You will be able to use pocket money to teach your child to budget, save and give.
Pocket money is one of the best tools a parent has for teaching a child about money. It works only if the rules are clear and both parents keep to them, and that is harder than it sounds once a child is standing in front of you asking for something.
These notes cover the middle years, roughly seven to twelve. At this age a child can handle a regular amount and start making real choices with it.
Take Maya, who is nine. On Saturday she spends all her money on blind-box keychains at the mall. By Wednesday she wants a new set of gel pens for school, costing S$4 (an example figure), and she asks nicely. Marcus's first instinct is to give her the S$4, because the pens are for school and she asked so politely. Priya says no, and Maya cries. Marcus feels mean, and Priya feels she is the only one holding the line.
Start by setting an amount and a day, and keep to both. The day might be every Sunday, or the first day of each school week. Paying regularly matters more than the size of the amount. A child who knows money arrives on a set day can plan around it, and planning is the skill you are building.
Be clear about what the money is for. Pocket money is a regular, fixed amount paid on a fixed day for extras and wants. Many primary school children in Singapore also get daily money for recess. That money is for food, and you may want to keep it separate from pocket money. Pocket money then covers the extras: snacks outside school, stationery your child wants rather than needs, small toys, games, and gifts for friends.
The hardest rule is this one: when the money runs out, do not top it up. If your child spends everything on Saturday, they wait until next Sunday. Under this rule Maya waits four days, from Wednesday to the next Sunday payday, for her gel pens.
A child who learns that running out leads to a top-up learns that budgets do not really exist. A child who has to wait for something learns a useful lesson, and the only cost to them is the wait.
Genuine needs still come up, such as stationery the teacher has asked for. Agree up front that school needs come from parents and wants come from pocket money, then stick to it. With that agreed in advance, a request like Maya's has a clear answer, and neither parent has to decide it on the spot.
Ask your child to divide their pocket money into three parts:
Spend: the part for now. Save: the part for something bigger, a few weeks or months away. Give: the part for others, such as a donation, a gift for a grandparent, a contribution at a religious festival, or a charity drive at school.
Use three jars, three envelopes, or, for older children, three columns in a notebook. A simple split works well at first. If Maya gets S$5 a week, she might put S$3 in spend, S$1.50 in save and S$0.50 in give. The exact proportions matter less than the habit of dividing the money as soon as it arrives, before any of it is spent. Adults learn the same idea in Lesson 2.3 of The Singapore personal finance system, "Automate payday so saving happens first".
Let your child make small mistakes. They may spend the spend money on something that breaks in a day, or raid the save jar for something they later regret. Talk about it afterwards without lecturing. Ask "Was it worth it?" and "What would you do next time?" Mistakes made at nine with S$3 cost far less than the same mistakes made at twenty-five with a credit card.
Shopping together gives you many short lessons. Ask your child to compare the prices of two brands of the same thing, to work out which pack is cheaper per piece, and to decide whether they would have bought a discounted item anyway. At this age children can start to understand that a "buy two, get one free" deal saves money only if you wanted three.
Talk about advertising as well. Children this age see a lot of ads on YouTube, in games and on the sides of buses. Ask what an ad is trying to make them feel and who pays for it. They will still want things, but they will start to notice that someone wants them to want things.
Around this age, a bank account in your child's own name can make saving feel real in a new way. Many banks offer savings accounts for children. A parent usually opens them, often as a joint account with the parent. Before you choose a bank, check its requirements, including any minimum age, minimum balance and fees.
The point of the account is feedback. Your child deposits the contents of the save jar and sees the balance in a passbook, statement or banking app, so their money becomes a number that grows. When interest is credited, even a small amount, show them. At an example rate of 1% a year, S$100 earns about S$1 in a year. That small sum introduces the idea that money can earn money, which Lesson 2.1 of How money works, "Simple interest pays on what you put in, compound pays on what you earned", builds on.
Agree all of this with your partner before you talk to your child, so your child gets one answer. Marcus and Priya sit down together before talking to Maya for exactly this reason. Your next step is the same. Decide the amount, the day and the split with your partner first, then agree it with your child and write it down where they can see it.
Sit down with your child and agree the pocket money amount, the day it is paid and the spend, save and give split. Write it down.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).