Ah, pocket money!
The minute you start thinking about pocket money, (whether because the kids are begging for their own cash, or because you want them to have some), pretty quickly you are faced with a myriad of choices about it. Is the cash a gift or do you tie it to chores? On what basis do you give it or withhold it? What age to start? Do you decide how they spend it or let them have free reign? And of course... HOW MUCH?!!
Pocket money, along with open family discussions around money and finances, allows you to share your family values around money. Though they may not even be intentional, we *all* place some sort of value system around money and spending. And trust me, over time kids are picking up our family values around money - whether we are conscious of it or not! Just think about the sort of money-spending-habits you observed or learnt from your own parents, for example - whether good or bad!? So, it's worth stopping for a second and thinking about what our values around money are, and what lessons we want to pass on to our kids. Like it or not, money affects our life in many ways - whether we choose to highly 'value' it or not, we still have to deal with it! 'Financial literacy' and our perspective on money and spending has a huge impact on how we interact with cash. So, if you are launching into pocket money, it is a chance to consider how to instill the values that are important to *your* family.
Note/Disclaimer! Our kids are only 7, 5 and 2, so we are still in the verrrrry early days of our (expensive) journey with pocket money! To be honest, I felt so overwhelmed at first - so many choices and values and strategies we would like to build in and consider! Then I realised we were best to just start off simply. Our system can (and I'm sure will) change and evolve over time. This post is about how we decided to kick things off - I thought I would share our thought process as to how we got to our starting point - as maybe it will help you too!
I'll give an overview of the main points people might consider with pocket money, and where we personally landed for now. There are a hundred 'right' ways to do pocket money, so feel free to use these just as prompts for your own family discussions and planning - different approaches work for different families :)
|This trio of gorgeous kids piggybanks are helping our kids watch their savings grow, right before their very eyes! :)|
Before all the detailed questions comes this key one - what is our goal in giving pocket money? It's not just about the ability to buy 'stuff' is it? As mentioned above, for our family it's about helping our kids learn about the value we place on money. How and why we use it. For our family, money is a tool by which we can bless and serve others, care for ourselves and take care of responsibilities, both now and in the future.
The management of it, (saving, giving, spending) are ways we apply these values. Pocket money is given to our kids as part of sharing in our family’s wealth and as an introduction to financial literacy. We hope for our kids to learn that money itself has no value, it's not a treasure to seek or store up for it's own sake, but a tool to be used - wisely and generously.
What AGE do you start?
Pick a number, any number! We decided that in our home, pocket money would start when the child starts kindergarten (in Canberra, Australia, that is about 5-6 years old). We find that is about the age when kids start to really understand the value and numerical concept of money, and start being more exposed to the 'outside world' and stuff they want! Before then, we feel they are not really mature enough to manage much cash - and it's ok for them to have a milestone age to look forward if they are hanging out for their own money! Besides, younger kids usually somehow have a few coins floating around so they feel sufficiently cashed up for a few treats till they hit school age! Especially if you have a generous Grandad like ours do... he empties his pockets of change every time he sees them!! Those coins gets eagerly counted then put straight into the kids piggybank until spending time rolls around.
|Counting those coins!!|
Tie the $$ to CHORES or is it a GIFT?
This is a toughie. I know many parents choose to tie the allowance to chores around the house, under the principle that in 'real life', we need to work to get money so they want their kids to understand that principle early. Getting their pocket money is dependent on completing whatever chores are set around the house within whatever time frame, so kids learn to be responsible and 'get the job done - and in a timely manner' in order to earn their cash. I can really see the sense in this! However, other parents are reluctant to take this approach as they feel everyone in the family should pitch in on chores because that's just what families do - and Mama don't get paid to do the laundry now, does she?! ;)
I can definitely see wisdom on both sides, but we have decided to go with the second approach. The kids have household tasks they need to complete independently of their pocket money. They are members of the household and need to contribute to its upkeep as they are physically able to. We feel strongly that our house is kept running through a contribution of all family members - that is part of the responsibility (and blessing!) of family! So we don't want to get in a habit of paying for them to do chores, or for them to start expecting a cash payment for clearing their plate from the dinner table!! ;)
Even though I appreciate the messages of both approaches, the value of household contribution felt more important to us. We, as the parents, give our kids pocket money as a gift and a blessing. It is a privilege we gift to them as members of our family (and yes, one we can choose to withhold if we decide to for whatever reason, e.g. behavioural, though we have not felt the need to do this so far).
RESTRICT spending or give FREE reign?
Another dilemma! Again, there seem to be two main camps on this one. One approach is to let kids loose with their money, let them do what they want and learn young to either crash and burn or spend wisely! The other approach is to help them be more disciplined with their money from Day One. This approach might mean deciding for them or with them how to spend their money, eg splitting into saving, spending and giving in various proportions. Again, I definitely see the benefits of both approaches! With money comes independence - a privilege to have at a young age!
