Welcome to the world of pocket money! As a money coach, I understand how important it is for parents to teach their children about managing their finances early on in life. One of the best ways to do this is by giving them pocket money. However, deciding how much to give can be a tricky decision, which is why I’m here to guide you through it.
Age matters
When deciding on how much pocket money to give your children, one important factor to consider is their age. Younger children may not yet have an appreciation for money, so they may not need a large amount. However, older children who understand the concept of budgeting should be given slightly more so they can learn how to manage their own finances better.
Family income is a key factor
Another crucial factor to take into account is your family’s income. Lower-income households may not be able to afford giving out large amounts of pocket money, whereas higher-income households may feel comfortable in giving more. The right budget for your children ultimately depends on your own financial situation and what you want them to learn about money management.
Set clear rules
It’s important to establish clear rules when it comes to spending the pocket money. This includes setting a regular allowance and guidelines around larger purchases or treats, like movies or days out. By doing so, children learn the value of money and develop healthy spending habits that will benefit them later in life.
Stick to the rules
Once you’ve set these rules, it’s important to stick to them. Don’t risk undermining any rules by allowing exceptions from time to time, as this can teach children that there are no real consequences for overspending. This can lead to bigger problems down the line.
Encourage responsibility
Parents may find themselves in situations where their children constantly ask for ‘one-off’ bonuses, which can set up expectations that such bonuses will happen again in the future. In such cases, parents should try to encourage other forms of earning, like chores. This teaches children responsibility while still rewarding good behaviour with monetary recognition.
Deciding how much pocket money to give your kids depends on many factors, including their age, your financial situation, and the lessons you want them to learn about managing their own finances. By taking all of these factors into account, you can provide them with enough support while teaching them valuable skills about budgeting at the same time.
Luca Caruana is the founder of the Money Coaching Hub. Follow his weekly column here and his LinkedIn account for more budgeting hacks. For other money-related columns, check out Luca’s hacks to budget like a pro and how to build an emergency fund.
