Pocket-money is a great way to teach kids about budgeting and saving, but how much is too much? At what age should children be given pocket-money? And as a parent, what should be asked for in return?
What's the right age to start giving your kids pocket-money?
There really isn't one right answer to questions like this but young children don't tend to need any of their own money, having very few opportunities to spend it. If they do receive pocket-money they might just eat it.
Often by secondary school kids will start paying for their own travel and food, which is a good opportunity to have them manage their own money.
Many parents want their children to carry, and use a mobile phone, in which case they may be able to start paying their own bills with an allowance.
As kids get older it makes sense that their pocket-money will increase. They're likely to be increasingly socially active and will need some money to go shopping or to the cinema with friends, for example.
Of course, it's also important that children acquire a good work ethic. For this reason, ever-increasing pocket-money could be a bad idea. At some point they need to have a reason to get out into the world of work.
Gifting it vs earning it
Some parents provide pocket money without any requirements but expect kids to be able to manage their own budget, including budgeting for bus fares, school dinners and their mobile phone bill, for example.
Depositing pocket-money in their own bank account will mean they can use a cash card, review their online statement and make online payments.
Just because their pocket-money is 'gifted' to them doesn't mean they won't benefit from learning about saving and budgeting.
Pocket-money can be useful way to influence children's behaviour and can teach them work ethic – when they realise that if they don't help with household chores they may lose out on their pocket money.
Some parents will have flexible pocket-money based on individual tasks. I remember being paid 50p for sweeping the kitchen floor and helping clean up after dinner.
Other potential paid tasks could include tidying your room, doing the laundry, washing up, loading/unloading the dishwasher, vacuuming, walking the dog and much more. In this way pocket-money can be used to teach children about all sorts of things.
How to work out what the right amount of pocket-money is
Work out what kids need to cover with their pocket-money. Consider the difference between essentials and luxuries. Kids should be encouraged to save for the luxuries, while essentials like bus fares and school dinners need to be covered by the weekly amount.
Set some conditions which must be met to receive pocket money. This could be household chores, putting the effort in at school or just getting along with siblings.
Give them the ability to earn more. You may decide that certain chores are a minimum requirement to receive pocket-money, but why not give them an opportunity to earn a bit more with additional tasks or responsibilities? This is how to get kids to want to work, nurturing their ambition and rewarding their enthusiasm.