Most parents at some stage toss around the idea of pocket money. Maybe the kids raise the issue, or maybe you see it is a way to instil financial sense. But it's not simply a matter of handing over a few coins once a week. To gain the most out of pocket money, it's important to think it through, work out your approach, and explain your reasons to your children.
Pocket money teaches children the basics of budgeting. They receive a regular income that has to last them until the next payday. If they spend it all at once, there's a long dry wait ahead. Children quickly work out the need to ration.
Ideally they'll also be introduced to the concept of saving. Talk to your child about the desirability of putting a bit aside each week to cover future large purchases.
Most parents want to know at what age they should start giving their children pocket money. A lot depends on your individual circumstances, but it's unlikely that children will feel the need while still at pre-school. Once they hit primary school, with the enticing lure of the school canteen, you can be sure the request for pocket money won't be too far away.
You know your child best, and can judge when they are sufficiently mature to handle money. If you decide to give it to them while relatively young - say around six - you may need to help them work out how to spend it. Show them that these coins will buy an ice cream, these will buy a bag of chips and so on. Once the coins are spent - that's it!
Again, there are no hard and fast rules. Many parents use the guideline 'fifty cents for each year' - so an eight year old would receive $4.00 per week, a nine year old $4.50. This may not suit you and it's best to exercise your own judgement.
When working out the amount, be clear what you expect your children to do with the money. This, of course, will be partly age-related. Do they need to pay for their own lunches? Canteen snacks? Toys? Books even? Make sure the sum you give them is enough to cover your expectations.
Trouble sometimes erupts where children discover their friends are getting more. This is one of the continuing challenges of parenthood. Explain your reasons and stick to your principles.
How should pocket money be paid? This depends on your parenting style. Some people like to pay a regular sum each week, no strings attached. Others will only pay up if the child carries out agreed tasks during the week, such as making their bed and setting the table.
Others pay a variable sum that's determined by how much work the child does. The child receives a certain amount for each task - x for washing the dishes, y for watering the garden. Records are kept and added up at the end of the week, when the child is paid. Other parents like to combine these strategies. For instance you could pay a regular weekly sum and if your child needs extra at any given time, they can do a few additional jobs around the house to earn the higher pay.
Which one for you? Don't be afraid to try out a few different approaches and see what works best.
By Stella Tarakson, Bachelor of Economics, Bachelor of Laws. Stella is a freelance writer on personal finance and legal issues. She is the author of 'Everyday Law', 'What to do When Someone Dies' and a co-author of 'Easy Guide to Your Rights in Australia' .