When kids start asking for pocket money, it’s a great opportunity to show them what they can get out of an allowance. As well as giving them independence, pocket money can help give them a taste for the real world, managing their money and therefore can help set them up for financial success down the track.
If you’re considering giving an allowance to your kids, some of the practical skills they could develop include the following:
Skill 1: Determination and Patience
Pocket money teaches your kids the value of money and the importance of saving. Saving for something important to them will encourage them to stick to a plan and make sure they get there – which, as we know, is definitely something that’s important to know as an adult.
Show your kids tools like the Australian government’s savings goals calculator. This is a free online tool where they can enter their savings goal and their current savings, and it will tell them how long they need to save to reach their goal at their current savings rate.
Skill 2: Budgeting
How often you pay your kids depends on your family’s situation. However, sticking to a regular schedule is useful as it prepares your kids for the reality of having a job and budgeting based on reviewing pay at regular intervals.
If you’ve got teens, paying them at monthly intervals allows them to flex their budgeting skills a bit more as they need to plan ahead for a longer period of time. However if your kids are younger you may want to stick to smaller amounts that are more frequent.
Regardless of your choice, it’s a good idea to sit down with your kids on the day you pay them and discuss how they plan to spend and save it. It also might help to show them some tools like Pocketbook, a free app that helps a user track their expenses and automatically organises money into categories like food and clothes so they can see where their money goes.
Skill 3: Earning their money
It’s up to you how much to pay your kids – it might come down to how much you can afford to give as part of your own budget. How much you decide to pay your kids will give them a better understanding of the importance of working for income.
According to the ‘Parents-Teen Financial Literacy’ report by ING & Galaxy research (March 29, 2018), the average amount of pocket money is $22.90 a week for teens aged 15-17. This can be a good starting point, and then you might want to pay them more or less based on how hard they have been working around the house. This all depends on your preference for household chores however. Some parents prefer not to incentivise chores as these should just be part of being in the family.
Skill 4: Real-world banking skills
While paying cash can give your kids something tangible and might be a bit more exciting for them, we recommend helping your kids set up a bank account to which you can transfer pocket money. There are a few reasons why this is a good idea:
- When your child gets a job, they will most likely be paid into a bank account, so it’s a good idea to get them used to “invisible” money now.
- They will receive bank statements, which are a great tool they can use to check where their funds are going and help them to budget.
- If they also have a high interest savings account this will help them understand the concept of higher interest rates leading to more growth in their savings.
If your child opens an Orange Everyday Youth account, they can deposit pocket money into it and they won’t have to worry about any monthly fees. And if they’re overseas there are no ING international transaction fees and they get global ATM fees paid back to them (they’re paid within 5 business days).
They can also pair their Orange Everyday Youth account with a Savings Maximiser and they’ll receive a high variable interest rate on funds in their Savings Maximiser. This is good training for their future financial independence when they will be saving for larger goals.
For the curious:
All Orange Everyday Youth accounts will receive the Global ATM Rebate Offer and the International Transaction Fee Rebate Offer. This means that:
- for ATMs in Australia – any ATM fee charged by the ATM operator is paid back to you immediately following the transaction,
- for ATMs outside Australia:
- ING will pay back the International ATM withdrawal fee of $2.50 immediately after it is charged, and
- ING will pay back any ATM fee charged by the ATM operator when your transaction is finalised (settled).
While a transaction is pending, the amount the ATM operator charges in fees will be deducted from your available balance and will be paid back to you after the transaction is finalised (settled). ATM transactions made outside Australia can take up to 5 business days to finalise, so that means it can take up to 5 business days for us to pay back overseas ATM fees to you, and
- for ING international transaction fees on card purchases – ING will pay back the International Transaction fee of 2.5% of the amount of the international transaction immediately after it is charged. The person you’re buying things from may charge you a separate fee for their services (which we will not pay back to you under this offer).
This offer may be changed or withdrawn at any time at ING’s sole discretion.
Orange Everyday Youth is an account for individuals who are 15 to 17 years old. Joint accounts and overdrafts are not available for Orange Everyday Youth. This information has been prepared without taking into account you or your teen’s personal circumstances, financial situation or needs. Read the Orange Everyday Youth Terms and Conditions and Fees & Limits Schedule, and the Savings Maximiser Terms and Conditions, available at ing.com.au, and consider if it is right for you. If you have a complaint, please call us on 133 464 at any time as we have procedures in place to help resolve any issues you may have. Orange Everyday Youth and Savings Maximiser are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL.
Savings Maximiser for Orange Everyday Youth customers: Interest rates are subject to change. See ing.com.au to find the current rates. High variable interest rate comprised of standard variable rate and additional variable rate. Additional variable rate can only apply when you also have an Orange Everyday Youth. The additional variable rate that is added to the Savings Maximiser standard variable rate applies on one Savings Maximiser per customer. Any amounts above $100,000 are subject to the Savings Maximiser standard variable rate applicable at the time. If you do not satisfy the conditions to receive the additional variable rate, the standard variable rate applies. If you have multiple Savings Maximiser accounts, visit online banking or call us on 133 464 to check or change which Savings Maximiser account receives the additional variable rate (if eligible). ING can change or withdraw the additional variable rate at any time. The additional variable rate is not payable in conjunction with any other promotional rate. This offer may be changed or withdrawn at any time at ING’s sole discretion.
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