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