Pocket money can be a valuable teaching tool for children. It can help them to understand the value of money and teach them money management skills. It can also teach important developmental skills like, goal setting and delayed gratification. These skills not only teach them about saving, they help them achieve more success in their adult lives (see article).
If you choose to give out pocket money here are a few ways to make sure your child is learning good habits:
- You need to be consistent (particularly if pocket money is a reward for chores)
- You should teach them to save a portion of their income
- You should monitor their spending (don’t let them buy things you don’t want them to have)
- You should give them an amount appropriate to their age ($1 per year is a rule of thumb many parents use)
There’s a lot of debate around how you should give out pocket money. Should it be a reward for doing chores or should children do chores regardless? And how do you help them to manage it? We asked around our office our office to see the different methods you can use.
I think it is very important for children to get regular pocket money in return for small chores. Started early enough it teaches them the importance of a good work ethic and a regular savings plan. My children get $1 for their age so that they get a ‘pay rise’ each birthday, eg: 10 years old = $10. They must bank a portion and the remainder is for them to spend on ‘wants’.
My son doesn’t get pocket money for doing usual household chores such as tidying his room and doing the dishes. This is part of normal living and contributing to a household. Over the soccer season we gave him some incentive. He loves playing goal keeper so we paid him $1 for every goal he saved and deducted 50c for every one he let in. He then had the choice of banking half with his school banking and keeping half to spend. He has proudly banked all of it and earned a healthy sum too.
I don’t give my kids pocket money, but if they want to save for something, I give them paid jobs to do around the house or garden. I give them two to choose from so they feel they’ve got some say. It is better to give them jobs that the whole family benefit from, not just tidying their own room. Looking after pets and picking up after themselves are essential life skills so I don’t reward them in cash for those tasks.
The Jury is still out at the Egan house however, my oldest does get $2 per week for the canteen and if she spends it in one day then there is no more for the rest of the week. They’re expected to do some chores regardless.
Our son is a toddler so we don’t give him pocket money. However, he is rewarded for random acts of kindness and helping without being asked. We reward him with treat money to spend as frivolously as he likes.
We have also used the purchase of something he’s really into and can look forward to as motivation to work hard at something over a period of time. We are currently playing with a small racing car set that we bought as a reward for a week nappy free at night with a dry bed.
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Donna has over 17 years experiance in the financial industry and is practised in all facets of financial planning, including retirement, wealth creation, gearing, superannuation and risk insurance.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.