Pocket money is a great way to teach your kids useful money skills. But it needs to be part of your family’s routine to be effective. Here are a few dos and don’ts to help you and your kids manage their money.
Should children earn pocket money?
Are you wondering how much pocket money you should give your kids or whether you should pay them pocket money for doing chores to teach them the value of hard work and responsibility?
Some parents feel chores are necessary for family life and shouldn’t be tied to money. And some parents take the middle ground. They give pocket money to their children, and they can top up by doing chores.
So should children get paid for chores? Ultimately, it’s a matter of personal choice. Only you can decide what works best for your family.
Establishing clear expectations and rules is important if you link your kids’ pocket money to chores. Make sure your child understands what’s expected of them and what they’ll get in return.
If you choose to give pocket money without any strings attached, teach your child the value of money and how to manage it responsibly. Encourage them to save some of their pocket money and discuss ways to use their money wisely.
Some of the main ways to help manage pocket money include:
- Setting clear expectations
- Make paying pocket money regular
- Use it as a learning opportunity
- Don`t tie it to behaviours
- Don't make it too high or too low
- Communicate with your kids
Don't bail them out
Discuss wants vs needs
Encourage them to budget
How to manage giving pocket money: dos and don’ts
Do set clear expectations
Be specific about the amount of pocket money your child will get and when you’ll be giving it. If you’re linking your child’s pocket money to certain tasks or chores, make sure they know exactly what’s expected in return. You’ll avoid arguments or misunderstandings down the line if you’re clear from the outset.
Do make it regular
Pay your child their pocket money on the same day each week or month. It builds trust and reduces ‘bargaining’. And as well as helping them understand the value of a consistent income, it’ll teach them how to make their pocket money last from one ‘payday’ to the next.
Whether it’s every Saturday morning or every Wednesday after football practice makes no difference. Decide on a day and stick to it.
Do use it as a learning opportunity
Pocket money is a great opportunity to teach your child money management skills. You can use it to teach them how to budget and save and explore ways they can make the most of their money by explaining interest and investing. You’ll be helping them make better informed financial decisions in the future.
Don't tie it to behaviour
Tying pocket money to behaviour sends the wrong message. Linking money to punishment or reward is not the goal here. It’s about teaching your children to live within their means. And that’s something they can only learn if they know they can rely on receiving a set amount of money at a set time.
Don't make it too high or too low
How much pocket money you should give your kids depends on their age and level of responsibility. How much you decide to give will also depend on what you can afford and think is fair. But you need to pitch it right. Too high, and you risk a sense of entitlement. Too low, and you could discourage your child from saving or budgeting.
Don't bail them out
Let your children learn from their mistakes. Don't be tempted to bail them out if they fritter away their pocket money as soon as they get it. Instead, let them learn the consequences of doing this, as it will encourage them to be more responsible in the future.
Don't forget to communicate
Communication is key when it comes to pocket money.
As Beth Zemble, GoHenry’s VP of Education, says, “Giving your kids pocket money isn’t just about giving them money. It’s an opportunity to explore concerns they may have. Was it a good purchase? Are you happy or sad that you spent your money? Do you wish you had saved for something else? By talking it through and helping them learn from mistakes, you’ll help them develop money confidence.”
Teaching your kids and teens to manage their pocket money: dos and dont’s
Do encourage them to budget
Help your child create a budget. Explain it’s a plan to help them control their money and make it work for them. Show them how budgeting works. You could use your household budget as an example. But there are lots of fun ways to teach kids about budgeting too.
Do encourage them to save
Encourage your child to save a portion of their pocket money and set up savings goals.
Make it fun by letting them choose a savings goal that's meaningful to them, and then work together to create a plan to achieve it. This will teach them how to plan and prioritise their spending, and set them up for financial success in the future.
Explain the importance of saving for the future and how to make their money work for them. Consider matching their savings to give them an extra incentive to put money aside. You could also open a savings account for them so they can see their money grow.
Do teach them to prioritise
Teach your child to spend wisely. Encourage them to delay gratification and spend money on things that provide long-term value.
Do discuss wants vs needs
To help them make informed spending decisions, discuss the difference between wants and needs with your child. Encourage them to think carefully about whether they need something before buying it. This will help them avoid overspending and learn to live within their means.
While it’s important to set clear expectations and guidelines for how your child can use their pocket money, you want to avoid micromanaging their spending. Give them the freedom to make their own decisions and learn from their mistakes.
Don't give in to demands
You want to be flexible and listen to your child's concerns, but it’s best to avoid giving in to any demands for more pocket money. Stick to the amount you agreed to and suggest they work for extra money if they think they need it. You’ll be helping them make them connect money as a reward for hard work too.
Don’t forget to praise
When your child makes wise financial decisions and reaches their savings goals, be sure to praise them for their efforts. This will help build their confidence in managing their own money.
Related: Positive praise
How GoHenry’s app can help
A pocket money app like GoHenry makes managing your child’s pocket money easy. A prepaid kids debit card for kids aged 6-18, it comes with a companion app for parents. You can set up a regular pocket money payment, monitor your child’s spending, set limits, and block certain purchases through the app. So while your child gets a taste of financial independence, you get peace of mind.
What’s more, our in-app Money Missions tool for kids is designed to accelerate financial literacy. They’ll learn everything from money basics like budgeting and saving to investing, stocks, shares and more. All through fun, interactive games and videos.