Pocket Money for Kids

Everyone agrees that kids need to be taught about money. But each family seems to have a different way of doing it! I have to admit, compared to many other families we know, we’ve been pretty stingy when it comes to giving our kids pocket money.

We only started to give them an allowance when they turned seven. It just seemed pretty pointless before then, since they really had no need for it! We buy them what they need, and if they want to get someone a present we allow them a small budget for that. It’s not like they can go out and buy something without us there anyway.

But we knew at some point it was important for them to start getting the idea that stuff costs money. We (arbitrarily) decided that at the age of seven we would start the process, and that at ten this would become a far more serious lesson.

Here’s what we’ve done so far, and what we plan to do later:

Age 7 – 10

We decided that from the three years between seven and ten years old we would give them $6 a month (hardly a king’s ransom I know). This has to be divided evenly between three money boxes: Save, Spend and Give.

The Spend jar/box can be used for whatever they like, but it includes little gifts for family birthdays and Christmas. I might top them up on certain occasions. The money in the Give jar is left to accumulate to $10, then they can choose who to donate it to. This might be to church or given as a present to one of our sponsor children etc. Once the money in the Save jar reaches $10, they can bank it.

Age 10 onwards

Once our kids hit ten, they graduate to a ‘Salary Plan’. This is something we designed based on a book by Mary Hunt called “Raising Financially Confident Kids“. It seems like a brilliant strategy for instilling good financial sense into children. Alongside this, I hope there will be many conversations on being wise with money. Most importantly of all, we will do our best to set them a good example!

Here’s my husband’s explanation of the salary plan:

When (Mary Hunt’s) children reached a certain age, they were given a monthly salary. This salary was designed to cover some of the items she and her husband used to buy for their children. Each year, the salary was raised. The raise would be commensurate with the child’s ability and the new responsibilities he would have in the new year.

There were a few simple non-negotiables. For instance, absolutely no loans. Even if the child had the money at home but not with them.

10% of the salary had to be put into long-term savings and 10% was to be given away. Purchases had to fit with family values. Aside from these few rules, Mary took a largely hands-off approach, and let her children make decisions and reap the consequences.

One disadvantage of the book was that there was no specific plan of attack for what a child would have to use their salary for each year. So this is something readers have to work out for themselves.

For those of you interested, here is a model first-year salary plan we have come up with for our eldest:

First Year Salary Plan 2020

Goals

The goal of this plan is to assist and teach Grace to grow gradually into an effective money manager who is not controlled by money, but rather uses money to provide for her needs and use it generously for God’s kingdom.

Commencement Date

The commencement date for this plan is January 2020

Salary

The monthly salary will be $35 per month. This will be reviewed annually, with the next review when Grace turns 11 in 2021.

Mandatory Disbursement

1. Giving: Every month Grace will take 10% of her salary and place this in her giving jar. When this jar reaches a total of $20, she will decide where or who to give the money to with guidance from Mum and Dad.
2. Long Term Savings: Every month, Grace will take 10% of her salary and place in her long-term savings jar. The savings will accrue throughout the year, and once per year be placed into the bank of Dad where she will receive a generous rate of interest.

Responsibility List

In 2020, Grace will be responsible for paying for the following things:-

Clothing

• Footwear
• Socks
• Underwear
• Hats
• Hair ties

Presents

• Birthday parties
• Family presents

Entertainment

• Non-family entertainment / treats

This list will be reviewed annually (or sooner if necessary) and added to.

Rules

While Mum and Dad will retain a hands-off attitude regarding spending choices, there will be a few rules that you must abide by.

1. You must abide by the mandatory disbursements listed above
2. You may not buy for yourself or anyone in the family anything that is against our family values for children. These items include, but are not limited to:-
   • Mobile phones
   • Other electronic devices (without permission)
   • Immodest clothing
3. You may never ask for an advance on your salary, nor are you allowed to borrow money. If you do not have your money with you, you will not be able to buy something.
4. You must keep a written spending record of everything you spend money on.

Infractions

Failure to complete your family responsibilities (jobs), failure to abide by the rules for your salary, or disobedience and disrespect may lead to fines. Fines must be paid by the due date or reduction in salary may occur.

Graduation Day

Grace will graduate from her salary 3 months after she has completed her schooling.

Signatures

Mum and Dad: _____________

Child: _________

Date: _______