The first time you receive pocket money is a big step for a young child. It’s the first time children manage money on their own. Money that they can use to practice how to save, spend and prioritize.
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.
Gimi has a few tips for parents with questions about pocket money:
When should I start giving out pocket money?
The most common age for children to start receiving weekly pocket money is 6. When children reach the age of 11 it’s time to start thinking about switching to monthly instalments. 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.
How do I use pocket money to teach my child 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, toys, sweets and ice cream but not clothing. 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 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 sweets, even though they are saving for an expensive game. 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.
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.