Young man sitting at a table in front of a laptop holding a credit card © Jack Hollingsworth, Blend Images, Getty Images

After many years of quantitative easing in my house, the tapering has begun.

As the Central Bank, John and I have pumped a lot of liquidity into the family economy, propping up wages and covering both essentials and many luxuries for our four daughters. Beyond what we pay them for chores, the kids have found ways to earn extra money from us—such as tutoring younger siblings.

But our monetary role is now being cut way back, dwarfed by the kids' earning power outside our system.

As our children begin to earn money on their own, it has raised their standard of living, taught them valuable skills and increased their confidence. But it also has raised a crucial question back home: How do we divide what we pay for and what they pay for now that they are making their own money?

The question is most pressing for the older two. Jamie, 17, is in demand as a baby sitter, earning an hourly rate that leaves my idea of the minimum wage in the dust. And Emily, 15, who has been using the name Riley on her artwork, and is now using it personally as well, has begun making real money from her art. She won a poster contest for which the prize was a $500 scholarship or a Kindle.

Anna and Isabella, 14 and 12, aren't earning from outside sources yet.

Jamie is taking the lead on the who-pays-for-what issue. As her outside earnings began to exceed $200 a month, she voluntarily started paying for birthday gifts for friends, social outings, some clothing, an upgraded cellphone and an iPod. She will sometimes spend her own money on food when she's out later than usual on school-related activities. Sometimes we reimburse her, sometimes we don't.

"I quail from ever appearing greedy," Jamie says. "So I volunteer to pay for stuff that you might agree to pay for. I want to be independent, and I want to help out where I can."

That attitude has delighted me and John, but not so much her siblings, who are wary of letting Jamie set the standard for all of them. "I want you to pay for everything because I don't like paying for my own stuff," says Riley.

Still, Riley adds, she knows that "isn't realistic." And Jamie advises her younger sisters to rethink their reluctance to pay their own way. "What is it that's your choice to participate in?" she asks them. "What's the extra cost that doesn't need to be paid but you want to do it anyway?"

So where do John and I come down on this?

I think Jamie puts it best when she says: "There's not a definitive line between what parents and kids pay for in our family. We trust you to pay us back if we spend our own money on something that we think we need that you agree with. You trust us to pay you back if you buy something for us that's extra, that we simply want but don't need."

For example, Jamie needs new snow boots after four years in an old pair that has begun leaking. John and I see that as an essential, but feel we should offer "reasonable and customary" coverage of up to $40 or $50, while Jamie may ultimately choose a more stylish pair costing far more, at her own expense.

With all three of the older ones, we now see them as responsible for funding their social lives. But while they pay their way to go out with friends, we cover their subway and bus fare, because we want them to get home safely. If we lived in a city where car ownership was practical, we'd cover the fixed costs of the car, but they would pay for gas and insurance.

Similarly, if they want to upgrade their phones, that's fine, but we cover only the basic phone and wireless plan. If they decide to upgrade to a more expensive data plan to support a smartphone, that will be on them.

John has long pressed the girls to buy anything we paid for -- such as sunglasses, watches or gloves -- that they later lose. That policy, which drives home the cost of carelessness, has picked up as the girls earn their own money.

It seems important to start the younger kids on the trail that Jamie is blazing, even if, in the end, they don't go as far as Jamie has in establishing her financial independence. In fact, she says that now that she is paying for some of her own food, she better appreciates her dad's thrifty approach to feeding the family. She believes that when college comes she'll be ahead on learning to budget.

While we insist the girls pay for their social outings, there is one key exception: prom expenses. With the cost beyond the reach of many self-funded teens, John and I agreed to pick up the cost of Jamie's ticket and half her dress. Accessories, transportation and dinner expenses will fall to Jamie, her boyfriend and their circle of friends.

It's important to us that the kids participate in milestones like the prom -- rites of passage that become some of the most precious memories of teen life. There are a few luxuries we'll gladly underwrite, whatever the age.

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