Setting up a self-imposed allowance system is simple, and it’s never too late to start one as a fun form of basic budgeting, combined with other good money habits. When I was a kid, because we moved frequently, my parents gave us an allowance for long-distance calls (this was, of course, before cell phones). We had a school-clothes allowance provided to us at the end of summer each year; it gave us kids the freedom to choose and buy our clothing. We also had a weekly “extras” allowance that we received in exchange for chores. Getting an allowance taught me that for us, a middle-class family, money was something we planned around—and there were limits to the amounts we had available to us. My parents didn’t need to tell me that money doesn’t grow on trees; I could see that firsthand. I knew that I couldn’t have every new fashion trend that came along or buy every album that my favorite bands produced. Plus, putting my brothers and me in charge of buying our own clothes—and giving us a weekly allowance for fun incidentals—turned me into a discount-digger at an early age. After all, I wanted more choices in my closet, so I learned to shop for sales. Today, I have an account that is my own version of that old weekly allowance—and it’s set up just for the extras.
What my allowance pays for
I set aside my adult “allowance” for non-essential purchases, not bills or food or socks. Instead, it’s for a class I want to take, a book I want to buy, or a dress I want to wear to a friend’s wedding. I put money in my “allowance” account each month the same way I budget for my cell phone, groceries, electricity, and savings. Some months, I might only spend $10 out of the account to buy a coffee and donut for a friend. Other months, I might not use any of the money—and in that way, my allowance works much the same way as it did when I was a kid. I save up my allowance to buy a more expensive item I might have my eye on, like a unique pair of boots or a new jacket.
What my allowance is not
The “allowance” is different from my emergency fund or savings account. I try not to touch the latter two with any of my “wants.” Those accounts are for “needs”—and unexpected events and expenses, from leaky-roof repairs to an emergency root canal. For me, I wouldn’t even have set up an allowance account without first funding my emergency savings. I’ve seen how one unforeseen trip to the dentist or a broken dishwasher can derail the best-laid monthly budget plans. Without an emergency stash of cash, I could very easily fall behind on my monthly bills due to unexpected expenses coming up. And once you fall behind, it can be beyond challenging to catch up again.
Bottom line
Getting an allowance as a kid seems straightforward, and a simple arrangement. But it was one that, for me, had far-reaching and overwhelmingly positive ramifications well into adulthood. For one thing, an allowance taught me how to delay gratification, something that is essential for saving for big adulthood purchases such as a car or a down payment on a house. And for another, getting an allowance also taught me the actual basics of budgeting: Namely, that you only get a limited supply of cash. If you want to go out for pizza today, you will have less for that soccer ball you want next week, and so on. For kids, getting an allowance can be the beginning of a lifelong healthy relationship with money. For adults, it can be a tool for meeting your needs and still budgeting for those extras—you know, the ones that help you enjoy the life you work so hard to budget for.
