The Two Options For Handling Teen Income

girl with fanned out cash

The majority of Moneypants customers have at least one teen in the home. Teenage years are complicated. Teens are busy preparing for the transition into adulthood but aren’t quite adults yet. Often teens feel like they should have the freedom to make all their own choices. Their bodies are changing. They are becoming more aware socially. They have much more capacity to do things. However, the level of responsibility teens typically have doesn’t match. They still live at home, Mom and Dad are still held legally responsible for their actions, and quite frankly they are still developing mentally. There are three “M” privileges that parents should retain control of until their children have moved out on their own. These privileges are money, media, and mobility. Today we are going to focus on the money privilege.

One mother who started using Moneypants had her 13-year-old daughter say, “I’m going to go get a job because you don’t pay enough. Once I get a job, I won’t have to do chores around the house anymore.” This is a common theme we have witnessed over and over again. Teens think that once they start earning their own money, they don’t have to abide by any home rules. This can lead to all sorts of problems. Luckily, there are some simple solutions. The first solution is to avoid paying your kids minimum wage.

Paying Your Kids Minimum Wage?

Moneypants purposely pays less than minimum wage. There are several reasons for this:

  1. Moneypants matches how much you are currently spending on your children to how much they can potentially earn. If Moneypants simply matched minimum wage, it would put a financial strain on the vast majority of families. Most families can’t afford to hire servants to daily cook and clean and upkeep their house and property!

  2. By keeping pay low, kids not only are more motivated to do their jobs, they often will come to you asking if you have any more work to do. In fact, the main clue that you are paying your kids too much, is if they snub offers for extra work. If this starts happening, it means your kids have too much money (either they aren’t spending their money on budgeted activities OR they are getting overpaid).

    Most parents think raising their child’s pay level is the answer to increasing motivation, but oddly enough doing the exact opposite, and lowering their pay is what fixes the problem! If there is an oversupply of money, the demand for more work goes down. Low pay preserves motivation to work.

  3. The lower pay encourages kids to get jobs outside the home and to move out once they are able. When my husband and I only had one child, we were living in a tiny one-bedroom apartment in LA. A young adult we knew was experiencing a crisis. So, we allowed her to come live with us until she was able to find a job and get on her feet.

    Once she had a job, I asked her how she was going to go about finding an apartment with roommates. She laughed and said, “Why would I ever leave here? It is free! And you guys feed me too. It doesn’t make financial sense for me to move out.” She had a really good point! She had no motive to go.

    Similarly, if you have a child living at home with free room and board, and they are making minimum wage just for helping out around the home, it would not make financial sense to move out on their own or go get a job outside the home.

The Real World

Paying teens minimum wage or more does not prepare them for the real world. Few kids nowadays are willing to work. When people do see teens who are willing to work, they often get excited and in their enthusiasm often become overly generous.

Overpaying Teens

We once ran into a problem when a well-intentioned wealthy friend began hiring our teenage son to do yard work. This wealthy friend proceeded to pay our son $50 an hour. Yes, $50 an hour! Our son would work for him for three hours and come home with $150. This was WAY above minimum wage, and it was compensating unskilled labor.

Soon thereafter, some other friends hired my son to chop wood. They “only” paid him $30 an hour. My son pointed out that their neighbors had paid him $50 an hour for similar work. Our son mistakenly thought that was the type of pay he should expect. My son was super obedient and would usually do his chores if I asked. However, all that cash in his pocket stole his motivation to work and progress at home. As a result, he stopped caring much about Moneypants. He stopped developing his talents. He stopped working on his habits. He stopped helping out around the house.

Then, to make matters worse, his high paying job affected his perception of the real world. He was not interested to apply for college. He thought you could make a good living without an education. He figured he could make $50 per hour doing unskilled labor.

Real World Woes

Later when my son moved out on his own and had to get a job, he was frustrated that so many of the jobs that he qualified for only paid between $9-$11 per hour, not $30-$50. His expectations did not match up with reality and it was a hard lesson to learn.

