It’s not the amount of pocket money that matters, but the way it’s used. A few pocket money rules now will teach kids money lessons they will benefit from forever.
Financial knowledge is the true value of pocket money. We followed these rules for own children and now we implement them for our grandchildren. Thankfully their parents are strong advocates as well.
Solid pocket money rules are the perfect way to start your kids’ financial education and life skills. Use pocket money wisely, hold fast on the ground rules and you’ll see the rewards once they’re all grown up.
Here are the five pocket money rules we had for our own kids that I reckon will work for yours too.
1. They must have a savings plan
For each of our kids, getting their pocket money was contingent on having a savings plan about what they were going to do with it.
Our rules were always the same: save 50 per cent and spend 40 per cent (don’t worry about our maths, we’ll get to what we did with the last 10 per cent soon).
The key is to agree with them on whatever they want to save for… saving for nothing is boring. We would sit down with our kids and dream together; a new doll, skateboard, footy, iPhone – whatever they wanted the most.
Then we’d work out how long it would take to save for their dream and draw a little bar chart. That way they could see the tally rising each time they received their pocket money. We’d make a game of it. Make it fun along the way and make a big deal of it when they reach their goal.
2. They need to have a budget
One of the best ways to teach kids how to budget is to pay pocket money rather than weekly… particularly for teenagers.
That’s four and a bit weeks on average that your kids will have to prioritise, improvise, scrimp and save to get by. A great introduction to the pressures they’ll face once they swap the family home for the real world.
Just remember not to cave-in if they blow their budget early. A week without tuck shop won’t hurt them, and they won’t forget it. But paying them extra can undo many of the lessons you’re trying to teach. Learning to live within your means is a critical financial lesson and sticking to your rules can teach it early.
More on this here: How to make your kids rich
3. They need to work for their pocket money
This has got to be one of your non-negotiable pocket money rules. Kids need to work to be eligible for their pocket money, it’s not just handed over. It’s the only way to truly teach them the value of money.
For us this didn’t mean personal jobs like cleaning up their room or a mess they’ve made. These are chores which should be done simply to develop conscientiousness and for the consideration of others in the family. Instead, jobs which saved us time like folding washing or unpacking the dishwasher, were all up for pocket money.
If they don’t finish their jobs, they don’t get paid until they do. Just like in real life. It’s a great lesson, reinforcing that you don’t ever get something for nothing.
4. They should regularly give to charity
We said we’d get back to what we did with the final 10 per cent of our kids’ pocket money. For us it was used to give them a sense of community.
One tenth of their pocket money was saved up and donated to a charity of their choosing… and we matched it dollar for dollar.
We know they felt empowered by this simple gesture, and learnt important lessons about social responsibility. If you make this one of your pocket money rules, it will go a long way towards instilling the values of selflessness and kindness in your children.
5. Once they’re old enough, they need to get a job
Jobs at home are great for younger kids, but there’s no substitute for the real thing.
So at 14 years and 9 months all four of our kids were shipped off to the local McDonalds. Whether you like the food or not, doesn’t really matter. Maccas – and other jobs for teens like it – is a wonderful training ground to learn customer service and the process and responsibility of work.
Not only was it a structured and positive introduction to working, it was great for them to meet other kids in the local area. And it was always interesting to see their reaction to their first pay slip, when they worked out how much of their hard earned cash went to tax!