Tips for the correct use of pocket money

The topic of money management plays an important role in the upbringing of Austrian parents. Three quarters of those questioned are of the opinion that dealing with the euro should be part of education by elementary school age at the latest.

According to a current survey by Erste Bank Financial Life Park, learning effects are particularly relevant motives for pocket money. The children should be taught to divide up the money, estimate a sum of money and take on responsibility.

Pocket Money Formula

Many parents wonder what amount of pocket money is appropriate for the age of the child. “It’s hard to tell from the gut, of course. But you can help yourself with a simple formula: We recommend weekly pocket money for children 30 to 50 cents multiplied by the child’s age. In adolescents it is seen monthly 2 to 3.60 euros times the agesays Philip List, Head of Erste Financial Life Park.

“But pocket money is not just about the amount. Rather, pocket money is a great tool for financial education at a young age. As a ‘salary’ for children and young people, it represents a very low-threshold entry point,” List continues.

The most important tips about pocket money

1. School entry as a starting point: A good time to start with pocket money is when school starts. You can use the above formula to find out about the entry fee.
2. Pocket money freely available: The children should be able to decide for themselves what they spend their pocket money on – as long as it does not harm the child.
3. Regularity and punctuality: An important aspect is reliability when paying out. A weekly payment is appropriate for children up to the age of twelve. From the age of 13, for example, one option is to switch to a monthly transfer to a youth account.
4. No advance and no additional payment: Children learn to organize the available resources. When money is tight, spontaneous wishes cannot always be fulfilled immediately. This knowledge is a key requirement for successful money management.
5. No pocket money for homework: The daily help in the household should not be paid additionally, since the child is part of the family and everyone should lend a hand. However, if the housework goes beyond the usual level, this can be remunerated separately.
6. No penalties with pocket money: Regardless of the performance, the pocket money should be paid out. By increasing good school grades or removing bad grades, pocket money becomes a reward or punishment instrument. The function of raising children to be independent is thus lost.
7. Set an example for children to save: When parents set a good example when it comes to saving, the offspring usually accept it better. Studies show that money management is often the responsibility of the parental home.
8. Not intended for basic needs: Expenditures for school supplies, clothing or food are not pocket money. If the child looks after himself during the day, he should be given extra money for this. Exceptions are, for example, willful destruction or the unconditional desire for a particularly expensive piece of clothing. Then a financial participation of the child would be appropriate.
9. Pocket money should correspond to the standard of living of the family: The pocket money must match the household budget. In financially difficult times, this may mean that an increase in pocket money will not be possible. FLiP director Philip List: “It is important to explain the amount of pocket money to the child and to place it in the context of the household budget.”