As children get older, most parents deem it necessary to give them a certain amount of money at regular intervals (weekly or monthly), known as pocket money or allowance. Usually, children can spend the money on whatever they like with some guidance or rules from their parents. The primary importance of pocket money, especially from the parents’ perspective, is that it exposes children to finances, spending, and the consequences of making wrong choices with funds. Not at all a baseless view. According to a study led by Adrian Furnham, a BPS chartered occupational psychologist and chartered health psychologist, children who receive an allowance are “more sophisticated with regards to financial decisions” when compared to children who did not receive an allowance. By far the best way to help teach your child the value of time and money is to let them practice the skill in small parts. Talking about money is difficult as, like sex, it can feel awkard. Here we give some more advice about talking to children generally about money.
The grounds or criteria with which children can access an allowance vary from one family to another. For example, some parents may begin to give their children pocket money when they reach a certain age without any specified requirements, while some may provide a fixed allowance as payment for doing their regular chores. Some parents strike a healthy balance between the two. They give a regular amount and provide additional payments for extra work or chores. Ultimately, whichever way you decide to go, be clear about what you’re trying to teach and the rules your child has to adhere to for the allowances they get.
How Much Pocket Money Should You Give?
Factors such as age and family background determine how much money a child will get as pocket money. A study in the Journal of Economic Psychology, Parental Attitudes to Pocket Money/Allowances for Children, found that parents generally agreed that 6.5 years is an appropriate age to give children pocket money. They also agreed that a correlation exists between age and the amount of money children receive. The older children get, the more their spending range expands. 5 to 7-year-old children may not have more to spend on except chocolate bars and toys. While teenagers may spend on phone bills, hangouts, or saving to get something important. A survey by Rooster Money found that, on average, a 4-year-old gets £3.13 per week and a 14-year-old gets £7.54 per week in the UK. In the US, parents generally start with $5 a week for 5-year-olds.
Other than age, below are some factors that can help you determine how much pocket money and allowances to give your child.
- Family income. When you start giving your child a certain amount, they’ll surely expect more as they grow older. As a baseline, you should start with an amount the family income allows you to sustain recurrently in the present and increase in the future.
- What the allowance is for. Sometimes your child might have an occasional need or treat they want, but their allowance isn’t enough. You could make an exception in situations like that, but make sure they know it’s an anomaly. If it’s a big deal that can wait, you could use the opportunity to teach them about savings.
- Chores. Parents who tie allowances to chores can alter the amount from time to time to fit the chore. This can also be used to underline the relationship between hard work and earning power. Here we discuss more for Should You Pay Your Child To Do Chores?
Why Should You Give Your Child Allowance?
The conversation about allowances for children still divides opinions. If you’re still unsure where you stand, below are a few reasons why many parents stick with giving their children allowances.
- Learn how to manage finances. A child gets the opportunity to learn about finances as they grow by managing their allowance. They understand that once they spend their money, it’s born, so making the best decision is essential. If they use up their money immediately after getting it, they’ll remain broke until it’s time to receive the next allowance. Teach your children about priorities. Even though they can’t get everything they’d like to with their allowance, children must learn how to spend money based on what they feel is more important. Children grow up to be financially responsible if they get accustomed to healthy spending habits. That’s the power of pocket money.
- Encourages saving. The habit of saving is something children learn when they get their allowance. Saving money shouldn’t only be done when they need something. Teach your child to make it a constant practice because life is unpredictable. They may suddenly have a pressing need, and their savings will come in handy then. To get your child to practice this, encourage them to save a percentage from every amount they receive. You can make this more exciting, especially for younger children, by getting a jar or piggy bank for them to keep the money they’re saving. Make sure to explain to them why it’s necessary to save and not spend every single penny.
- Teaches what it means to earn. Since some parents believe pocket money should be earned through chores, children in these households have to do their duties to get an allowance. They learn that work is tied to earning. It’s the parents’ responsibility to set the rules of what chores or tasks need to be done by their child regularly.
- Know the value of money. Money is valuable, and children need to learn the value of money. They need to learn how much things cost and how much they’ll have to give up in exchange for an item or service. There’s a certain kind of carefulness that comes with understanding the value of money. This can only be achieved when a child is allowed to go through the process of saving for a long time just to buy a single item. Note that it’s not an easy thing to instill. Your child will get impulsive sometimes. The journey to financial maturity will require your guidance and assistance as a parent. As you let your child make their own decisions on spending their money, give them advice when you notice any unhealthy habits.
- Get a feeling of achievement. As alluded to above, doing and hopefully success is the best way to learn. Your child should know what that feels like and the satisfaction that comes with saving. Children experience this when they earn money, purchase items by themselves, and save towards a goal. They learn how to set a particular plan and work towards it. Children who get paid for chores or complete tasks are encouraged to perform more tasks to earn more money.
What are Some of the Downsides of Giving Your Child an Allowance?
For all it is touted to be, giving children an allowance also has its downsides. As a parent, you need to manage the downsides and maximize the upsides. The reasons below are not reasons not to give your child pocket money and allowances, but to be aware of.
- May spend a lot. Children may spend a lot when they get access to money. Some may spend every penny as soon as it gets to them, which isn’t a good habit. If you notice your child is a quick spender, encourage them to save a portion from every allowance they receive. Be firmer if they continue to spend recklessly. You can even make a rule to ensure they save from their pocket money. The is a positive as they will learn from this mistake as they buy too many sweets they can’t buy a computer game. Obviously, this lesson on delayed gratification is better now than later when saving for a home. Remember not to solve this for them by giving them more money.
- Comparison with friends. When children learn how much their friends get as allowance or pocket money, it can become a problem. They might ask for a raise to match their friends. When your children come to you with complaints like these, you need to help them understand that they’ll have to go by your rules. Explain the importance of individuality and how people’s situations differ.
- Overemphasis on money. Children who earn their allowance by doing chores or extra money from specific tasks may tie every single gesture to money. While it is essential to teach your children the value of hard work and earning, they should learn that they shouldn’t expect payment for every single thing they do.
Final Thoughts on Pocket Money and Allowances
They can help around the house or assist their friends or siblings without always expecting a reward. Yes, every parent wants their child to grow into a financially intelligent adult. However, it’s necessary to teach children that everything isn’t always about money.
Pocket money for children is an excellent idea if you want your child to learn about finances early. You can decide to make it a payment for chores. However, you should give a fixed amount regularly–say monthly, fortnightly, or weekly.
