Pocket money can help your child to develop a sense of responsibility and understand the basics of money management – important skills for life. Find out more about the benefits of pocket money and easy ways you can help your child learn good financial habits.
Allowance or ‘earning’ pocket money?
If you are thinking about giving your child pocket money, you can either give them a weekly allowance, or try getting them to earn it through completing simple household chores that they wouldn’t normally do, like unpacking the dishwasher or folding the laundry. Both approaches have pros and cons so think about what would work best for your family.
Whether you decide to give your child an allowance or get them to ‘earn’ their pocket money, here are some of the benefits of pocket money for you child:
Giving your child pocket money will teach them about managing their own finances and encourage their independence and responsibility. Talk to your child about how it is their responsibility to look after their own money, and encourage them to keep it in a safe place – like their piggy bank, or in a children’s savings account with a bank (so they can earn interest on their savings!). Many schools also have a ‘school banking’ program your child may be able to participate in.
Saving – it’s worth it!
You can teach your child about saving and encourage their self-discipline by helping them identify and work towards a savings goal. It could be anything that your child wants (within reason!) but if they haven’t set a savings goal before, it’s best to start small. Encourage your child to aim for something exciting that they can achieve in a short timeframe. By keeping the amount small and the timeframe short (no more than a month) they will be able to achieve their goal without too much difficulty, which will encourage them to save again in the future.
You can help your child reach their savings goal by encouraging them to visualise their goal, keeping their savings separate from other spending money, and tracking their progress. Making a savings chart can be a great motivator for kids as they can see their progress towards their goal.
Learning from mistakes
If your child is more interested in spending their pocket money than saving, that’s ok too. Spending all of their money and having to wait for the next ‘Pay Day’ will help your child learn that once money is spent, it’s gone. And spending their money on ‘impulse purchases’ which break within a day, or aren’t as great as they were expecting will (eventually!) teach your child to be more careful with their money, and what they spend it on. Talk to your child about ways they can budget their pocket money and make better spending decisions.
Value for money
Talk to your child about ‘value for money’ – that the price of things is relative, and similar products can come in a range of prices. Children often assume that if an item is more expensive, it means it’s better. Talk to your child about how prices can vary depending on quantity (it’s often better value buying in bulk), how ‘big brands’ will often be more expensive than ‘no name’ brands, and that waiting for a sale can make a big difference to the price you pay for things.
Real life maths
Pocket money can help your child put their maths skills into practice. Encourage your child to do simple maths problems with their pocket money, such as adding up all their coins to find out how much money they have, working out how long it will take them to save for desired items,
keeping track of their spending over the week, and figuring out the change they should get when they buy something.
How much money?
If you do decide to implement a pocket money system, the amount of pocket money you give your child is completely up to you. Take into account how much you can afford, what you want your child’s pocket money to pay for and your child’s age.
Check out the Raising Children Network for more information about pocket money for kids.