Should children have pocket money? We certainly think it’s a good thing, and you’ll find very few financial education experts arguing, ‘children should not be given pocket money’.
That’s because pocket money (or allowances if you’re in the US) helps kids learn the value of money, while also getting to grips with how to earn, save, budget and spend. It’s a terrific way to help children develop financial independence too. So pocket money is a Good Thing. Understandably, though, parents aren’t always sure the best way to set up pocket money at home.
Three different approaches to pocket money
The good news is that there’s no single way to give or set pocket money. Different parents do it differently depending on what makes sense to them and their child or children.
In our conversations with families over the past year, we’ve found there are typically three different ways that parents give their children pocket money:
- Task = reward. In this first route, the child receives specific rewards for specific chores. 30p for washing the dishes, say, or 20p for tidying their room.
- Recurring allowance. In route two, the child receives a weekly or monthly allowance where payment is not directly linked to individual chores.
- Blended. In route three, the child receives a weekly or monthly sum, but can earn extra by doing specific chores like washing the car, for example.
Some experts believe that core chores should not be done for pocket money, but should be done because they’re part of what you do to keep the household running, as in adult life. Others disagree and argue that linking chores directly to pocket money reinforces good behaviour.
However you choose to manage pocket money in your family, one thing that most experts agree on is that chores are good for children. One study, done over 25 years, found that the best predictor for young adults’ success in their mid-20’s was whether they participated in household tasks at age three or four. Those first shared responsibilities helped them with their careers and relationships as adults.
Cash vs digital money
Once you’ve decided what the terms of your pocket money are, next think about how you plan to give your children the money itself. Traditionally, pocket money has been handed out in cash. And cash can be a great way to start learning about money. Coins, in particular, make an abstract idea concrete. You can hold them, smell them, bite them if you want. You get a sense of what is a little and what is a lot.
pThe issue with physical money is that it has become a hassle in an increasingly cashless world. Plus, as we continue to shop online and bank on our phones, there’s never been more need to help introduce children to digital money in a way’s fun that makes sense. That’s why we created Pigzbe – half kids pocket money app, half digital piggy bank.
It’s also why we created our Parent’s Pocket Money Guide, which has tips and tricks for how to do pocket money at home, along with more from experts on how pocket money helps kids learn good financial habits. Click here to download it now.