These are common questions, and many parents struggle to answer them. In reality, there are no right answers and many opinions out there. What works for one family may not work for another. This article has some ideas to consider when deciding what is best for your family.
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"Money makes the world go round" is a cliche, but it highlights that money is important. Indeed, many basic and ordinary things are only possible with money. As your kid grows into adolescence and adulthood, you can empower them with a solid understanding of what money is, how it works, and its value. As we all know, you can explain something ad nauseam to your kid. Still, until they experience it for themselves, they may not accept or retain the knowledge. Only when your kid experiences not having enough money to buy what they want will they start thinking about what they need. This is where pocket money comes in. It can be a handy tool for your kid to learn the power, limitations, and value of money.
If you are in a cycle of being forced to say NO to your kid while shopping, the answer is pocket money. If you feel like an ATM, when your kid is coming to you regularly for another drop of cash to fund some activity with friends, the answer is pocket money. If your kid is running up large bills you must pay, the answer is pocket money. If your kid isn't interested in money, the answer is pocket money.
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Do you want pocket money to:
It's very tempting to answer yes to all these goals, as they are powerful and important, but they each require learning different lessons. Mixing those goals under a single practice of giving pocket money might diminish learning. It might be best to separate pocket money (a gift) from additional money that can be earned (a payment) from contributions to the smooth running of the home (unpaid).
Let's look at these goals individually in more detail.
In our modern world of cards, apps, contactless and other "click of a button" payment methods, kids must learn that real money is needed to buy things. They need to own a pot of money to understand the value of money, learn how to be responsible for it, and look after it.
Through the process of owning money, kids can learn to:
The process of having pocket money can teach life skills:
Over time there will be numerous opportunities for learning and conversations about what happened and why. Just remember, don't be tempted to bail them out. Instead, talk about what happened and why so they can avoid making the same mistake next time.
With less actual cash changing hands, kids must learn that:
You can find ways for your kid to earn money for doing extra jobs beyond their responsibilities as a family member, e.g. clearing leaves or clearing snow. Ideally, these jobs would benefit you as a parent, or you would pay to have them done. Keep tasks simple and doable to avoid getting into negotiations about completion, pricing, and payment. Avoid confusing this with tasks your kid should be doing as a good household member, like keeping their room tidy or picking up their laundry.
Through the process of being paid for doing extra tasks, they will learn:
The process of earning money also enables life skills:
Think carefully about this topic before you decide what to do. Using a given or paid pocket money to motivate or discipline your kids significantly complicates your job as a parent.
Here are some consequences of doing this:
To be clear from the start, you should decide if the pocket money is going to be:
You can start as early as the time when your kid can count. Many people suggest you can start as early as four or five years of age. However, it's never too late to teach your kid about money. The experience of giving them full control over some money is so strong that even doing it a few years before they leave home will help them prepare for life outside the home.
How much you give depends on what you intend the pocket money to cover and what the family budget allows. Make it clear each year what the money does and doesn't cover, e.g. treats, gifts for others, charity donations, and saving for a particular game or toy. Set a budget and stick to it. Try not to supplement or pay in advance if your kid runs out of money. The amount you give will typically increase as they age to include more spending categories, e.g. clothes, movies, and phone use. A rough rule of thumb is 50 cents to $1 per year of age per week. One way to consider pocket money is to give what you would already have spent on your child. Just allow them to decide how and when to spend it. Also, remember that if the pocket money is too generous, your kid won't learn how to allocate their money because they don't have to prioritize.
Take a look at our Kids pocket money data analysis for graphs and tables of allowance and pocket money by age for the USA and UK.
Be sure to give the pocket money on a set day, and remember it. Imagine if your employer missed or delayed a paycheck! Paying cash to younger kids makes it an authentic experience. It will allow them to handle and look after their own money. The sound and feeling of dropping coins into a filling piggy bank is a powerful message. Some people encourage their kids to split their pocket money into save, spend, and share "jars". As soon as your kid can own one, pay the money into a bank account with an ATM or debit card so that they can progress from being a child with money to a young person ready for the world.
Pocket money is a great and fun way to teach your kid about money. Giving some of the family's money to your kid to own, look after, spend, or save as they wish, can make them feel important, and they will learn a lot along the way.
It's critical to consider "giving" pocket money versus "paying" for work versus "unpaid" chores. Is pocket money delegation of ownership of "family" money or something you must earn? Mixing these can confuse what and if your kid learns, so it is better to keep them separated.
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https://www.scholastic.com/parents/family-life/financial-literacy/allowance-age-age.html
https://roostermoney.com/us/how-much-pocket-money-should-i-give/
https://www.gohenry.com/uk/blog/pocket-money/how-much-pocket-money-should-we-give-our-kids
https://raisingchildren.net.au/preschoolers/family-life/pocket-money/pocket-money
https://natwest.mymoneysense.com/parents/articles/how-much-pocket-money-should-i-give/
https://www.positiveparentingsolutions.com/allowance/allowance-when-and-how-much
https://www.marketwatch.com/story/5-mistakes-parents-make-when-giving-kids-an-allowance-2016-05-06
https://www.thebalancemoney.com/what-is-the-average-allowance-for-kids-4177812
https://hermoney.com/connect/family/new-rules-of-allowances-for-kids/
https://mint.intuit.com/blog/trends/average-allowances-in-america-by-age-0813-2/
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