The topic of pocket money (or an allowance) for children can be a highly emotive topic. Even between parents there can be dissenting views on this subject.
With the recent publicity about children and money, we thought it timely that take another look at a an earlier blog on this subject.
The starting point before you even think about talking to your children about pocket money, is to make sure that as parents, you are on the same page. This means you both have to agree on the need for it, how it is going to work and the implementation.
The nitty-gritty is there’s one fundamental question you have to answer first: do you pay pocket money? Then if you do, why are you doing it? Is it to reward them for chores that they do or is it something else?
Sounds easy. But if Mum is all for pocket money and Dad is against it, there may be a few hurdles and things in your own money story you need to sort out first.
Our advice is to come back to your family’s values.
What is it that you want to teach your children, not only about money, but about the type of person you want them to be in life. Use your values as the guide as to whether you pay pocket money and how it might be earned. Each family is going to be different and you want to have something in place that works for your family.
So, we’re going to assume that you’ve opted to pay pocket money. There will be a multitude of reasons why you’ve chosen to do so, not the least will be to teach your children about money – how to spend it, how to save and perhaps why they might give some away.
Now you have decided to pay your children pocket money, the next decision will be what you are linking it to.
You could have a look at the research on the subject and there’s plenty of it out there, although as you might expect, the conclusions are mixed.
Maybe an option is to find the middle ground about what chores are expected as being part of the family and what are ‘jobs’ that you are happy to set a rate and pay your children to do.
Motivated to earn reward or motivated for its own sake?
Intrinsic vs extrinsic motivation. If your child loves helping you in the garden, this is intrinsic motivation, they are doing it for the love of the task. If you were to start paying them to help, then there is a danger the motivation becomes extrinsic, i.e. the money (external) becomes the motivator! This can be demotivating and have the opposite effect from what you desire.
Once you have got over this hurdle, then you need to decide on a system to pay the pocket money. Go back to your child’s money personality and work out a system that suits their personality, e.g. getting a Spender type to put away a 1/3 for saving in a clear jar they can see, is going to drive them (and you) crazy. The same system may not work for all your children, so be prepared to be flexible.
Talk to your children about the system and explain why you are doing this.
Help them understand the value of money, what it can buy, what happens when you save and how it feels to give some away. Set a few ground rules so they know what to expect. Don’t be too dictatorial on what they can and can’t spend on and certainly but give guidelines that keep them safe and healthy.
Once you have a system in place, this is when it comes back to you to be disciplined so that the system going and is being consistent. Going back to an earlier blog where we talked about the abstraction of money, paying the pocket money in cash is a great way for younger children to learn about actual money rather than a card of some sort.
Managing the pocket money system may require new thinking as a parent. You need to pay them the same day each week – and it’s easy to forget that you have to get the cash out first. So, maybe a token system, or play money can be used instead. The main thing is that your child learns the value of what they are getting.
You need to be consistent; payday is payday. Put yourself in their shoes. How you would feel if your employer forgot to pay you one week, or varied the day to suit themselves. Your child would feel the same.
In the early stages, your children will make mistakes, they will blow all their money in the first few days and then want a top up. You need to be strong enough to stick to the ground rules you have set. Letting them make mistakes is all part of the learning.
The pocket money system isn’t set and forget
As they get older and their understanding of money increases, so should the level of responsibility you give them and the system you use, changing from cash to bank accounts for example. There is no set time for this, keep the dialogue going and you will know when it is right to move to the next stage.
In order for you to help your children learn about money, make sure that you are happy with your own financial strategies. If you would you like to discover strategies to become financially healthy, drop us an email or click on this link to find a day and time that suits you to have a chat with us – it’s completely free!