kids together if you have more than one, and give them enough extra money to get less than what they want. They’ll have to negotiate and compromise which extras to get.

Send them to a different grocery store each time in the beginning, so they see the difference in prices. Comparison shopping experiences are a great way to teach value, and make people think twice. And for items that kids use, like food, they’ll remember the prices, especially when they find a good deal.

Their reward will be points they accumulate on their reward cards. Maybe they’ll get free stuff, an airline discount. Do make sure it’s a rewards card. You have to be careful here, though. Reward cards reward people for spending more. You want them to find the best deals at the grocery store, get the most for their money.

So hedge your bet. First and foremost, their reward should be cash: Say you give them a $250 limit to do the grocery shopping. If they comparison shop, really find deals, they might have $20 left over. If they do, let them either buy junk food or keep it. Make their first goal to get a commission on the job.

Let them learn that reward points are rewarded for what you need to spend and no more.

Remember, they used to teach grocery shopping in the 1950s in high school home economics class. The kids can handle it. At first, you may eat some disgusting food when they buy the wrong things, but you’ll live, and you can always exchange it when they’re not home.

This concept can become expansive, too, as they become responsible. You can add other acceptable merchants to their list: school for tuition, or rent— all those expenses that can be put to use helping them establish credit. They will also see credit as a convenience and system to earn rewards, not a vehicle for buying more than they can afford per month. They should own and operate a credit card without revolving credit. That’s the habit to establish.

After a while, let them pay the credit card bill every month, either by auto-payment from their checking account, or if you’re daring, by letting them write checks. The trick will be to see if they remember to do it before incurring a finance charge. If they do well with it—never incurring a finance charge—you can reward them with something to go with their frequent flier miles: a ski or beach trip.

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