Read Skint Dad’s top tips on introducing your children to financial responsibility by managing your child’s pocket money.
We don’t have a huge amount of spare cash. We budget very tightly and, where we can, put a little aside to cover for unexpected emergencies.
The older my children have become, the more they’ve started to ask for pocket money. They expect money, because let’s face it, “All my friends get pocket money” and “all my friends get everything that you don’t let me have.”
With money tight I was inclined to say no but, wanting my children to grow up understanding money, I eventually agreed to start paying up.
Work for the money
Rather than paying out for nothing, I have drawn up a reward chart and, if chores are completed around the house, the kids receive money up to a maximum value.
The amount for each chore is not a lot; the idea is to get them more motivated about helping around the home with a financial incentive at the end. The aim, I hope, is that they will recognise that hard work pays off.
Cash or transfer
Rather than paying in cash (which I worry will just get spent on chocolate or junk food), I have set up bank accounts and transfer money on a monthly basis by standing order.
Each month, I can transfer money straight from our account into theirs. Our 10 year old has a cash card with her account (which makes her feel very grown up indeed!). The card cannot be used online or in-store but she is able to withdraw cash from ATM machines across the country.
In this way, she knows that she is only able to withdraw cash when she reaches a whole £10. I think it’s important that the account is in her name, rather than me saving on her behalf, as she is able to manage the money on her own.
She gets letters in the post from the bank and has the responsibility of her own cash, if she wants to blow the lot on something silly then (although I want to) I won’t stop her. I would prefer her to make mistakes at a young age with money (and only a small amount of it) so she won’t make money mistakes when she is older, with larger amounts!
Balance the amount you give
Now it’s all very well and good giving pocket money but, I needed to start watching extra treats. I didn’t realise that while paying pocket money out each month, we would pop to the shop and I’d get a tug on my top asking for a bar of chocolate or a magazine. Thinking it wasn’t too much I agreed but then I realised I was paying out double. I still carried on buying the occasional magazine, mobile phone credit, sweets, treats and toys, and this had to stop.
Now they were getting pocket money, they would need to use their own cash to buy their own treats. They are more than welcome to spend on what they want but need to understand that when it’s gone, it’s gone, and that I wouldn’t give any tops ups – just like having a salary.
Don’t give more than you can afford
Some months are tighter than others – I’m sure some of you know where I’m coming from! Although we do balance our budgets as well as we can, sometimes there are unexpected bills, like a kitchen appliance breaking, or a school trip out of the blue, or the gas bill rises (again!).
We don’t keep secrets about money, bills, debt and spending in our house and hope that by being open and honest about finances, it will put our children in a healthy financial position when they are older. However, when we cut pocket money, as it’s personal to them, they aren’t too happy.
In this situation, we sit them down and have a discussion about why we’ve stopped pocket money. We don’t want them to be overly annoyed or even panic that we are in trouble with money so give them the facts and let them know that we will start to pay it again soon.
Do you pay your children to do chores around the home? Perhaps you have another way for them to earn their pocket money? It would be good to hear your thoughts.