Giving a child an allowance is more than simply handing over coins each week. When used correctly, an allowance becomes a powerful tool to teach financial responsibility, goal-setting, and wise spending. In this article, we explore how parents of 8–13 year-olds can transform pocket money into meaningful lessons that build lifelong money skills.
Why an Allowance Matters
An allowance provides children with regular access to money, helping them understand its value. Unlike rewards for completing chores, an allowance given regardless of household tasks builds a foundation of trust and security. Most of all, children want to feel a sense of significance and belonging within the family. When allowance is not linked to chores, they learn that money can be a consistent resource rather than a transactional reward for work.
Don’t Link Allowance to Chores
It may seem logical to tie pocket money to chores—after all, chores involve effort. However, research shows that paying children for household tasks can actually reduce their internal motivation. If a child only does chores when they know they will receive money, they miss out on learning responsibility, cooperation, and contribution to the family. Instead, treat chores as a normal part of family life, not a job. An allowance should be separate: it’s a tool to teach money management, not an incentive for cleaning their room.
Using Allowance to Build Confidence
When children receive an allowance, they feel valued and trusted. This sense encourages them to take ownership of their actions. They learn that handling money is a skill they possess, and they also feel that they are in control over their own finances. As they grow older, this confidence (with appropriate learning about money and finances) translates into better decision – making and healthy money habits.
Setting Up an Allowance System
- Determine the Amount
Choose a weekly or monthly allowance that fits your family’s income level. A common guideline is £1 for each year of the child’s age per week. For example, a 10-year-old might receive £10 weekly. This amount should cover small goals without encouraging careless spending. - Explain the Purpose
Let your child know that their allowance is for learning about money, saving for goals, and making thoughtful choices. Clarify that chores and family responsibilities are separate: helping out at home is a way to contribute, not a means to earn pocket money. - Teach Goal-Setting
Encourage your child to set a savings goal. If they want a game costing £50, they can decide to save 5 per week. This approach teaches patience, delayed gratification, and basic arithmetic as they calculate how many weeks it will take to reach £50.
Encouraging Smart Spending and Saving
While saving remains a crucial lesson, an allowance also teaches smart spending. Encourage children to compare prices and resist impulse buys. For example, if they have £10 and see two toy options, guide them to evaluate which toy offers better value or lasts longer.
- Compare Prices
Look at different options together — online or in-store — to understand value for money. - Use the One-Day Rule
If your child wants a non-essential item, have them wait one day before purchasing. This simple rule helps reduce impulse spending and reinforces thoughtful decision-making.
Reviewing and Adjusting the Amount
As children grow, their needs and understanding of money change. Periodically review the allowance system:
- Quarterly Check-In
Hold a short family discussion about how the allowance is working. Ask your child what they’ve learned and whether the amount still makes sense. - Adjust as Needed
If expenses (like school lunches or extracurricular activities) change, consider adjusting the allowance slightly to match new responsibilities without linking it to chores.
An allowance given without requiring chores builds a foundation of trust, significance, and belonging. By separating chores from pocket money, parents encourage children to develop genuine responsibility and internal motivation. Teaching children to manage allowance through goal-setting, saving, and careful spending sets them on a path to becoming financially confident adults.
Want to teach your child about money and finances in a fun, hands-on way? Enrol in our interactive course to help them build smart money habits, practise real-life skills, and gain confidence with money: Join here https://smartkidseducation.org/
Leave a Reply