Pocket Money for Kids

In 2010 we implemented a pocket money system for our boys (now 5 & 8). Once we decided that we will provide pocket money to the boys, we discussed whether or not to make it earning-based or simply as a treat/reward. There are 2 main schools of thought on this:

  1. Pocket money for no reason
  2. Pocket Money for completing certain {household} tasks

Pocket Money for no reason: We decided against this one fairly early on as it does not mirror the reality in everyday life. No-one gives you money ‘for no reason’ in our society. One of the goals of parenting is to raise functioning members of society, and to us, one way to help with this is to try and mirror the real life ’employment’ model to help them understand how money works. In other words: you have to perform something in order to receive payment.

For this reason we opted for model 2: They would receive payment for completing certain household duties every week. Some duties are mandatory to receiving their pocket money, however there are other tasks available to allow them to earn a little more if they wish to! However, there are sites/articles explaining that this could be fraught with danger (such as this raisingchildren.net.au article). However, to try and prepare our children to contribute to society/understand how the world works, we decided to push on with this model, and for our family, it works.

What they need to do – The Basics & the Extras

The Basics: Here’s the standard list of duties:

  • Making their bed
  • Putting their clothes away,
  • Keeping their room tidy (relatively speaking)
  • Packing away toys (especially in the lounge as we don’t have a large place so no rumpus room for our boys to spread their stuff)
  • Unloading the dishwasher
  • They also have a rotating roster for setting/clearing the table at dinner time, putting the rubbish out and watering the plants

The Extras: Here are the tasks that can earn them extra (note most of these are performed in conjunction with one of us):

  • Hang washing on the line
  • Take washing off the line
  • Handwash dishes, plastic containers, lunchboxes, etc
  • Wash the car
  • Rake the leaves/help with the gardening

Distribution

The boys each have 4 moneyboxes (combination of jars + moneyboxes) that relate to the following categories. There are rules around what they can spend their money on, and in essence they do not need to spend money on Clothes or food or any other necessities:

  1. Long-term saving (20%)
  2. Mid-term saving (40%)
  3. Spending (30%)
  4. Charity (10%)

Long-term saving: This is for once-a-year purchases, such as Christmas presents and a birthday present for their brother.

Mid-term saving: Similar to long-term, this can only be accessed every 3 months and can be used to supplement Spending, should the need arise. The goal of this is to use it to save money for something for themselves. So far it’s been used to buy toys and a video game.

Spending: This is their money to do what they like with. If they wish to go to the corner-shop and buy lollies and ice cream – they’re welcome to! If they want to buy bread to feed to the local birds – they’re welcome to! We will offer suggestions on what may have longer-term value (a lolly is gone quickly, a toy car or pack of cards will last longer).

Charity: This money is used for donations to any worthy cause. Quite often during the year, the school will require a gold-coin donation to participate in mufti-days or special activities. We also encourage the boys to regularly donate some of their money to charities.

Why we’ve chosen this & Our hopes

  • We’re doing this to teach our boys the value of money (we believe it’s best to learn it in the home and learn it early!)
  • It’s also important to teach them how to handle money
  • We wanted to balance the concept of spending (immediate gratification) and saving (delayed gratification[1]). Another way to look at it is to determine what is worth buying now vs. worth saving for.
  • It’s hoped our boys will eventually become better members of society; through understanding the link between work and reward, as well as being able to manage money and not fall into the trap of excess consumption.

I would love to hear from other parents out there (either for or against pocket money for kids) – leave a comment!

Resources & Further Reading:

  1. For more information on delayed gratification, I recommend Don’t! The secret of self control by Jonah Lehrer
  2. A similar article to the above was posted by Matthew Hall on Neerav Bhatt’s blog.
  3. Teaching kids about money
  4. Pocket money and kids

9 thoughts on “Pocket Money for Kids”

  1. Hey Andrew – we did almost the exact same thing with our son Calvin, who is now 22. We posted the list of chores on the refridgerator with the amounts next to each. Calvin was taught very early (around 10 or so) how to do his own laundry, so it was on the ‘mandatory list.’ Our list of extras also included vacuuming, mopping the floor, cleaning the bathrooms, and dusting. The result? Calvin is probably the most frugal individual in his circle, HAS learned the value of money, and as a side benefit, he has developed a great appreciation for the work that it takes to maintain a home. He is now on his own, renting his own place, fending for himself, and thriving!