When kids earn money outside the home, it can potentially ruin your Moneypants system. Your kids will lose out on all the benefits Moneypants has to offer. It’s a good idea to set up the rules ahead of time. We have two suggestions for how to handle outside income so Moneypants can continue to work for teens who regularly work outside the home.

Option #1: Mandatory Savings Plan

The first option is that you can tell you tween or teen, “If you get a job outside the home, 100% of the money has to go to a savings account. As soon as you finish high school and move out, you can withdraw the money. If you have things you want to buy now however, that has to come out of Moneypants.”

Our 17-year-old daughter got a job at McDonalds. She is a senior in high school and plans to leave for college next year. She puts all her McDonald’s earnings into a savings account. She is still motivated to participate in Moneypants because it is how she purchases clothing, makeup, and other items she needs and wants now. If she gets random or irregular small jobs from neighbors, she simply adds it into her Moneypants funds.

However, all the big pay checks from her regular job go to her savings account. This approach has created a great situation for her. She is nervous about leaving home, but seeing the money set aside for that transition is giving her confidence that she can do it. Furthermore, she now has a resume with real work experience she knows will help her get additional work in the future. Meanwhile she is meeting other Moneypants goals she set for herself such as prepping for the SAT and ACT, completing her homework, and more. These things will help her get into a good school and qualify for much needed scholarships.

By putting her outside earnings into savings, instead of hindering her, the outside money is helping prepare her to transition successfully into adulthood.

Option #2: A New Spending Plan

The next option for regular outside income is to incorporate their outside income into their yearly spending plan on Moneypants. (Note: this can only be done if the outside income is ongoing and predictable. It does not work for irregular or seasonal income.) The reason this helps avoid problems is because the app will distribute the funds to their piggy banks according to a spending plan. Only 10% of the money will go to fun money.

So, let’s say your son or daughter has a long-term goal to save up for a car, school, or a service mission. The app could put a significant portion of their money aside for that long-term goal. However, your teen would still get to enjoy the immediate reward of 10% fun money. It may help your tween or teen stay more motivated as they work towards their long-term goal.

Possible Complications

What if your teen gets a job and keeps their earnings a secret? What if they say, “Hey Mom and Dad, it’s MY money, I found the job, and this is my own private business”?

Unfortunately, access to a lot of money and secrecy about it can be a major safety concern. We once had the situation where a teenage daughter of ours made $3,000 working at a restaurant. Our daughter’s bank account was linked to our family account, so we were able to see her account if we wanted to.

One evening my husband just happened to check her account and noticed our teen only had $500. Over $2,000 was completely unaccounted for! Our teen had no receipts or purchases to explain the missing money. This was a huge red flag. Granted, it could be that she had donated over $2,000 to feeding the homeless and the missing money was no problem.

But what if our child was getting blackmailed? Or using the money to buy drugs, alcohol, or other harmful things? Teens with access to a lot of money can get into serious trouble that is way above their heads. This is more likely to happen if there is not accountability.

Privacy Concerns

How do you handle this demand for privacy? You could respond to a teens insistence that you keep out of their business with the basic, “My house, my rules!” or, “I’m the parent”. However, that may or may not go over well. If possible, it is better to anticipate this issue BEFORE you allow your teen to get a job outside the home.

Family Council

Hold a family counsel and explain that working outside the home is a privilege, not a right.

Tell your children you expect their stewardships at home to be taken care of before they can have the privilege of going somewhere else to work. It would not be fair to get a job and dump all the home responsibilities onto someone else. If you live in the home, it is your duty to help contribute and do your part. If you don’t, the home won’t work, and everyone suffers. Remember, everyone in the home has a stewardship. All the family members are part of team, and everyone has to do their part. No exceptions.

If outside income disrupts the family team, then the outside income is the problem, not the family.

