Pocket Money – The Ultimate Kids Money Management Tool

Pocket money has long been a tradition in Australia, with kids of all ages receiving money from their parents every week or fortnight. For some, pocket money usually comes with completing various chores, be it doing the dishes or washing the parents’ cars every weekend.

For new and existing parents, the questions of how much money and for what chores are commonly raised. The following tips may help parents determine how to best use pocket money to teach their children about money and how to properly manage it.

Use a Fair Pay System That’s Comfortable for All

The issue of how to pay pocket money has a few different answers, depending on who one talks to or reads. The two most common answers are; pay according to the child’s age, and pay according to the chore carried out. A fair, albeit potentially complex, pocket money pay system is a combination of the two.

The older a child gets, the greater the ability they have to learn and understand money management, and also the greater the potential for them to want more expensive products. However, as seen with most paid occupations, the more complex and responsible jobs usually come with higher payments, which is something that could be reflected in paying more for larger and more complicated chores.

Budget, Budget, Budget

With a lack of general money management classes in schools, most children learn about and adopt money habits in the home. Although budgeting may not be a fun exercise for most children, it will encourage them to take greater responsibility while teaching them the true value of money.

One of the most effective and talked about ways of encouraging budgeting is to use two jars, one for saving and one for spending, and explaining to the child the importance of this. Not only does this increase the chances of children becoming good money managers, but it is also a great way for parents to spend more time with their children.

Nominate a Pay Day

The overwhelming majority of workers are paid on a set day, usually every week or fortnight. Emulating this in paying children pocket money for their chores helps prepare them for an eventual teenage part-time job or adult work.

Paying children pocket money on a set day may also encourage them to save, as the amount paid on that day would cover various chores over a certain period, which is likely to be far more than the amount they would get paid after only one or two chores.