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Pocket Money

There are many different stages of childhood development, and as children mature one area is learning how to contribute to their home and those that they share this with. Often this means earning pocket money, which provides early stages of their financial literacy.  

For many children starting to earn pocket money can help children start to recognise that they are growing up, and that they are able to work towards important goals; parents may be pleased to have children start to contribute in small ways around the home, such as unpacking the dishwasher or putting their toys away. But how do you know when your child is ready to receive pocket money or an allowance?

For children in primary or high school earning pocket money can serve a range of different purposes. On one hand it motivates a child to take on increasing responsibilities around the home, particularly those which align with their maturing activities of daily living. When pocket money is designed to encourage a child to contribute to the household, it should be in completing activities that are helpful to the whole family not just that individual child. Children of course need to learn to care for themselves tidy their room, but it is important for a child to also learn how to be part of a household and contribute to other members, contribute to running the household, and to be respectful of the family home. Pocket money also introduces children to the value of money, how to save, budget, and plan for activities or things that they would like to purchase. A child of school age is not ready to understand the use of their earned money to pay for necessary items, such as their own clothing or school supplies, but rather fun or discretionary spending.

When starting the use of pocket money with the child whether it be for the purposes of motivating the child to complete at home activities, homework, or to contribute to the family home, it is important for the child to clearly understand the purpose of their pocket money. That being, if the pocket money is used as a reward or a payment, then it should be clearly explained to the young person what they need to do to receive payment and for the parent to also abide by the agreement that is made. If however the pocket money is given for their own discretionary spending in order to teach money management, then outlining rules and expectations around the way the money is earnt and spent. The expectations being outlined in advance and monitored how they are spending their money to teach valuable financial skills and decision-making.

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