Monthly pocket money
Money isn’t everything in life, but it’s an important part. We have seen that not having control over your personal finances can affect your state of mind. Understanding how to manage money isn’t something that you’re born with. That is why we must learn how, a skill that we have discovered is important to acquire as children. That’s where pocket money comes in.
Getting monthly pocket money means that children can practice managing money over a longer period of time, just like adults do with their salary. The pocket money is now supposed to last the entire month, cover more things than before and more should be able to be saved for long-term goals.
Gimi has a few tips for parents with questions about pocket money:
When should I start giving out monthly pocket money?
Around the age of 11 weekly pocket money is often changed to monthly. We already know that children mature at their own pace, you decide when your child is ready to handle a bigger responsibility by switching to monthly pocket money. If you notice that they run out of money too quickly, talk to them about ways to make it last longer and maybe draw up a budget together. Sometimes it can be a good idea to go back to weekly pocket money for a while, practice saving, spending and prioritising a week at a time and wait until your child is truly ready for monthly pocket money.
How can we use monthly pocket money to teach children about money?
Make part of the pocket money a fixed amount. You will unconditionally pay this part each week, which allows your child to practice saving and spending money. A rule of thumb is that the amount should be large enough to cover the things that children need to buy themselves. It should also be small enough so that your child must make decisions and prioritize. Don’t forget to talk about what the money will be used for! For example, sweets, hobbies and eating out with friends but not a winter coat or groceries. When your child wants an expensive toy you are primed for a discussion about how much pocket money they need to save and for how long in order to afford the toy in the future.
We also recommend that you make part of the amount variable. What does this mean? Well, if your child helps you with something outside of their regular responsibilities you give them a little bit more money that week. This helps them understand the connection between work and money, and gives your child a sense of competence, freedom and control.
How much pocket money should I give?
The amount isn’t the most important part, in this case, consistency is key. If you’re still wondering about the amount, you can use our pocket money calculator.
What do I next?
Let your child decide how they spend their money. Make sure that everyone follows any rules that you have in your household, don’t pay more if all the money has been spent! In the long run, your child will learn how to make a budget based on what is important to them. What you can and should do is help your child evaluate their own decisions, both good and bad, without prejudice. For example, maybe your child has spent all of their pocket money on fast food with their friends, even though they are saving for an expensive trip. Ask them how it felt and if they understand that it will now take longer to reach their savings goal and if they would do it again. Finally, keep encouraging them to always have their own savings goal. Even if they missed their last one, or maybe received the item as a Christmas gift, it’s healthy to keep practising setting and saving for long-term goals.
The second part of monthly pocket money is about learning how to earn money and give your child the feeling of financial freedom. It can involve doing chores at home, or for neighbours and relatives if your child is old enough. Talk to your child about what works best for your family. Don’t decide how your child should use their money, and don’t pay more when all their money is spend. In the long run they will learn how to budget their money depending on what is important to them.
In the end, pocket money is about building a foundation for a lifelong and healthy relationship to money, and the earlier you start the better! Remember, the routine is more important than the amount.