Pocket money has been part of family life for decades, but modern financial trends are prompting parents to rethink how and why they pay it.
It often starts with two words: How much? While this may vary widely between families and their capacity to pay, a common amount today seems to be $1 per week per year of age of the child.
MBA Financial Strategists principal Mark Borg said there were no strict rules about pocket money.
“The aim is to work out what works best for your family and stick to it,” he said.
However, there are some golden guidelines to help make pocket money worthwhile.
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1. LET THEM STUFF UP
“Being allowed to make decisions — and mistakes — is a great start,” Mr Borg said.
If children choose to blow their money on lollies and then can’t afford an expensive toy they want, let it happen — this can be a powerful learning experience for them.
“Budgeting is delayed gratification, and delayed gratification is a skill that helps build financial success throughout life,” Mr Borg said.
2. INTRODUCE ELECTRONIC PAYMENTS
Most transactions today are electronic so it’s wise to replicate this with at least part of children’s pocket money.
“Paying pocket money via electronic funds transfer not only ensures payday is regular, but it also familiarises children with our increasingly cashless society,” Mr Borg said.
Other technologies are also available.
Credit Simple CEO David Scognamiglio said children did tech better than their parents.
“It is a language they already speak and the way of the future,” he said, and suggested products such as Spriggy, which included a prepaid Visa card and app to map spending, budgeting and savings goals.
Compare children’s savings accounts
3. WORK FOR IT
Giving pocket money for no reason may develop a handout mindset among children so it’s good to make sure they earn it.
Catapult Wealth director Tony Catt said he used a “carrot and stick approach”. There were minimum jobs to be done to earn pocket money, but his kids could boost their income by doing extra jobs.
“We give them opportunities like the corporate environment — it gives them incentive to do extra,” he said.
4. INCLUDE OTHER CASH
Many children are receiving more money than ever before — often via gift cards for birthdays and Christmas. This should form part of their saving and money management too.
“No one gives gifts anymore,” Mr Catt said. “It’s a fear of failure about buying a present a kid doesn’t like.”
5. SPEND SOME
Parents can be guilty of buying everything for their kids, and this can make pocket money lessons pointless.
A child who simply hoards all their pocket money doesn’t learn the important lesson that money should be spent and enjoyed on things that are worthwhile to them.