Set Up Rules Ahead Of Time

After you explain the issue, have the family come up with and agree on some rules. There should be consequences for kids who take off to work for someone else without completing their duties at home first. It could be that they get charged a certain fee, or they lose whatever money they earned, or they have to pay for hiring a substitute.

If the problems continue, they may lose the privilege of working outside the home. Decide on the consequences as a family. Write down what you agree to and make sure everyone has a copy. By setting up rules and consequences ahead of time and agreeing on them as a family, you will prevent a lot of problems. For example, when the rules get broken, anger is less likely to be directed at you, the parent. Having rules set up and agreed upon helps prevent future conflicts. (It is not a guarantee though! 🙂

For example, our oldest daughter had a small house cleaning business. We set it up ahead of time what we expected. She knew that if her weekly Saturday job was not done at home and her room was not clean, she could not earn money working for someone else. The rule was that she would lose whatever money she earned if she neglected to complete her jobs at home first.

So, our daughter would wake up early and work hard to complete her work at home before leaving to work outside the home. This worked well because we had set up and agreed on consequences ahead of time BEFORE she started the new job.

Consequences

Next, you need to decide on what the consequences are for not disclosing how much money they earned. Explain that having money is a privilege. That you are okay letting them make decisions with money within certain boundaries. However, for safety reasons you need to know where the money is going. There has to be accountability. Otherwise, the privilege of earning money will be suspended. Once again, after explaining the issues and concerns, decide on the rules and consequences.

Clear Communication And Accountability

Finally, explain to your teen that if they earn money outside the home, you have expectations of where that money will go. Give your teens an option of putting the money in a savings account or CD or incorporating it into their Moneypants spending plan (if it is a regular job). Explain the pros and cons of both decisions. Let them decide which option they prefer.

Isn't This Extreme And Controlling?

Not only is this not extreme or controlling, it is actually quite sensible.

Allowing a child to suddenly handle large amounts of money, would be like having your kid turn 16 and handing them a car and saying “Go for it. Take it on a drive! You are old enough!!!” without having taught them how to drive.

Instead, a new driver has to learn all the rules to driving and pass a written test. Sometimes they are required to pay for driving lessons as well. Once they pass the test, they receive a “restricted license”. They are required to have a parent in the car supervising them as they drive. If they don’t follow the rules, their license can be revoked. A year later, the teen can take another test. If they pass it, only then are they allowed to drive independently.

Would you say this system of parent-supervised teen driving is controlling? Of course not. It’s quite the opposite. It is sensible. A brand-new driver could seriously hurt themselves or others when they are learning how to drive. It is for their safety and well-being that this “restricted license” is issued. This restricted license helps them safely transition into independent driving.

Restricted License

Similarly, Moneypants is like a restricted driver’s license. It provides a safe and supervised transition towards full financial responsibility.

If you give kids too much freedom all at once, the freedom can end up hurting them instead of helping them. The money becomes a burden instead of a blessing.

Moneypants gives kids and teens the opportunity to earn, budget, and handle money. However, that freedom is kept within boundaries. It is NOT a free for all. Directed spending helps them develop the decision making and budgeting skills needed to transition into adulthood, however this transition takes place with careful accountability. It is being supervised by parents. The goal is to provide a smooth and safe transition into adulthood and responsibility, not prematurely dump adult responsibilities onto teens.

Teens are not adults who pay for their own food, medical care, and housing. Until that happens, they don’t fully comprehend money and its value. Furthermore, teens may have earned their own money, but parents have a responsibility to keep their kids safe. Access to that money has to be contingent on their willingness to be accountable and use it within the boundaries you set up.

Avoid Danger

Unfettered access to money could potentially be used by teens for harmful things like substance abuse which could negatively impact the rest of their life or even end their life. It would be better that they not have money at all than to risk these problems.

On the flip side, wouldn’t it be better and more sensible to allow teens and kids to start developing skill with money but with supervision in place? For example, having weekly payday helps teens show their cash matches their Moneypants piggy bank. They learn what it means to balance an account. It helps make sure the money is being used in positive ways instead of harmful ways. Teens and kids learn healthy spending habits.

