Watching our kids grow up and become independent is a joy, but teaching them essential life skills along the way is equally important. One of the most valuable lessons they can learn is money management, and this often begins with pocket money.
So, how can we use pocket money to instill the right values and financial habits in our children? In this article, we’ll explore the best strategies, common questions, and modern tools to help you make informed decisions about giving pocket money to your child.
When to Start Giving Pocket Money
One of the biggest questions parents ask is: At what age should I start giving my child pocket money?
According to a Canstar survey of 1,023 parents with children aged 4-15 years:
“Almost 80% of parents pay pocket money, with the average starting age being just over six years old.”
However, every child is different, and there is no universal right or wrong answer. Consider the following factors when deciding if your child is ready for pocket money:
- Does your child understand the basics of money and its value?
- Are they mature enough to manage small amounts of money responsibly?
- Have they started asking for pocket money?
- Do you have older children who already receive pocket money?
- Can your household budget accommodate regular pocket money payments?
Tip: Don’t feel pressured to start giving pocket money just because others do. Make the decision based on what works best for your family.
How Much Pocket Money Should You Give?
The amount of pocket money you give should align with your family’s financial situation and your child’s needs. Ask yourself:
- What can I afford to give?
- Once you start, kids may expect consistency, so start with an amount you can sustain.
- What is a fair amount based on my child’s age and responsibilities?
- Younger children may receive smaller amounts for discretionary spending, while older kids might receive more but be responsible for certain expenses like lunch money or clothing.
Tip: Start with a lower amount and gradually increase it as your child grows and their financial understanding improves.
Pocket Money and Chores: Should Kids Earn It?
A common debate among parents is whether pocket money should be tied to chores. Here are two approaches:
- Unconditional Pocket Money: Some parents give pocket money without linking it to chores, believing children should contribute to household tasks without expecting payment.
- Earning Through Chores: Others require children to complete age-appropriate chores to earn their money, helping them understand the concept of earning and financial responsibility.
Compromise Approach: You may decide to pay for extra tasks beyond everyday responsibilities, such as washing the car or mowing the lawn.
Setting Clear Expectations with Pocket Money
Once you establish a pocket money system, ensure your child understands how it works. Some useful methods include:
- Rewards Charts for younger children to track progress and responsibilities.
- Pocket Money Apps like Spriggy, RoosterMoney, or GoHenry, which help children manage their savings, spending, and earnings digitally.
Cash vs. Digital Pocket Money
As cash transactions decline, many parents wonder whether to give pocket money in cash or digitally. According to the Westpac 2019 Money Management Survey:
“76% of parents still give physical cash and coins to kids as pocket money.”
However, with digital payments becoming more common, children are increasingly using prepaid debit cards, bank transfers, and mobile payment options.
Pros of Cash:
- Helps children understand the tangible value of money.
- Encourages budgeting by physically seeing money being spent.
Pros of Digital Payments:
- Prepares kids for a cashless society.
- Provides tracking and security features.
- Some apps offer savings incentives and budgeting tools.
Tip: A hybrid approach—using both cash and digital money—can provide a well-rounded financial education.
Teaching Kids to Save with Pocket Money
Pocket money is a great way to introduce children to saving habits. Encourage them to:
- Set savings goals for larger purchases.
- Use a three-jar system (spend, save, give) to balance their money.
- Explore pocket money apps that offer savings features.
The Barefoot Investor’s jam jar method is a fantastic way to help kids allocate money effectively.
Final Thoughts
Pocket money isn’t just about giving children spending money—it’s a tool to teach them financial responsibility, budgeting, and the value of money. Whether you choose to link pocket money to chores, use cash or digital payments, or set savings goals, the key is consistency and open discussions about money.
By fostering good financial habits early on, you’re setting your child up for a financially responsible future. Start small, stay consistent, and watch your child develop money-savvy skills that will last a lifetime.