Pocket money is a great way to help teach your child financial management skills. It gives them a firm idea about the value of things, teaches them to save and gives them a sense of responsibility for achieving their own goals.
It’s important for parents to remember that children take their cues about money from you. So, while you might give them their own pocket money it is beneficial to model positive money behaviours yourself. This might include talking to them about the research you do before making a major purchase or chatting with them about how long it’s going to take you to save for something special.
When to give children pocket money?
Obviously, there is no hard and fast rule, but a general rule of them is when they are old enough to understand:
- that things cost money
- that once they have spent all their money there is none until next time.
How much pocket money do you give them?
First and foremost – pocket money is a privilege and not a right. If your personal circumstances don’t allow for giving pocket money, don’t feel you have to do so.
Depending on how your family works, you might give children pocket money ‘just because’, when they do chores, or a combination of both. You need to be really clear with your children about the amount they ‘can’ get versus how much they ‘do’ get based on your agreement.
For instance, you might give your child $5 a fortnight ‘just because’ and then an additional twenty cents per chore they undertake during that fortnight, or they get an extra $5 all up if they’ve done all the chores assigned.
Some people give their child a dollar per cycle for every year they’ve been alive (ie if you’re 7 years old you get $7 dollars a week/fortnight/month depending on what is workable for your family budget.
Some people put a chart on the fridge where every chore has a value (say $1) and whichever child does the chore gets the money.
Also keep in mind what you expect to be paid for out of the pocket money – if you are expecting your child to pay for transport and lunches out of their pocket money, you will need to make sure you factor that into the amount you give them.
For children to get a true sense of how to manage their money, it’s important to have conversations with them about what your expectations are in regard to the money.
A popular methodology is to get your children to agree a split on their pocket money each cycle. For instance, they might donate 10%, save 40% and spend 50%. That helps them understand how to make their money work both short and long term.
If you pay pocket money in cash, you might provide different tins for their money. If you pay pocket money into a bank account, help them to set up different accounts to help them keep track of what their money is doing.
Make sure you give your children control over their pocket money. Let them choose how they want to donate it and agree a time period (say every six months they’ll take the money in that account and donate it). With their savings – they might set short and long term goals. For instance, their short term account might get them a Lego set they really want, whereas the long term goal might be spending money for a holiday at Disneyland.
Make sure that whatever your approach to pocket money is that you have discussed it with your children and are clear on the rules as a family. Sometimes it can be useful to write the rules down and stick them on the fridge so everybody can see them. This will be the first financial agreement your children embark on, so it works for both of you to make sure it’s clear, transparent and achievable.
Disclaimer: The ideas, discussions, options and details expressed in SCCU Blogs are for general informational purposes only and are not intended to provide specific personal advice or recommendations for any individual or on any specific security or investment product. We intended only to provide education about the financial and banking industry to make the complex simple, and help everyday customers realise their dreams.