  2. @Sue Ruiz
    That sounds like what we are hoping for, Sue! Great to hear your story where it has proved successful! At the moment, Mr8 does know how to use the washing machine so all is on track for that to start in a year or so πŸ™‚

  3. Hi, good article, except, think it’s too much for a child to follow long and mid term saving, kids dont see time like we do at certain ages, it will be while before they grasp that. Another thing is, when is pocket money too much money? What’s the limit? Is it age based or both get equal value per chore? Also, when giving children picket money, should it be up to us to say how and when they spend it? Should it be more, they’ll learn quickly spending quickly means they can’t get the bigger/expensive item unless they save?

    Another incentive is, to give interest for the longer they keep the cash in the jar, e.g, 10c a day for every day they don’t touch the cash. Interest will done weekly, however, If they touch it before week is out, they loose interest?

    I apologize for the ramble, I do think it’s important to teach our children the value of money! πŸ™‚

  4. @Laz
    Hi Laz – Thanks for your input! Don’t worry about the ‘ramble’, you raise some great points!

    We have not yet determined ‘when’ raises will come, but did not want it to be tied to age – calendar year equates to school year and we’ve already recognised that the youngest is far more mature after his first year of schooling, that by next year he may be ready for a raise.

    At present we have no real say over their ‘spending’ money, but for the mid/long term we have been more strict on what it’s for/when to access it. In a way we may be ‘forcing’ them to save and they’re not doing it themselves, but I’m not sure my boys are really on top of the concept of ‘delayed gratification’ – here’s where our knowledge of them comes into play to help make sure savings happens. In the future we may relax the restrictions as/when necessary.

    As for interest on their savings – we wanted to keep it as simple as possible for the first year so may be something for the future.

    Oh and at present the ‘extra’ chore itself is worth the same as either boy one can complete the task, so it’s task-based, not age-based πŸ™‚

  5. Great article Andrew. We have been having discussions recently about when we should start pocket money. Ours are 4 & 6 and already have daily tasks, we just don’t pay them. How did you determine how much each task was worth?

  6. hey bro, thanks heaps for sharing this… actually, your personal experience sharing has benefit the non-parents too… we all ought to learn something more about prudence financial mgmt…

    keep it up, brother.

  7. @Kay – Hectic Helpers
    Hi Kay,

    To Be honest we set it at $5 for Mr8 (and set it at $2 for Mr5, more as a token than an amount of any real value). $5 can accumulate quite quickly. For the tasks, we made them all 50c, but have done part payments (for part of the job done) because sometimes it’s hard to keep them focused. The idea works well when there’s something they want badly and are happy to do the extra tasks. Therefore the ‘carrot’ method works well WHEN they want something πŸ™‚

  8. @KC
    Great to hear KC! I firmly believe we can all learn something from someone, and it doesn’t need to be specifically aimed at us, either πŸ™‚

  9. Hi,
    I have enjoyed reading your article and the very positive comments (reflects the quality of the article I think). One of the rules of thumb I have heard regarding the amount of pocket money is simply to divide the child’s age by 2, which is consistent with one of the comments above.

    This is a topic very dear to me as I have two young kids that I want to educate to the best of my ability. I know a lot about finance and investing and have now set out to educate myself on the best ways to educate my children.

    I figured it would be worthwhile to write down what I learn for others to benefit from. I’ve set up a one page site where I’m taking questions from people about the things they’d like to know the most.

    They are posting:

    “What’s Your Biggest Question About Teaching Kids About Money?”

    I’m using these questions to make sure I don’t miss anything in my research and would love to know what your questions are. Thanks.

    You can post your questions at http://www.cashcleverkids.com.

    Thanks.

    Emlyn πŸ™‚

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