Should you give your kids pocket money, and if so, how much? Should they do chores in return? Should it be fun? Massey University’s Dr Pushpa Wood helps tackle this sometimes tough issue.
When I’m talking about financial capability, the topic I get asked about the most is pocket money.
Parents ask: “Should I give my children pocket money?”, “At what age should I start giving pocket money to my children?” and “How do I decide how much to give?”
Whenever someone asks me any of those questions, I say: “What do you think? Should you be giving pocket money to your children?” Then, depending on their answer, I ask why, or why not?
Usually this starts a discussion around the cultural norms of the family, the value the family places around money, lessons the family wants to teach their children about money, and the behaviours the family wants to encourage when it comes to managing money.
Have rationale behind your choice
Whatever you decide to do, put some thought into your decision and explain it to your children. There’s no right or wrong when it comes to giving, or not giving, pocket money.
The most important thing is making sure you have a rationale you can explain behind your decision. Leave room to revisit and negotiate your decision too.
I don’t believe in paying children to do chores like keeping their room tidy, vacuuming the house, doing the dishes, or folding washing, because this is what you do when you’re part of the family.
I’ve had many discussions with young people where I challenge their thinking by asking questions like: “What’s the relationship between a ‘right’ and a ‘responsibility’?”
There’s method in my madness. I want the next generation to understand that every right or privilege has a minimum of two responsibilities attached.
So, if they can talk about what they’re responsible for, and they’re ready to fulfil their obligation, we can talk about the rights.
What I’d consider before deciding on pocket money:
· The children’s ages. Are they old enough to have a meaningful conversation about handling money, or should I be teaching them how to ‘delay gratification’ first, before moving on to money?
· How will I teach them about the value of money, the value of work to generate income, and managing the income that will come to them in the form of money?
· What do I expect in return from them, over and above what they’re expected to do as ‘being part of the family’?
· How will I make it a simple and fun activity to keep them engaged in long-term planning, keeping in mind that they’re only looking days or weeks ahead?
· How will I teach them about saving for tomorrow?
· How often should I sit down with my children and explain some key principles of managing money?
· How will I negotiate how my children will use their money, rather than spend their money? This will include factors such as your cultural background, your value base, and your expectations.
I’m quite drawn to the ‘one-third’ method, where children divide their pocket money into three pots. One third is for saving, one third for spending, and one third for giving.
This exercise will also help you to introduce your children to banking products and services later on.
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First published by 24 May, 2018.
Story by Dr Pushpa Wood.
Dr Pushpa Wood is the director of the Westpac Massey Fin-Ed Centre, a research and education centre based at Massey University that aims to help improve the financial wellbeing of New Zealanders.
JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.