Should I Give Pocket Money (an Allowance) to my child?

A lot of parents wonder if and when to start giving their child pocket money (an allowance) and how much to give them.

A good rule of thumb is that once children understand that money is necessary to purchase things - either things that they want (a toy) or experience (an outing) - you can consider giving them regular “pocket money” or an allowance.

For some children, this might occur as young as 5 or 6 years old, whereas others might be closer to 8 or 9.  It just depends on the maturity of your child and also on their interest in money and what it can do.  Some children are completely oblivious to money and rarely ask for things whereas others are just more into “stuff” or aware of what’s out there and available for purchase.

You will need to make your own judgement on when your child is ready to start receiving regular pocket money - and don’t worry, if you start and then realise that your child is actually too young and isn’t quite “getting it” or managing the additional responsibility, you can always pause and then start again in a year or so when your child is more mature.

Giving children regular pocket money is a really good way for them to learn about money and managing their finances.  Children learn best through their own experience, and learning about money is no different.  It is important to start teaching children when they are “young,” so that they can start with small amounts and if they make poor judgements or lose money, it hopefully won’t be too serious. 

Imagine, if you only start giving your child pocket money when they are in their early teens - an age typically where children begin to “need” money for socialising with friends or purchasing small items.   The amounts that you are likely to give them will not be insignificant and if it’s their first time handling money, it will require a lot of faith and trust that they will use good judgement when deciding to spend that money.  That’s asking A LOT for a young teen who has never previously handled money and whose brain is undergoing some major re-wiring!

Why give pocket money?

You generally want to start giving your child regular pocket money (or an allowance) so that they can learn how to manage small amounts of money and the value of that money.  They will need to make decisions about whether to spend money immediately to buy something small or to save up their money to buy something bigger.  The latter helps them develop their self-control and ability for delayed gratification - two critical life skills.  Having pocket money also teaches children about the natural consequences of losing money or poor money management, without you having to lecture them.  Learning how to handle and appropriately exchange money also builds their confidence and sense of independence.

How much pocket money?

How much money you give your child will depend on what you expect them to be able to purchase with that money as well as your own financial situation and family values.

As a guide, you should consider giving your child increasing amounts of pocket money with age whilst also increasing the items you expect them to purchase with this money.  The amount you give them should be able to reasonably cover the items you would expect them to pay for. 

For example, a 5-8 year old might receive a dollar a week.  And you would expect them to purchase little treats or knic knacs from a dollar shop or the checkout aisles. 

A 9-11 year old might receive a few dollars a week but then be expected to cover any treats as well as small personal items - think hair accessories, stationary, sports paraphernalia, trading cards, magasines, etc.  You might expect them to use this money to buy small birthday gifts for their friends.  They might even be expected to be able to pay for any school supplies or sports kit that need replacing - in the event when they have lost or broken what you supplied originally.  This helps them to learn to take responsibility for their belongings.

For both of these age groups, you might expect them to learn to “save” up for any new toy or “extra” item that they might desire.  So, when you’re in the shops and they declare that they “really really want xyz” you can respond by letting them know that you understand they really want it (always offer empathy and understanding first!), and explain that if that’s truly the case, they can start to save up their pocket money in order to be in a position to purchase the desired item at a later date. 

Depending on where you live, your finances and their school situation, you might give older children slightly more money and expect them to pay for public transport to/from school and activities and their lunches as well. 

For teenagers, you can reasonably expect that their pocket money can cover most of their optional social activities (days out, meals with friends, cinema trips, etc.) as well as their phone bill, personal hygiene products and non-essential clothing.

What about savings?

You can teach your children the value of saving money by encouraging them to split any pocket money into 3 batches - one for spending, one for saving and one for giving.  This obviously would require the amount to be sufficient so that their “spending” portion covers whatever you are expecting it to be able to cover.  Then, give them a guideline of how much you would expect them to consider putting away in a “savings” jar and a “giving” jar. 

For example, you could simply give a younger child 3 dollars - and expect them to split it evenly between spending, saving and giving. 

To encourage savings and teach the value of saving up over time, you can play up the role of banker and grant “interest” periodically - say, every month for younger children and quarterly or yearly for older children.  This can be done as a percentage of their savings (as it would be done in a bank) or, if the quantum begins to get too high or your child is too young to understand percentages, you can agree a fixed amount (e.g., an extra dollar or two per period). 

Most children need an incentive to save up over time and not give into the lure of instant gratification, and whilst saving up for that desired toy or gadget might be sufficient, rewarding your saver child with interest would also help (as well as mimic real life).

What to do with the giving jar?

Any money saved in the giving jar could be given to your child’s local charity of choice, or else used to purchase items for those less fortunate in the community or further afield (think: Christmas charity shoe boxes or other similar drives). 

It could be donated to your church or you might use it as a vehicle for your child to be able to purchase small Christmas or birthday presents for family members. 

Whatever your guidelines, be sure to discuss them with your child at the start so they know what to expect - the point of the giving jar is that it’s money that they are acting as a custodian for - ultimately the money is not destined for them.

What about Chores?

Chores, or household contributions, should definitely be part of your child’s daily routines.  How to go about that is the subject of a whole other post, but suffice to say it’s important for your child to do chores to build a strong work ethic, sense of identity and independence.  And that they are a key contributing factor to your child’s future success.  

But should you pay your child to do these chores? 

Ultimately, as with all parenting decisions, it is your choice. 

However, I would strongly encourage you to teach your child to contribute to the household without expecting a payment in return.  Doing these contributions are part of being an active member of the family and household.  As mentioned briefly, there are huge intrinsic benefits for your child.  If you start paying them to do these tasks, you might find they refuse to do them or demand increasing amounts of money for the same tasks as they get older - and then how will you respond? 

We all have tasks that we need to do in order for the household to run smoothly and stay in order - make beds, draw curtains, empty rubbish, set/clear the table, help in the kitchen, prep meals, clean, do laundry, etc.  Your child needs to learn to do these tasks as part of their development and learning to be independent adults - for their self-sufficiency, competency and confidence.  Keep pocket money separate from chores. 

If you’d like your child to learn from experience that they can earn money by working, offer them “additional tasks” - items above and beyond what you might ordinarily expect them to do - in return for a sum of money.  It could be washing the car, weeding the garden, babysitting younger siblings or facilitating a big spring clean - periodic tasks that need extra time or effort. 

How to start?

First, decide as parents how much you plan to give to your child, taking into account your financial budget and their age, and the frequency you’ll be giving it. 

Weekly is generally best for younger children, moving to monthly for teenagers once you think they are financially competent to manage their funds for the month. 

Consider what you will expect them to buy with their pocket money.  Then have an open and honest conversation with your child about all these details.  You may wish to write some of them down so that you have a document to reference in the future if things get a bit “fuzzy”. 

Remember nothing is set in stone - you can always adapt the amount, frequency or list of what they are expected to cover as you go along. 

Also, you might consider help your child get set up to begin with by getting them a wallet or some other vehicle to put their money in - glass jars work very well, especially as children can “see” the money inside and you can have 3 - one each for spending, saving and giving.

Being financially literate, managing to a budget and learning the value of money are critical life skills that our children need to learn.  Not only will these help them in daily life as adults, but as children, learning these skills increases their sense of independence, self-confidence and maturity.   

Giving regular pocket money to your child, giving them guidance on how to deal with it and letting them learn through experience whilst they are relatively young is an easy way to help your child learn these life skills progressively over time.