Should you give your children pocket money? If you do, should you insist that they do household chores in return?
The answer to the first question is clearly yes. All children should have small amounts of their own money from a young age - it teaches them the value of money, and hopefully a bit about basic budgeting.
When you're on your way around the shops and they ask for things, you can simply tell them to save up their pocket money. That'll teach them the worth of saving and make a start on the concept of opportunity cost - if they buy one thing they can't have another thing.
In an age where far too many people seem to find these basic concepts confusing, that's got to be a good start.
The answer to the second is trickier. I interviewed people in Cardiff on this very subject for SuperScrimpers just a few weeks ago. Most people told me that they only gave their children pocket money in exchange for work around the house.
To get their £6 a week (the rough average in the UK) they had to empty the dishwasher, keep their bedrooms tidy or help with the hoovering. And if they wanted more money they had to do more chores. I was mildly shocked by this. Why? Because I dont think this is the way it should be.
Instead, children should be keeping their bedrooms tidy and helping around the house regardless of family cash flow. Doing so is simply part of being the member of a family. We don't get paid for cleaning our own houses (much as we all wish we did), so why on earth should parents be paying children to help clean up their own mess in their own home?
The same goes for giving money to children for finishing their homework (as 20% of parents apparently do), giving it for good behaviour, or deducting it for bad behaviour. Do so and suddenly you are putting a monetary value on what should be co-operative family life. That doesnt seem to me to be a very good idea.
So how should you manage the pocket money problem? First, you need to start early with the chores. Make it clear to your children from the age of four or five that they are expected to help tidy their toys, put dishes away and the like.
Then when they are a little older, start giving them a small and regular amount every week. The regular bit is vital. If you want your children to be able to budget and save they need to get the same amount every week - then they know how long it will take them to save for any one thing.
Next, make it clear what expenses should come out of pocket money. For very young children it might just be small toys or magazines you aren't prepared to shell out for. For older children or teenagers it might be clothes, cinema tickets or trips to the hairdresser.
Either way, if you want them to grasp the basic concepts around the way money works you have to be completely consistent with both the amount of money to be given each week and what it is expected to pay for.
And you need to be careful not to override your own rules; don't buy your children things they are supposed to pay for themselves if they run out of money. They need to learn how to balance out their needs and their wants by themselves. You might also occasionally allow your children to do earn a little extra money in order to begin to understand the link between money and work that will dog them throughout their adult lives.
I would repeat that making beds and so on absolutely doesn't count for this, but the odd non-regular and relatively nasty chore might. Think cleaning the car inside and out after a long road trip for example.
Finally, encourage your children to save. You might perhaps insist that their piggy bank or bank account gets a certain percentage of their cash every week. That way not only will they get in the saving habit early but they might even accumulate quite a cash pile: if they can save £3 a week - which on £6 a week they probably can - they'll have £156 by the end of the year.
If your children demand more pocket money don't just give it to them. Ask them to explain why and to show you a record of how they spend it, then you'll know if they need more or if they just want more.
Merryn is Editor-in-Chief of MoneyWeek.
