Giving pocket money to your kids does more than just allow them to treat themselves each week. It enables them to make choices about how to spend or save their money, which lays the foundation for financial responsibility later in life.
However, pocket money comes with the need for financial education; otherwise, kids risk overspending or spending on items they don’t really need.
Not convinced giving them pocket money is the right thing to do? Below, we will reveal some of the benefits of using pocket money as well as how to teach kids how to manage money.
Related: How much pocket money should we give our kids?
Should children get pocket money?
There are key arguments for and against giving pocket money to your child. On the one hand, some people believe that pocket money is essential for children to learn how to manage money. This is particularly true if they are given pocket money that they have to use to cover specific expenses, such as buying lunch at school or going to the movies with friends. This can teach them money management and how to budget effectively.
Sonia Rach, Deputy News Editor of FT Adviser and author of Loose Change: Tina Learns to Save, agrees, “Pocket money is a great way for kids to learn about the value of money and the concept of saving. In a largely cashless society, children can find it difficult to fathom or quantify money as something physical as they don’t always see it, and providing them with something they are in control of gives them a sense of responsibility and ownership over it rather than having it bought for them.”
That said, some people feel that pocket money is unnecessary and encourages children to spend it unnecessarily. They believe that children should only be given money when they need it, such as for buying school supplies or paying for extracurricular activities.
So, what is the right answer? The truth is, it depends on your individual situation and what you believe is best for your child. Here are a few tips to help you make the decision:
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Talk to your children about money and how it works. This will help them understand why they are receiving pocket money and how they should use it
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Set clear rules about what the money can be used for. This will help your children stay within budget and not spend impulsively
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Help your children to save their money. This can teach them the value of delayed gratification and how to save for a specific goal
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Monitor how your children are spending their money. This will help you to ensure that they are using it responsibly and not wasting it on unnecessary things
There are many reasons why pocket money should be earned. But ultimately, whether or not you give your children pocket money is up to you.
What are the benefits of pocket money for kids?
- Shows the importance of financial planning
- Encourages saving for bigger ticket items
- Teaches how to budget
- Encourages independence
- Teaches needs versus wants
- Encourages delaying gratification
- Shows the value of money
- Limits pester power
- Encourages an evaluation of options and consequences
- Serve as earnings for completing chores
From teaching them financial responsibility to helping them discover the value of hard work, let’s look into some of the biggest advantages of pocket money.
Financial planning
One of the main benefits pocket money has for kids is that it teaches them financial planning. This is a crucial skill they will need when they reach adulthood, and it could save them a lot of stress later in life.
When they receive pocket money, kids need to decide how to spend it. They need to determine how much they want to save and how much they have available to spend. As they get older, you can start to set them targets, such as using their pocket money to pay for some of their expenses. Learning how to manage their money lowers the risk of financial issues in adulthood.
Teaches kids saving
Saving money isn’t always easy, especially when you’re an adult. However, if you teach crucial savings skills from a young age, it makes saving more of a habit. If your kids get used to saving a portion of their pocket money now, they will have no problem saving as they grow up.
Teaches kids budgeting
By receiving a fixed amount of money on a regular basis, children learn to allocate their money wisely to cover various expenses. They must make decisions about how to divide their pocket money among different categories, such as saving, spending on immediate wants, and setting aside money for other goals. Through this process, children develop essential budgeting skills.
Teaches kids independence
So, how does pocket money teach kids independence? When you give your kids pocket money, it is up to them how they manage it. They need to make the right choices to ensure they can afford the things they want and need. Through making their own choices, they gain vital independence that will help them as they progress in life.
Teaches needs versus wants
Pocket money teaches kids how to differentiate between needs and wants. They need to make choices about how to allocate their funds, distinguishing between needs, such as money to go out with friends, and wants, like snacks or treats.
Encourages delaying gratification
Pocket money encourages kids to delay gratification by introducing them to the concept of saving for future goals. Instead of spending their entire allowance immediately, children learn to set aside a portion of their pocket money for bigger purchases or long-term objectives.
Shows the value of money
Kids don’t always understand the concept of money, particularly when they are younger. If you want them to start learning the value of money, giving them pocket money can help. When they see that money doesn’t come for free and it only goes so far, they will learn to be better at handling it.
