by Adele Gregory

Created on: January 15, 2010

The greatest value in giving children pocket money is that it teaches them how to manage money itself and the skills of saving and budgeting. The trouble with asking them to earn their allowance is that financial lessons get mixed up with other issues, and other responsibilities become linked to money.

One is the biggest problems with having children earn their pocket money is what happens if they don’t, especially if this occurs on a regular basis. If you stay true to the principle of earning, the pocket money will stop in hopes that going without will teach them to be reliable workers. But how long will they be content to go without? Over time, resourceful children could well find other, less responsible ways of meeting their needs. They might borrow from friends, turn the pester power on other family members or even steal. These are not skills you want them to learn.

Encouraging children to work for pocket money also has its downsides because whatever you ask them to do for it becomes linked with financial remuneration. Ideally, they should be helping around the house because they’re part of the family and studying hard to do well at school, not because you’re paying them to. What parents ask their children to do to earn their pocket money are often things children should be doing anyway -and for free.

The link between chores or grades and regular pocket money can also be problematic in that technically, children should be able to say “no” to the work if they’re willing to forfeit the money. If Johnny’s not too bothered about losing the money he gets for cutting the lawn you’re left with an uncut lawn. You then have to apply other disciplinary procedures which might get the lawn cut, but the earning system has broken down. Similarly, earned pocket money shouldn’t really be removed for disciplinary reasons if the child has already fulfilled what he or she needed to do to earn it.  In the adult world, that would be a breech of contract.

Many of these pitfalls can be avoided if regular pocket money is treated as an allowance for personal expenses rather than a payment for services rendered. It’s a less complicated system for children to learn and parents to implement. There won’t be so much starting and stopping (which parents have to track) or decisions about what to do if some things aren’t completed or done to standard. But more important is that it shifts the focus from reward to independence. Its message is “I’m giving you a certain amount of money each week in lieu of buying things for you on demand. You must pay for them yourself now so think carefully about how you spend it.”  

Both earned pocket money and the allowance model teach children responsibility, but different types. Earned pocket money stresses the value of work and that you can’t get something for nothing. An unearned allowance gives children a certain amount to work with and in doing so it teaches them that resources are limited and they will have to use what they’ve got wisely. In financial terms, you could say that earned pocket money is about income while allowance is about expenditure. In regard to life lessons, however, earning is a fairly easy skill to pick up later on, but budgeting needs all the help it can get.

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