Spending power

PUBLISHED : Sunday, 24 April, 2005, 12:00am
UPDATED : Sunday, 24 April, 2005, 12:00am

PAUL PONG, MANAGING DIRECTOR of Pegasus Fund Managers, believes pocket money is the best and most hands-on way to teach children how to spend and save, but says it should not be used as a system for punishment or reward.

'By using their own funds, its limit becomes real and tangible to them. They get only a certain amount each week or month, and rather than having access to your seemingly infinite wallet, they soon realise they can't have everything they want,' he says.

Mr Pong's 12-year-old daughter, Ada, receives a monthly allowance but is expected to save for short-, medium- and long-term items. She is also encouraged to save lai see money and money received on her birthday. Short-term saving is used for daily spending on snacks and soft drinks. Medium-term saving covers computer games and fashion items, while long-term saving is for investing and building up a savings account.

'The key to teaching children how to manage their money is to start early, using clear, practical examples. As your children grow, so should the lessons and responsibilities,' Mr Pong says. In her spare time, Ada often helps Mr Pong in his office, for which she receives extra money.

Tracey Furniss, a single parent and editor of The Parents' Journal, rewards her six-year-old son Matthew with smiley faces to stick on a chart when he completes his homework and helps with the housework. Each time Matthew accumulates 10 faces, he receives $50 to spend any way he wants or to save for a more expensive toy.

'I involve Matthew in our home budgeting but I am not too strict and, if at the weekend he wants a CD or a comic book, I usually let him have it,' Ms Furniss says.

Clarissa and Robin Blake, who have three children, Nicholas, nine, Jameson, five, and Abigail, four, believe the best way for children to learn about managing their pocket money is to have their parents help them with their successes and failures.

'If our children ask for a particular toy, rather than saying no, we explain that we are going to save for it,' Mrs Blake says.

Elder son Nicholas also receives a $5 to $10 reward for gaining good marks at school. All the children are expected to help with the housework.

'Children should understand that doing chores is part of the membership in a family. In healthy families, all members contribute and all contributions are valued,' Mrs Blake says.



Children develop a sense of how much has to be done to earn money.

They learn that money does not grow on trees.

They learn what money can buy.

They know there is a set amount of money, rather than asking for money all the time.


Children may think they will get paid for everything they do to help.

You have to find the money to pay them regularly.

It can be difficult to know what the pocket money is supposed to pay for - there always seems to be something more.