Limits pester power
Pocket money can help limit pester power by empowering children to make their own spending decisions within the boundaries of their allowance. By having their own money to manage, children may be less inclined to constantly ask their parents for items they desire, as they understand that their pocket money is finite and must be managed responsibly.
Encourages an evaluation of options and consequences
Pocket money encourages children to evaluate options and consequences by giving them the responsibility of managing their own funds. By experiencing the outcomes of their spending decisions, they learn valuable lessons about the importance of considering the long-term consequences of their choices. This helps them develop critical thinking skills and financial literacy, preparing them to make informed decisions as they grow older.
Can be given as earnings for chores
Pocket money can also be used to show appreciation and achievement. Perhaps your kids helped out around the house more than usual? Providing them with pocket money for their contribution can show your appreciation. The GoHenry app lets you set paid tasks. As your child completes them, they will receive the agreed payment. It also rewards them for their hard work and motivates them to help out more.
Pocket money vs other rewards
There are a lot of ways to reward kids for good behaviour other than by giving them pocket money. Other popular rewards include:
- Days out
- Food treats
- Toys
While each of the above can be highly motivating to kids, they don’t teach anything other than reward. With pocket money, it teaches them about money management. It also arms them with the knowledge they need to help secure their financial future.
Other rewards are ideal if you want to reward your kids for doing their chores. However, pocket money is the best option if you want to help them learn and develop financial independence.
Are there any disadvantages to giving pocket money to kids?
There can be some cons to pocket money but they are easily solved by explaining the purpose of pocket money and setting clear expectations around it.
Encourages a bank of mum and dad mindset
Giving weekly pocket money may make your kids think they can get money for nothing from you whenever they want it. Make sure they understand that they get a set amount every week and what this money is for. Of course, giving pocket money or paying for chores is a personal choice. Some parents choose to do both: they give their children pocket money, which can then be topped up with paid chores.
They are unable to delay gratification
Your child may be so excited at the prospect of pocket money that they spend it all in one go every week and then regret their spending. As frustrating as this is to see, allow them to make money mistakes, so they start to learn the power of budgeting and waiting for what they want to buy.
They won’t get a part-time job
An over-reliance on pocket money can stop children from developing important life skills such as getting a part-time job and seeing the value in money. This is easily solved by striking a balance between how much money is given and how much money they are expected to earn, either with a job or by helping you around the house.
Should I just give my child pocket money or make them earn it?
There’s no right or wrong answer to this. Both approaches have pros and cons. If you give your child pocket money, they will learn about money management and budgeting. But if you expect them to earn their pocket money, they will learn the value of hard work and delayed gratification. You should also keep in mind that there are many ways to reward your child.
A good option can be to adopt a mix of both approaches. For example, you could give them a small amount of pocket money each week and then top it up if they do extra chores around the house. Apart from other benefits of giving kids chores, this will teach them both the value of money and the importance of hard work.
How much pocket money should I give?
According to our latest research, children’s weekly pocket money now stands at an average of £7.54 per child. 14-year-olds' pocket money increased by 2.5% compared to the previous year, reaching a weekly average of £12.15.
Of course, how much pocket money to give your child depends on your individual situation, and it really doesn’t matter how much you give. It’s the act of giving something that helps kids learn good money skills. You may want to give your child a smaller amount of pocket money each week or a larger sum to give them each month or once they reach a specific milestone (e.g. completing their school year). Alternatively, you could focus more on paid tasks and chores.
It ultimately depends on your child’s age, what they want to spend their money on, and your family budget.
What’s the best way to give pocket money to your kids?
The best way to give pocket money to your kids is through a pocket money app. At GoHenry, we offer a kid’s prepaid debit card and an accompanying app. The card enables your children to actively participate in the digital economy and spend in the same way they will as adults. It also provides a safer place to store their money as it won’t get lost down the back of the sofa.
GoHenry’s in-app Money Missions can also accelerate your child’s financial education via interactive games and quizzes on topics such as saving, spending and budgeting.
While there is some debate on whether pocket money is beneficial for kids, when handled correctly it can teach them to be financially responsible. As you can see above, there are plenty of potential benefits pocket money can provide. The more clued up children are about money and how it works, the less likely they will be to fall into financial difficulties later in life.
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