Yahoo Finance To give or not to give? Pocket money splits Aussie parents
When an Aussie mum, Bianca shared her pocket money hack on Facebook earlier this year, she was flooded with hundreds of comments.
Some loved her idea of putting money on a board as a teasing way to get her teenage son to do jobs around the house.
Others weren’t so enthusiastic.
“I got $0 from my parents cuz they put a roof over my head and fed me. Still did chores, my own washing ironing etc,” one member of Facebook group Australian Kmart Hacks responded.
“Start your kids early and it's just routine. No one pays me to do this stuff and they live here too. Team effort is how it's supposed to work,” another added.
And just last month, another mum asked for pocket money tips in the Facebook group Mums Who Budget and Save.
Again, hundreds of comments flooded in, with parents keen to share their techniques.
Some parents split kids’ chores into tasks and gave 20c per task, while other parents expected children to keep their rooms tidy and clean up after themselves and would only give pocket money for big chores like mowing the lawn or washing the car.
Other parents give no money.
“My kids do chores for no pocket money because I’m a working single mum and I have told them the three of us are a team, and it’s teamwork that gets stuff done,” one mum said.
“I definitely think kids should learn the value of working to earn money but they also should learn to do stuff just because it needs to be done.”
And other parents still only give money for things like phone credit or subscriptions if their children do extra tasks.
“Jobs like feeding the rabbits and keeping the cages clean aren't done for money but for responsibility, but if she wants phone credit or extra Netflix time she does the vacuuming or the dishes. She never asks for money [so] when she does then [we] will sort that out,” another member of the group explained.
But while it’s clear there are millions of different pocket money strategies, Michael Ashton – the head of children’s investing platform iTrust Invest – told Yahoo Finance there are some good rules of thumb.
How much pocket money is too much?
This comes down to what you’re using the money for.
“We suggest using pocket money as a learning tool from an early age so you can teach your child the value of money,” Ashton said.
“This can be for either a reward for doing chores around the home, teaching them the link between reward for work and imparting basic saving, budgeting and investment skills.”
He said a good tip is to give kids a dollar a week for every year of age. That means that if your child is 7, they would receive $7.
However, he also suggested teaching kids the importance of saving by funneling a portion of that money into a savings or investment account. If children can see their money growing on a platform like iTrust, it helps them understand the way money works, and also teaches them delayed gratification.
But according to corporate watchdog ASIC, there’s also something to be said for not giving children pocket money at all.
“Paying pocket money is not appropriate for every family so it is up to you if you prefer to use other ways to teach your children about money,” the Commission’s MoneySmart service explained.
What age is best to start giving pocket money?
“There are no strict rules on when to start giving children pocket money, it depends on the child and the family,” Ashton said.
“By the age of four or five many children are counting and recognising numbers. Giving some pocket money at around this age can be a great way to help them understand the link between counting, learning monetary value, saving and investing.
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“There should be a plan with your children when you start giving them pocket money about what the end goal is. You don’t want there to be trouble down the road if they don’t know where it’s going.”
Should pocket money be attached to chores?
This one divides parents. Some argue that it should be expressly attached to specific chores, while others believe the pocket money should be a general payment. And others believe pocket money shouldn’t be paid at all, and that children should instead learn that staying tidy and contributing to a household is a basic expectation.
As Ashton summarised: “There is no single rule for every family.”
“Linking children’s chores to pocket money might lead to bargaining about how much chores are worth. On the other hand, some families feel that pocket money should be earned and not just given and giving pocket money can motivate some children to do chores.”
But if you do decide to link pocket money to jobs, the jobs need to be consistent. For example, children need to make their beds every day, feed the family pet every night, set the table and clean their bedroom very week.
“We also suggest to pay them on a particular time or day a week.”
Moneysmart agrees that deciding how to structure payment and chores can be tricky. The team there suggested deciding on which jobs were expected jobs, which were paid, and to remind children that they don’t receive money for doing nothing.
Additionally, parents can also just talk to other parents to figure out what they’re doing.
How should you talk to kids about differences between pocket money they and their friends receive?
“Pocket money should be explained as a privileged thing that not everyone can afford,” Ashton said.
“If your child has a lot less than others they could feel hard done by. If they have a lot more their friends could get jealous. At some stage, you need to have a conversation with your child that all families have different amounts of money and there will always be people who have more than them or others who have less.”
How else can parents teach children the value of money?
Dividing pocket money into money to spend, money to save and money to give to charity will help children learn about where their money goes and develop savings habits.
If you’re giving children pocket money, you can also teach them the consequences of damaging or losing items. For example, if your child loses their second drink bottle in a row, they need to pay half of the new one from their pocket money, Ashton suggested.
And if you don’t believe in pocket money, there are still plenty of ways to help kids learn about money.
For example, taking children grocery shopping with you and giving them an allocated amount to spend on fruit or vegetables will help them learn the value of money.
“For ages 6-10 include them more in financial decisions. Explain why its cheaper to buy goods in bulk to get a cheaper per-item price,” Ashton continued.
The same goes for saving money. Setting up an investment or savings fund and depositing a certain amount in every week or month, and then watching the interest grow is a sure-fire way to help kids understand long-term financial goals.
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