One of the most important things we can do as parents is to teach our children the value of money and how to manage it wisely. An easy way to do this is to introduce a pocket money reward system. But for this to work well you’ll need some tips for managing kid’s pocket money.
First of all, before we even get into the management side of things, you’ll need to decide if you even want to pay your kids pocket money. Then you’ll need to decide if you want to tie pocket money to household chores. These are 2 important things to consider. You might want to read Diane Levy’s Pitfalls of tying chores to pocket money article first.
There is no single, best way to do this – pick a system that fits with your family situation and values.
The key guidelines for success are to keep it fun, make it regular, and ensure it is motivating!
A great way to ensure your success is to link pocket money to a savings goal that each child values, such as going to the movies or buying an ipod or a bicycle.
Different ways of allocating pocket money
Pocket money systems must be age appropriate, and can be structured in a variety of ways, including these tips or ideas :
- Pay every child in the family the same amount each week or month (say $2 or $10).
- Pay each child an amount that is linked to their age; i.e. $1 for every year of age – $5 if you’re 5, $10 if you’re ten.
- Link pocket money to a list of tasks to be completed each week (e.g. making beds, laying the table, emptying the dishwasher, putting out the rubbish, or mowing the lawn).
- Have a pay rate for each task (i.e. $2 for cleaning the car, $5 for mowing the lawn) so that the child can earn more if they put in more effort.
- Include “bonus payments” for kids who do a task without being asked, or just do something particularly well.
Tips for managing pocket money
We would recommend that you follow these guidelines in order to minimise stress levels:
- Stick to even amounts that involve gold coins – this makes life a lot easier, and saves you from tricky calculations that involve cents!
- Have a regularly weekly payday where a tally of jobs done is made, and the money is paid out (e.g. Sunday, at the end of the week). Make sure you have those gold coins ready though!
- Ensure your pocket money rules are in writing and kept somewhere visible (i.e on the fridge). Keep the rules short and simple.
- Aim to instil the savings habit by making your children save a percentage of their money each week – this may vary from 10% to 50%, but is a vital part of their learning process.
The 3 jar saving system is perfect for this last point, and a great early training tool. Just take 3 jars and label them save, spend, share and split your child’s pocket money evenly across each. One jar is for spending on themselves, 1 jar is for saving for the future, and the third jar is for donating to charity, their school, or any cause your child sees fit:
Good luck – you are training our future property investors, financial gurus and New Zealand millionaires!