If a teen is unwilling to report their spending or money is disappearing, that is a red flag. The money might be hurting your child instead of helping them. Until a teen is on their own, earning and handling money should remain a privilege, not a right.

Financial Independence

Things change when a teen has more financial responsibilities such as paying for their own food, transportation, and housing. Once faced with those real responsibilities, their view of money and how to use it quickly matures. Just avoid doing it prematurely. If you give a child the freedom of making all their own decisions with money, you run a much higher risk of the money being used in potentially harmful ways. There has to be accountability.

In summary, if you want to avoid the attitude problems and safety issues associated with teens getting work outside the home, use the following ideas:

  1. Be sure to set up some ground rules before the job outside the home starts.
  2. Let your kids know that working outside the home is a privilege NOT a right or even a necessity.
  3. Let your kids know this is a supervised transition time similar to a restricted license. It will help prepare them for real independence.
  4. Prevent future problems by anticipating them and discussing them as a family.
  5. Have the family agree on rules and consequences ahead of time in order to prevent power struggles.

If you follow these steps, you can continue to enjoy the benefits of Moneypants, and your teen can better prepare for more responsibility when they leave home.

Bonus

Here are just a few things we’ve learned from allowing our kids to work outside the home. These are things we wish we’d known before sending our kids off to work for other people.

Tip #1: Use The Buddy System

Often tweens around ages 12-14 enjoy working for neighbors babysitting, housecleaning, doing yard work, and more. If possible, try to stick to a buddy system. Ideally, they would take a sibling that is old enough and responsible. If they don’t have siblings available, taking a trusted friend along to work with them is also helpful.

If you stick to a buddy system, it is less likely that weird problems will happen. To put it bluntly, there are a lot of weirdos out there. Having your 13-year-old working at someone’s else’s house alone puts them in a vulnerable position. Having a buddy will not only help protect your children, but it also usually helps your kids make better decisions as well.

If you make the buddy system a blanket rule for all jobs, then it won’t cause an awkward situation where a neighbor or friend feels singled out thinking you don’t trust them. Instead, your kid can say, “My parents have a policy that I have to take a buddy with my no matter who I am working for”.

Tip #2: Know The People

Any time your kid spends a lot of time with another adult, you want to know the person pretty well. Being loosely acquainted is not enough. You should be familiar with the members of their family and their general values. And you should visit their home and make sure you feel comfortable with your tween or teen working there.

We have made the mistake of allowing our kids to work for people we did not know very well. Sometimes it was fine, but other times we deeply regretted it. For example, unbeknownst to us, one employer was often drinking alcohol while our teen was working for her. She also began offering our daughter alcohol telling her it was “okay for our daughter to drink alcohol as long as she was supervising”. She also tried convincing our daughter that her religion was wrong and there was no God. She espoused other ideas that we considered harmful. I naively didn’t expect someone else to do that because that is not something I would do, but that is what they did.

Moral of the story: Only let your kid work for people you know. Make sure you feel comfortable in their home and comfortable with them influencing your child.

Tip #3: Know The Job

For regular jobs older teens get, examine the environment where they will be working. Know what will be required for the job. For example, one weekend my husband and I stopped in an ice cream shop. The shop wasn’t in the best area of town. A cute teenage girl was working in the shop. As we were waiting for our ice cream, we noticed that no one else was there. We asked the girl where her fellow employees were. She said she was the only one working there and that she often closed up shop at 10:00pm all by herself. Both my husband and I were very worried. This young teenage girl was being put in a very vulnerable position working completely alone. I doubt her parents were aware of the unsafe situation.

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What about you? Do you have teens who work outside the home? How do you help them learn to use it wisely? Did we give you any new ideas? What ideas did we miss? Leave a comment below.

Hannah Judd

Hannah Judd

Hannah is the co-creator of Moneypants and is the mother of 13 amazing kids.

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