Giving kids regular pocket money is a fabulous opportunity to start getting them familiar with money management skills. It gives them the chance to make decisions about how they think money should be saved or spent, and watch how the choices they make affect how quickly they can achieve their goals. We take a look at how pocket money can be used as a learning tool in your household.
When to give pocket money
Does your child understand that they need money to buy the things they want - but that they shouldn’t necessarily spend it all? Looks like it might be time to start entrusting them with a regular amount to put these concepts into practice!
Top tip: Let your child know that, once their pocket money is gone - that’s it! Teaching money as a finite resource helps to encourage the motivation to set a budget and stick to it, and the need for saving money.
How much pocket money?
There’s no straight answer for how much pocket money a child should get. Some things to consider are:
The age of the child
What is pocket money being used for? Older children might be expected to pay for things such as their mobile phone bills/credit, and so may require more pocket money (upon negotiation, of course!) - whereas younger children may not have as much expectation placed upon their money.
How much can the family afford?
Speak to friends and family to see what the “going rate” is, and adjust accordingly as works best for your family.
How to spend pocket money
Giving pocket money to kids gives them the chance to take an active role in their financial learning, and so it’s a good idea to encourage them to make good decisions themselves (under your guidance). While constantly running out of money isn’t a habit that we want kids getting into, occasionally spending all of their money way before “payday” will probably help them to learn that they need to make compromises along the way to make those dollars stretch!
A good idea for teaching kids how to use their money is the “50/40/10” rule; save 50%, spend 40% and donate 10%. With their allocated spending budget, some ideas for them to work into the budget may include:
School lunches from the canteen once a week
Special activities, like going to the movies
Supplies for their favorite hobbies, like craft or sports
Weekend activities with friends
Mobile phone credit/bills
Gifts for friends and family
Chores and pocket money
Some parents choose to tie pocket money to chores, others to selected jobs only, while other families prefer to have pocket money separated from the help around the house that the kids give as part of the family responsibilities.
At the end of the day, there’s no “right” or “wrong” way to use pocket money as a financial learning tool - figure out what works best for your family, and discuss it openly with your kids. Give them the chance to take ownership of their own funds, and truly grasp the smart saving and sensible spending skills they need to make their money work for them; you’ll be surprised just how savvy they can be!