Children & Pocket Money

Overview:

Pocket money is a great way to teach children how to manage money. It is my belief that this is not something a great many children are taught, but money management is such an important issue. By providing your child with pocket money you can help establish money skills which hopefully will remain with your child into adulthood.

What are the benefits of pocket money?

• Teaching children about money in general.
• It provides the child with money to buy something they want.
• It teaches them to  save for a more expensive item & provides the enjoyment of the delayed gratification which comes from saving up for something.
• Learning how to budget, put aside a certain percentage of their allowance for a 'rainy day'.
• It provides the opportunity to make & learn from financial mistakes. Impulse buying instead of putting thought into a purchase. Saving money instead of blowing it all in one go.
• It gives them the opportunity to make financial choices for themselves. Do they blow it all in one go on sweeties, or do they save it for a much wanted toy?
• Children learn how to look after their money. Ie; put it safely in a purse, not leave it lying around where it can be lost.

At what age should I start giving my children pocket money?

There is no set age for starting pocket money. Ask around, see what friends & family are doing with their children. Children under 5 years of age probably won't understand what money is, so it probably isn't a good idea or any benefit to the child to give it before this age.

How much pocket money should I pay my child?

Again, this is up to the individual family, how many children there are, their ages & what you can afford. A good rule of thumb is $1 for each year of the child’s life.

Saving pocket money:

It is a good idea to have your child save a certain amount of pocket money per week. Most banks offer fee free accounts for children. 10 to 20% is a good start.

Opening up a bank account gives you the opportunity to teach your children about banks, depositing & withdrawing money & bank interest. Check with your bank what their fees & charges are for children's bank accounts.

Should children have to do chores for their pocket money?

It seems that the answer to this question is split between the yes & no camp. Some believe that pocket money should be earned, others think it should be given without any conditions attached.

Personally, I provide my child with a basic $5 (20% of which she has to save), and she isn't required to do any chores for this money. However, she is asked to do some regular chores to contribute to the running of our home. If she forgets, she does not have money docked. If at a later stage she would like to earn additional money, she will be required to do additional chores to earn the extra.

If you are going to require chores be done for pocket money then ensure you choose age appropriate ones. There is no point expecting a 5 year old to fold up laundry & put it away.