Giving pocket money: smart idea or will it spoil your child?

While some people say giving pocket money to children is a smart idea and teaches them the value of money, others claim it will spoil your child. Who's right?
Although some controversy surrounds the concept of giving pocket money to children, some believe it's a smart way to teach them money-handling skills, whereas others say it will spoil them. Here are arguments both for and against giving pocket money to little ones.

Many people who are against the idea of handing out pocket money believe that children may misuse the money or become spoiled. Some also believe that withdrawing pocket money as punishment may cause arguments within the family.

• Interestingly, a well-known business mentor believes that pocket money does not foster a spirit of entrepreneurship in children. He thinks that pocket money teaches children to expect hand-outs (when it is not linked to chores) or assume that a weekly or monthly wage is the norm in life.

Generally, pocket money for children is considered a positive action as it is a way of teaching them the value of money and what it can and cannot buy. What's more, some believe it encourages them to save for items they want and shows them the downside of frivolous spending.

• The Canadian Securities Administrators (CSA) says that, although children may not have much money to deal with, they are able to learn how to budget successfully. They suggest starting with a very simple budget chart that shows money in, money out and savings. Comparatively, a practical way to physically separate pocket money is to have jars or envelopes for different categories, such as regular expenses, spending money and money to save.

One group of parents believes that linking pocket money to chores is a form of bribery for doing tasks that are part of everyday living. On the other hand, many others say it can be a way of teaching children about finding opportunities to earn money.

On the whole, the following principles apply:

• Everyday jobs such as making the bed, tidying bedrooms and putting dirty clothes in the laundry basket shouldn't be linked to pocket money.
• Tasks such as car washing, weeding the garden, vacuuming and dusting may be linked to pocket money. Giving a bonus for work well done encourages a good work ethic.
• Setting a limit on what can be earned through chores is a good idea, as is listing chores in order of priority.
• Teach your children how to budget. In other words, don't top up pocket money when it's all spent, as this could give the child the idea that the supply of cash is endless.
• Let children decide. If they choose what they want to spend money on and how much they want to save, they will gain a sense of responsibility that enables them to learn how far the cash will go.