Lending Club Blog

Allowance Cutbacks During Difficult Financial Times

A related topic that came to mind during my discussion of Five Questions to Ask Before Giving Your Child an Allowance was how to handle allowances during difficult financial times.

When household expenses are being cut down, allowances may have to face similar cuts. It may seem like cutting a presumably small expense like your child’s allowance is unnecessary, but it will help your children to understand that sacrifices are being made across the board. Keeping an allowance at the full amount after a job loss, financial setback, or unexpected large expense teaches your children that money is immune from economic factors. Recent history has shown just how untrue such a sentiment can be.

The New York Times explored this topic in their recent article As the Rich Get Poorer, Teenagers Feel the Crunch. More than just a profile of rich kids having to make do with less (and still more than most), the story actually showed the positive way that teenagers were reacting. For many, allowance cutbacks came as a wakeup call to the realities of the sagging economy and inspired a change in habits. Despite the desire to take on part-time jobs, some of these teenagers had trouble finding one. Adults who are happy to find any work they can get are increasingly filling the minimum wage jobs that were typically staffed by teenagers with few skills. Employment of 16-19 year-olds is now at a 61-year low.

Even if they can’t find part-time jobs to supplement their curtailed or eliminated allowances, the fact that teenagers have the awareness to seek work is an encouraging sign. Other changes in habits give similar hope. These are a sure indication that the lessons of allowance cutbacks during difficult times are largely being learned.

Have you cut back on your child’s allowance in line with other budgetary cuts?

Friday, January 30th, 2009 at 6:37 am

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