For now, we have decided to start off with the 'free reign' approach. This is working well because it lets us learn the kids innate spending habits and while they are earning so little, there is not too much damage they can do with it, haha. It also leaves them free to be generous as they see fit which is a principle we personally will always hold to, in that we believe giving should come from the heart, not compulsion. For example, Lily decided recently on her own to give $1 of her money to the collection for the disadvantaged, at church, rather than her usual 50 cents. Or when she chooses to buy gifts for others out of her own money - last year she spent ALL of it on a Christmas gift for her teacher (like, over $30!!!). It is wonderful to see generosity pour out of a child's heart :)
While now it is an interesting experiment to give them this freedom, I think at some point we will introduce more guidelines, encouraging them when they are a little older to think through percentages to save, to spend, to give. While for now 'free reign' is working well, I think it's also a good thing to introduce the thought process and discipline of money management while they are still in the home! While it gives a bit less freedom, they do get to learn how savings can accumulate, how to be disciplined in setting money aside for others and so on.
How to TRACK it?
We had a few failed attempts at trying to introduce pocket money!! The intention was there but the follow through was lacking - and the kids were just as forgetful about it as their parents, haha! Plus we rarely have that much cash around the house. Yes, yes, slackers ;) Then one day I thought to myself... in this day and age - I bet there is an app for that! And you betcha there is an app for that! Heaps! So I went hunting. The best two I found were KiddyBank (it has sliding scales to set for giving, saving etc - and you can even set an interest rate for their savings!!!!) and RoosterBank which lets older kids log in and check what money they have, and also has an easy way to divide up their money for saving, spending, giving. With both, you can also add in extra amounts like birthday money and payment for big chores, etc.
I've tried both and currently use KiddyBank as it's super easy and quick to set up and use (no registration). It has lots of more advanced ways to use it (even emailing spreadsheets to your teens!!) but we just use the basic tracking elements for now. The great thing with an app is that when we are out and about, if the kids want to get something, I can easily check my phone to find out their balance, and deduct what they spend without having to remember to do it later. Let's be honest, we are heading into a cashless society so not a bad thing to get used to this ;) The app helps me remember how to track the bulk of their pocket money, but of course all kids love counting coins too, and still end up with some of the 'real stuff' to fill their piggybanks with!
That one is very much up to you and your budget! We decided to set the bar low (very low!) as we figure we can always go up but it's not so easy to come down, haha ;) With three kids and many years of pocket money ahead, we kept it basic for now - they don't really need much, after all. Some people use a general guide of $1 per year of the child (eg $5 for a 5 year old), but that seemed a little high for us! ;) Partly this is because our kids don't seem to really want for much - they don't watch TV commercials and rarely go to the shops, so they don't seem to really ask for toys and junk... though they certainly do want an iPad haha, and are making half-hearted attempts to save for one! ;)
As they hit closer to the teen years, I can see us taking the approach where we significantly raise the pocket money while also giving them more responsibility to use it for things like paying for the school canteen, gifts, outings with friends, clothes etc. I can see a lot of benefits in this approach because they get to learn to budget for real life expenses early, while still being able to use our guidance.
It's wonderful to see children's financial independence emerge. When we are out somewhere special, I love to see the kid's pride when they want an ice cream and decide to buy it for themselves (with our approval). Suddenly they take an interest in which one is the most and least expensive because they are on their own dime! ;) It's fascinating to see them struggle between the instant gratification of spending a little money a lot, versus delaying gratification by saving up for a bigger or more special item. Of course, this is often highly emotional processing, especially when they realise they can't buy something because they already spent all their cash!
Sooooo, that's my wrap up on pocket money! There are lots of variables to consider, and it can take some thinking through to find an approach that feels right for your family - hopefully this post might give you some starting points for discussion!
As I said, we are at the starting gates, so would love for you to please share your pocket money approaches, lesssons and learnings in the comments, for my and other reader's benefits :)
Finlee & Me is one of Australia's best websites, full of quality goodies for babies, kids and parents! You can find out more about the excellent products they stock on their website, or follow them on Facebook or Instagram.
Finlee &Me kindly gifted us these gorgeous kids piggybanks, which are clearly being put to good use! I've been looking for a quality piggybank for ages (where the kids could SEE the money and where it wasn't either too hard or too easy to get the money out - these tick those boxes and more, cos they are so cute too!). I love the design - fun and functional and look awesome in the bedroom of a toddler *or* a teen... Let's be honest, I'd have one in the loungeroom for my own savings, they are such a gorgeous, modern yet classic design! We love them - thanks, Finlee & Me! (All opinions 100% my own, of course!)