Whether it's for investing in Bitcoin, buying lollies or betting on illegal dog fighting, give 'em some cash.
At some point your children will get to the age where pocket money will pop onto the horizon. Pocket money is an important part of growing up and is a great way to teach kids financial literacy and responsibility.
It can also provide children with a sense of independence, especially in households run by single parents. It encourages kids to value their earnings and to budget in order to best satisfy their needs and wants.
As such, it's important for parents to talk openly about the significance of pocket money, how they want it managed, and what kind of lessons they want their child to learn from it.
Is it Tax Deductible?
Why not deduct it from your tax? Oh, yeah that’s right. So you don’t go to prison.
I think cold hard cash is a great way to start as it’s tactile and physical. They can see it, feel it, count it. Even starting as young as 4 or 5 (when they’ll start learning about money at school) they can begin making decisions about spending or saving, learning how much things cost and that money is finite and ‘doesn’t grow on trees’ as our own parents used to love saying to us.
Understanding that some things they want they might have to wait for until they save enough is an important life skill in not getting instant gratification by getting what they want, when they want. Something as simple as trying to decide which chocolate bar they can afford with the coins in their little hands begins to teach them value.
Understanding the Root of all Evil
Financial literacy is one of the most important skills we can give our children. In a mostly cashless society, which has become even greater thanks to the joy of Covid, children are growing up without even seeing cash.
Imagine what it’s like for a child. You go grocery shopping, you fill the cart with food, get to the checkout and then just wave your phone or card over the machine and walk out. It’s an abstract concept, they see no money changing hands and they won't see how a starting amount of money decreases as we spend.
They’ll have the impression they can get whatever they want and just wave a card to get it. Teenagers can get into terrible debt and trouble with credit cards partly because of this mentality.
How Much, How Often?
So cash is a great way to start, and of course, the maths that goes with adding, subtracting, counting, and value are ‘priceless’ pardon the pun.
Start small with something you can afford that is also sustainable. Chances are the single dad has less disposable income then before, so a dollar or two a week at most for young children is a good start, with more the older they get.
Try to give it on the same day each week for consistency. Dads with large disposable incomes will be tempted to start out giving kids something ridiculous like $50 a week. Don’t.
Work up to it gradually if that’s what you want to do, but developmentally and for the sake of learning I suggest you start with a much smaller amount they can actually count. By all means put larger amounts into an account as well as the small amount of cash in their hands if it's something you can afford to do.
If you’re co-parenting then work out between you how this will work in an amicable way and don’t use it as ‘point scoring’ against each other. Giving your kids more money than your ex just to 'buy' their affection in a bid to spite her isn't reasonable.
Oink! Oink!
Have a ‘piggybank’ or similar in your child’s bedroom for them to collect and save their money. As your children get older you can move to online and cashless payments by setting them up a bank account or using a children’s debit card designed for such purposes. In Australia the ‘Spriggy’ card is a great example of this as you can 'load' it with money directly from your bank account for them to use in place of cash. There'll be plenty of other banks and institutions that offer similar products.
Cheap Slave Labour
You may wish to incorporate pocket money as something that needs to be earned by doing household chores or other activities. This provides a second layer to the value of money as it has to be earned and is not always just given.
I’ve seen some great examples that parents have used by creating a chart of jobs and how much each job is worth. Emptying the dishwasher for 20 cents, taking out rubbish for 50 cents etc.
As these jobs are finite each week, they can’t repeatedly do them over and over again then demand $60 at the end of the week! Make it so the jobs add up to roughly what you intend to give them each week.
Alternatively just have a list of tasks that must be done by ‘payday’. Be mindful of what activities you consider basic expectations they should do simply for the benefit of helping and not for cash. It's important that not every thing you ask them to do is rewarded with cash as soon that's the only way they'll do anything. Whatever works for you, your kids, your situation.
Don’t look at pocket money as something you just give to kids so they can buy lollies and chocolate. Look at it as a life skill that must be learned to prepare them for being financially responsible adults.
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