Pocket money is a great way for children to learn the basics of managing money – a skill they’ll definitely need for life – and it helps them feel more independent and responsible. Kids NEED pocket money! It gives them independence!
How to make pocket money work
Give it to your child with no strings attached i.e. chores, jobs etc. Daily or weekly chores are something kids just HAVE to do as part of the household. They should have responsibilities and chores as part of home life but they should NOT be paid for this. Pocket money is their salary for everyday life. This approach makes it easier to keep and less battles. Also, I am not a big fan of ‘paying’ our kids’ for getting good grades. We are in danger of sending a signal that they work hard for YOU not for them self. CLICK here to read here about ‘should I give my child exam’s gift’ and how to respond to child when he/she ask, ‘what do you pay me if I get an A’?
Benefits of Pocket Money:
- Teaches the value of money: the relative price of things
- Teaches about spending: accepting that money is gone once it’s spent
- Teaches about earning: understanding that earning money can be hard work, but usually that’s the only way to get it
- Teaches about saving: using short-term and long-term goals
- Teaches about borrowing: understanding the importance of repaying borrowed money
And the good news – there is something in it for us too!
- Usually end up ‘dishing out’ less money (when they have to spend their ‘own’ money suddenly they don’t need that toy or ice cream)
- Less arguments (things are clear in terms of how much they get and what it’s for so no need to argue)
- Can control how much money you give
- You are not just an ATM
- You can feel proud of yourself
- Set them up for the future
- When: weekly or monthly?
- How: Agree how they get it (cash or into an account)
- What: Decide what comes out of pocket money and what doesn’t and be sure to make this clear to your child: e.g. cinema, clothes, train/bus sweets, mobil, a toy, saving etc.
- How much will they get; that depends of WHAT you expect them to buy themselves, age etc
- To make the experience of handling their own money as useful as possible, try not to interfere in your child’s financial decisions. Whether they decide to save for something really worthwhile or they fritter their money away on the latest fad, try not to get too involved or worked up. Your aim is to help them become self-reliant individuals and they’re bound to make a few mistakes on the road to independence. You can only advice and give your oppinion!
- Encourage your child to put away a portion of their pocket money or allowance into a savings account, while the rest is theirs to spend as they choose.
- You can encourage saving by adding to it e.g. 10% every time they reach a certain amount, e.g. save £100 = gain £10
- Get a bank or building society book (or a SMART card when they are age 11)
- Agree on additional chores where they can earn extra money i.e.. wash the car, cut the grass etc.
- Help them to get a job: write to everyone in your road and let them know your kids can babysit, pet sit/walk, look after gardens etc.
Honour the agreement: don’t use pocket money as consequences, where you take away what you have given them! You gave it them – they keep it. Choose other consequences!
How much to give: Ultimately the decision on how much to give is yours to make. Of course how much you give will depend on what you’re expecting your child to cover with this money – will they buy their own clothes from their allowance, transport, birthday gifts, lunch etc.
When to start: Really this is down to the individual child and family but your child is ready to try managing some pocket money if he or she:
- Understands that you need money to get things from shops (can’t just take)
- Understands that spending all her money today means there is no more until the next payment
- Knows the basics of maths
- Has a spending need: i.e. magazines, toys, clothes, phone etc.
- Giving pocket money to children as young as four or five years old helps them to begin learning about money management
Even though pocket money can be given without ‘strings attached’, make sure they do still have some chores around the house!! If they refuse to help around the house and do the agreed chores you can have other consequences: no TV, computer, phone, early to bed, no dinner if they refuse to set the table etc.
From Mette Theilmann