I am often asked about pocket money. How much, how often and what should they do to earn it (or should it just be given). Here I have put together a guide to pocket money including some suggestions on how to decide what to give and how to give it.
The purpose of pocket money
One of the first steps in deciding how pocket money will work in your home is to decide on its purpose. Is it to teach a child to understand the value of money, to learn about saving, to become more generous or thankful. Are you using it as a reward or payment for chores? What is your goal? Once you know what the purpose of pocket money is in your home you can then decide on how it will work.
What is pocket money to be used for?
This question will help shape how much you give (particuarly for older children or teens). Are they expected to use their own pocket money for outings, activities, clothes or gifts? What level of general contribution to their expenses does their pocket money account for? If you expect it to be used for all entertainment and activities as well as gifts for friends and family then you need to consider the cost involved in these expenses and work out a suitable amount of pocket money.
What do you do to get it?
Is pocket money just handed out without the expectation of anything in return? Is it chore based or reward based? Does your child lose entitlement to some or all of their pocket money for undesirable behaviour?
Personally I like the idea of pocket money being chore based with basic chores that form part of being part of a family and then “pocket money chores”. They are on top of the regular everyday stuff and need to be done in addition to those jobs to earn pocket money.
When to start
When to start giving pocket money can be a difficult decision. We are about to start with our 3 year old, not for the purpose of getting chores done but to teach about saving and giving. I want him to learn to save his money and also to give to those in need. I am hoping he will learn to value money for what it provides and can give to others and in turn to be thankful and not wasteful.
How much to give
I think this depends somewhat on what it is used for but I have heard a good suggestion of a dollar for every year of age. This may need to be expanded for older kids if you expect them to use their pocket money for most or all activities and gifts. Perhaps set a baseline amount for general chores and then the opportunity to earn additional funds. Some people try to make it more “real world” like and pay based on time. So a child may earn $x an hour for certain activities, just like they would in the workforce.
Do your kids get pocket money? How do you decide how much to give?