If your kids ask you to increase their allowance, rather take the opportunity to teach them how to budget.

My youngest started university this year and is living on campus. We gave him an allowance to cover his various expenses including additional food (18-year-old boys need more than three meals a day, it seems), toiletries, and entertainment. I felt it was a generous allowance.

At the end of the month, he told us it was not enough, and he needed more money. I made him write down everything he had spent and to divide it into three columns.

The first column was “one-off expenses” – these were items that he had to buy for the year like a bicycle lock, stationery, face cloth, sponges etc.

In the second column were the monthly necessities (needs) such as food and toiletries, and the third column was entertainment and gifts (wants).

He then calculated that 50% of his allowance had gone to one-off costs. In fact, he had been very disciplined and kept is monthly expenses well under control, only using 50% of the allowance for day-to-day spending (most probably because he had run out of money).

How to budget for one-off expenses

Like any household knows, the beginning of the year always comes with large one-off expenses, and we need to make sure we have the funds to cover that. However, during the course of the year there will still be larger, irregular purchases one will need to make. In my son’s case this could include buying clothes, and he needs to know how to budget for that.

I suggested that he allocate 30% of his allowance into a savings account which he can accumulate to pay for those larger, irregular expenses during the year. This means he still has 70% of his allowance for his monthly expenses which even provides some room to start longer-term savings.

It was an interesting insight for me into how we react when our spending exceeds our income. Rather than understanding what our expenses are, we think the only solution is more money. The problem with simply throwing more money at our expenses, is that very quickly even that extra money will not be enough.

It was also a great example of how to use teachable moments to educate your child about managing money. Hopefully my son has learnt from this and will be able to use budgeting skills throughout his life – although he was disappointed that his allowance was not increased. That is the tough love part of parenting. If you just keep giving them money when they run out, they don’t learn how to manage their money, which is really the greatest gift you could give your child.

This article first appeared in City Press.