Why should you give children pocket money?
Many parents feel they cannot afford to give their children pocket money regularly. However, Sheila Walkington, director of "Money Coaches Canada" and a financial coach, says, "Giving pocket money to children is an excellent opportunity to teach them how to manage money from a young age." She adds that, in the long run, giving children pocket money helps parents save money because this practice eliminates the need for children to nag about buying things they want—they will have their own money to spend as they see fit. This creates the foundation for teaching children how to manage money effectively.
When should you start giving children pocket money, and how often?
Experts recommend starting to give children pocket money as early as possible, especially if they ask you about money or frequently pester you to buy them small treats. Andrea Ramsey Spears, a psychotherapist and parenting coach, says you can start giving children pocket money as early as age 3, but in small amounts—just a few coins. At this stage, you can teach children how to store money in a safe place—a piggy bank—and how to pay for small items like gum or candy. "At age 3, your children might not understand how money works or its value, but they will enjoy the sense of responsibility and independence that comes with making small purchases on their own," says Spears. Walkington adds that by ages 5–6, when children begin to understand the value of money, it’s time to teach them about saving and donating.
How to give children pocket money?
One of the most important things is not to give children pocket money as payment for doing household chores. Gail Vaz-Oxlade, author and Canadian TV host in the financial field, says, "Chores are an integral part of being a family, and no one pays us for doing them. The purpose of pocket money is to teach children about money, not to turn it into a reward for doing chores." Spears agrees and adds, "I believe children should participate in household chores, and I also believe they should receive pocket money, but I don’t think the two should be connected." Here are 5 tips to help you give your children pocket money in a proper and beneficial way:
1. Set a fixed amount of pocket money
Gail suggests giving your children an amount of pocket money that is sufficient for them but also conveys the lesson you want them to learn. "I recommend giving one unit of currency for every year of their age each week. For example, a 7-year-old would receive 7 units weekly. From that amount, a portion should be saved, and the rest can be spent on things the child wants but doesn’t necessarily need, such as snacks or small toys."
2. Be consistent
Walkington says you must give your children pocket money regularly and consistently, according to a schedule you set for yourself. It could be weekly, bi-weekly, or monthly, on the day you receive your paycheck—anything works as long as it’s consistent. If you don’t give pocket money in this way, you won’t be able to rely on your children to save and plan what they will do with their money, not now and not in the future. Our perceptions about money are shaped at a very young age, so it’s essential to prepare your children for a lifetime of financial management as it occurs in reality.
3. Divide the money into three categories: Spending, Saving, and Donating
Walkington suggests that when it comes time to divide money into "saving" or "spending" categories, it’s best to use jars, a piggy bank, or wallets to make this division physical and clear. For instance, your children can have a jar or piggy bank for saving and a wallet for spending. This helps children see where their money is going and how much they have in each category. Additionally, it’s important to dedicate a portion of pocket money to donations, which teaches children the value of giving and being grateful for what they have that others may not—even if it’s just a small amount.
4. Create rules for using pocket money
You should agree in advance on what your children can buy with their pocket money. For example, if they want a treat or a toy in a store, they’ll know they need to pay for it with their pocket money rather than nagging you to buy it for them. Walkington says some children don’t like spending their own money and prefer to save it, but if parents are paying, they won’t hesitate to spend. Therefore, it’s crucial to stick to this rule without exceptions. As your children grow older, you should increase their pocket money while also giving them new responsibilities, such as purchasing their own clothes.
5. Involve your children in your financial decisions
It’s very important to talk to your children about money and involve them in your financial decisions because no one else will teach them how to handle money as you can. Gail says this is especially important for children entering their teenage years. "When my daughter was 10, she decided she wanted to receive her pocket money monthly, like a paycheck, and it was easy to plan. When she was 12, I increased her pocket money so she could buy her own clothes, and later on, we started negotiating her allowance—by then, she understood how money works and how to manage it wisely, a skill she’ll use in her future."
A few final words
If you instill these values and principles about money in your children, they’ll be able to support themselves with the salaries they earn after their education and know when and how to ask for a raise—something not everyone knows how to do. Proper financial management is one of the most important skills for living a good life in the modern world, so don’t underestimate the importance of this education, which is your responsibility to pass on to your children.
