The Importance of Pocket Money

Our Finance Editor, Justine Davies, joined the breakfast team on 96.5fm  this week to discuss pocket money: what age to start, how much to give and what to expect in return. This is what they talked about…

The Commonwealth Bank recently released a survey on pocket money; apparently it’s worth $1.4 billion each year!

They surveyed 1,023 parents of a child/children aged 4–15 years and found the following:

  • Almost 80% of parents pay pocket money, with the average starting age at just over six years old.
  • Younger children save more of their pocket money than older children.
  • The most common chores for earning pocket money are tidying the bedroom and washing dishes.
  • Children are most likely to spend their money on food, snacks and lollies.

Why Pocket Money is Important

Now, I’m a big supporter of pocket money for three reasons:

It Teaches Kids the Value of Money

It is AMAZING just how much pestering is eliminated once kids earn their own money. If they are paying for something – a slushie, a toy – from their own money, suddenly they stop to consider whether they really do want that item after all, particularly if it represents half, or all, of their pocket money for that week. Quite often they decide that they don’t want it that much. It’s all about prioritising – having their own money to spend – money that they’ve earned themselves – teaches them to prioritise their needs and wants. That’s something that we have to do as adults, of course, so it’s a fantastic skill for kids to learn.

Kids are never too young to save…Kids are never too young to save…

 

It Teaches Them A Savings Habit…

…IF you make them save some of their pocket money. As an example, my three kids receive $1 per week per year of age. So my 9 year old gets $9 per week, my 7 year old gets $7, my 5 year old gets $5 per week. In fact once I’ve paid their pocket money, they sometimes have more money than I do! BUT – they have to save about 20% of it. So each week, one or two dollars goes into a different piggy bank for each of them and every now and then we take that to the bank and put it in their savings account. Now, other research has shown – and this is the theory that I support – that the earlier you start a savings habit, the easier it will be to continue that as an adult. It makes sense; the routines and lessons that we learn as kids do stay with us. You’re taught as a kid to clean your teeth before you go to bed – you do that as an adult. It’s a habit. Saving is the same.

Kids and pocket money

Delayed Gratification

If there is a particular toy that one of my girls wants to buy, the chances are that it will take a few weeks of pocket money to afford it. That experience of saving over time; of delayed gratification is so valuable. In fact given our current credit card debt in Australia of $50 billion, it’s a lesson that many adults would benefit from, too!

Should Kids Do Chores in Exchange For Pocket Money?

Finally is the issue of whether or not to make your kids earn their pocket money – should they do chores? On the one hand people say that yes, you should earn money, not just be given it. On the other hand, people argue that you shouldn’t pay kids to do tasks that they should do anyway.

Personally I’m most definitely in the “earning via chores” camp. Learning about reward via effort is also a fantastic mindset. And if you make the chores things such as “get ready for school on time”, “put in a good effort on your homework” and “be kind to your sisters”, chores can make your life as a parent a whole lot easier, too!”

Source: Commonwealth Bank

Compare Youth Banking Accounts With CANSTAR

Share this article

Enjoyed reading this article?

Sign up to receive more news like this straight to your inbox

By subscribing you agree to the Canstar Privacy Policy.

Thanks for signing up!

Good things are coming your way.