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Pocket money

Posted In Pocket Money - By KidsMug On Wednesday, March 14th, 2012 With 1 Comment

Pocket money is one of the first ways for children to learn the basics of managing money – a skill they’ll definitely need for life – and it makes children feel independent. Equally, if your family finances or values mean you’d rather not give pocket money that is also an important lesson for your children.

how much
Talking with other parents about what they give their kids might help you find a benchmark.
It might also help avoid squabbles between kids about how much pocket money they get.
These points might help if you are thinking about giving your children pocket money.

Generally, children learn their attitudes towards money from home. Giving pocket money creates the opportunity to teach children about spending thoughtfully and saving (and even the consequences of misplacing it, losing it, betting or giving money away).
Regardless of the amount of money, giving pocket money to children as young as four or five helps them to begin learning about money management.
Pocket money helps teach children about having to make choices, saving up and waiting for things they want.
Letting your children make a few mistakes (like spending all their hard-earned savings, originally earmarked for a hot-wheels car, on fake tattoos instead) is part of the learning process. You can put limits on what they spend their money on, for example, you may discourage them from buying bubblegum or lollies if that interferes with their appetite for nutritious food or you want to protect their teeth from decay.
Learning about money

Your child learns a lot by watching you and how you deal with money. Spending, saving, withdrawing or donating money: they’re all chances to teach your child more of the basics around money.

Advertising has a strong influence on children. Your child might get the hang of managing money earlier if you explain how advertising can make you want things you don’t really need or can’t really afford.
As children get older, you can teach them about:

the value of money: the relative price of things
spending: accepting that money is gone once it’s spent
earning: understanding that earning money can be hard work, but usually that’s the only way to get it
saving: using short-term and long-term goals
borrowing: understanding the importance of repaying borrowed money.
When to introduce pocket money

Although research has shown that many parents introduce pocket money when their child is six or seven years old, there are no hard and fast rules.

Your child might be ready to try managing some pocket money if she:

understands that you need money to get things from shops
understands that spending all her money today means there is no more until the next payment
needs money to buy school lunches or catch the school bus. In this case, pocket money can help your child to plan daily spending so that money lasts for the whole week.
How much pocket money?

This depends on your circumstances and what you think is a reasonable amount. As long as your child understands how much she will get (and how often), she can start learning how to use the money well.

Base your decision on:

what your family budget will allow
what you expect pocket money to pay for – if you expect it to cover things like transport, lunches and savings, then you might need to give a little more
how much pocket money your child’s friends receive.
What should pocket money cover?

Pocket money could cover any of the following things:

the bus fare to school
lunch on Fridays
a certain amount as savings
spending as your child pleases
donations to charity.
If you find that your eight-year-old wants to save for something special and has been saving responsibly, you may decide to add something extra.

Letting your child spend as she pleases is an important way for her to understand the concepts behind money, and to develop a sense of responsibility and independence.

Tips on giving pocket money

Explain to your child what pocket money is for and what it’s not for.
Pay what you can afford, regardless of what other parents (or your child!) might advise.
Pay it on a set day.
Set up a number of jars to help your child divide her money. For example, one jar for small things she wants now and one for saving towards bigger things.
Put saved money in a dedicated container (such as a glass jar or a money box). Seeing the level grow helps highlight the achievement of being a good saver.
Try not to give payment in advance.
If pocket money is to cover entertainment, talk about what kinds of entertainment.
Try not to supplement pocket money – it’s all about teaching your child to live within her means.
Pocket money and chores

Paying your children to help around the house is a complex issue. Linking their family contribution to pocket money may lead to unnecessary bargaining and interfere with the idea of contributing just because they are family members.

However, no single rule is right for every family. If your children work well under these circumstances, go with it. You might even consider giving bonuses for extra chores if your child is saving for something special. If you do decide to pay pocket money for chores, explain tasks clearly so there is no confusion about what needs to be done and when.

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