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Pocket money: how much is enough?
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By MyBudget Editor

An important part of becoming an adult is learning to handle your own finances. But what’s the best way to prepare kids for the future challenges of money management? In researching this article, we asked our Facebook followers for their advice about pocket money and bring you some of their responses as we explore the benefits of pocket money, how to choose an approach and finding an amount that works for you, your kids and your budget.

The benefits of pocket money

Despite the fact that kids grow into adults who need to handle money on a daily basis, money skills are rarely taught at school. Instead, most people learn about money from the ‘school of life’, often in the form of harsh and expensive lessons. With parental guidance, however, pocket money can help kids learn about the value and consequences of money before the responsibilities of adulthood have increased the stakes. 

Alice tells us that her eldest son receives $60 pocket money every fortnight. At 13, he’s learning to organise his finances by dividing his pocket money into two jars: one for living expenses and one for “splurges.” When he wants a new Xbox game or lunch from the school canteen, he’s expected to use his own money.

Some of the key lessons of pocket money can include:
 
1.        Teaching the value of money
Rather than waiting for their first job, pocket money gives kids an opportunity to practise simple real-world transactions like going to the shops. Money mistakes, such as losing money or experiencing buyer’s remorse, are actually valuable lessons best learned sooner than later.
 
2.        Budgeting
You can help your child learn to budget like Alice, by showing your child how to divide their pocket money into jars (or separate accounts for older kids). MyBudget’s world-class budgeting platform works on very much the same principle by budgeting your income into streams. 
 
3.        Delayed gratification
Being able to wait and save for things is one of the cornerstones of financial fitness. Pocket money can teach your child to wait while their savings grow. As they do, they get to experience the satisfaction of being able to afford higher ticket items, such as saving for a skateboard or new clothes. 
 
4.        Generosity
Many parents are concerned about talking with their children about money because it might instil a sense of greed. But when handled correctly, pocket money is more likely to be an opportunity to practise generosity, such as saving for a loved one’s birthday present or donating to a charity. 
 
5.        Talking about money
Pocket money is a great vehicle for starting a conversation with your child about money. Will they save it? Spend it? Buy a present? Give a portion to charity?? These are all opportunities to instil your money values, as well as teach your child practical financial skills. 

Living allowance or payment for chores?

Some parents utilise pocket money as a way to get their kids ready for the working world. In those instances, pocket money is tied to the performance of chores: you work, you get paid. In other instances, parents may choose to provide pocket money with no specific work expectations. The logic being applied is that Mum and Dad don’t get paid for doing the dishes, so why should the child? 

Whether pocket money is a form of compensation for specific work or a non-specific living allowance, it really comes down to your personal philosophy and what motivates your child. Some children, for example, will flout their chores because they have minimal interest in the pocket money attached to it. Other children are highly motivated by the idea of doing more to earn more.

MyBudget follower Juanita says that she provides a pocket money allowance of $160 a fortnight to her 15-year old daughter. It sounds like a lot, but Juanita is trying to teach her daughter how to plan her finances and budget by expecting the teen to pay for her own phone, entertainment and name brand clothing.

What’s the right amount?

Household budgets and personal circumstances will differ for every family, so there isn’t a magic formula to say what age to start pocket money and what amount to give, although that would be handy! One of the simplest recommendations is one dollar for every year of age, e.g. $7 for a 7-year-old. 

MyBudget follower and mum of four Anmre keeps it simple by sticking to $10 a week for her two eldest children, aged 14 and 11. They can earn extra pocket money by helping out around the house, such as babysitting their younger siblings. 

Parents can also consider reducing the amount of pocket money their children receive as they grow up and become old enough to get a part-time job and earn their own income. 

Since separating from her son’s father five years ago, Debra’s 15-year-old son has received $20 pocket money a month. Debra reports that her son’s phone bills and general living expenses are taken care of. Meanwhile, he has written his resume and is looking for casual work to supplement his pocket money.

Financial management as a family 

There are no hard and fast rules about pocket money but there are important benefits in talking to your kids about money and involving them in family budgeting. Children are constantly absorbing knowledge and developing money values and a worldview from the examples around them, so it pays to make those lessons positive. 

Do you need help with your finances? Our caring personal budgeting experts at MyBudget can show you how to budget and save as a family. Call us today at 1300 300 922 for a free consultation.

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