Pocket money could be the latest casualty of the cost-of-living crisis, with new research from Compare the Market revealing that 64.2% of Aussie kids aren’t getting a weekly allowance from their parents.

However, those who do get an allowance work hard for the money, with the findings revealing that as many as 77.5% of parents ask their kids to do chores in return for an allowance.

The survey found that, making the bed (44.2%), cleaning their room (42.8%) and doing the dishes (41.8%) are the most requested chores in exchange for loose change.

With some other common household chores also making the list, such as loading and unloading the dishwasher (25.4%), watering the garden (15.2%) as well as doing laundry (13.8%).

Compare the Market’s Economic Director, David Koch, said that getting kids to do chores around the house in return for pocket money is an important first step in creating good financial habits.

“Perhaps now more than ever, given our economic climate, it’s important for parents to teach their children financial literacy,” Mr Koch said. “Kids aren’t oblivious to the financial strains many families face, especially those in their teens, though they may not fully understand why it’s happening.

“You don’t need to be an economist or finance expert to start laying the foundations. When young ones want something for themselves at the store, parents can start by asking them to buy the item from their pocket money or encourage them to save to reach their goals.

“These practical examples of the importance of putting aside savings and budgeting which will reap dividends years later. Setting some time aside with older kids to answer any questions they may have, as well as explaining to them the ways you budget and what works for you, may also be a good guide.

“By starting early and creating a routine around earning money in exchange for chores around the house, kids can understand the value of money and how to budget what they have. This ultimately prepares them for when they get their first jobs and then later move on to their careers.

While most children start receiving pocket money in primary school, some are getting a head start while they’re still in diapers.

Brisbane dad Andrew Barnes has opened a managed fund for his 8-month-old son Eddie.

“We encourage friends and family to deposit into his account in lieu of some gifts,” Mr Barnes said.

“We look forward to teaching him, as he grows, about the importance of having a nest egg.

“As we’ve all seen over the past year of rate rises and economic uncertainty, having an investment income can certainly help during these times!”

Compare the Market’s own Household Budget Barometer found earlier this year that a third of Australians (32.3%) are turning to social media to get financial advice, while another research in December of 2022 uncovered that as many as 53% of Aussies stated they never received any education about managing their personal finances⁺.

Commenting on these findings, David Koch said that financial literacy should start at home.

He urged young people to be wary of unlicenced accounts on social media providing what looks like financial advice, as the advice is unreliable and is usually not relevant to your current financial situation.

“I’m astounded by the number of people who claim that they never received any education, either formally or informally, about managing their personal finances,” Mr Koch said.

“Knowing how to manage what comes in and out of your household budget is a key priority of becoming an adult, and it seems that there is well over half of adults managing their household budget blind.

“This is why it’s important to start teaching your kids early about the financial decisions you make at home so that they don’t have to start from zero, even if you had to.

“At the end of the day, it doesn’t matter how much you pay your child in pocket money or allowance. It matters how that money is going to be used by them.

“And while it can sometimes be hard to stick with rules you set around pocket money, it’s best to hold fast to these rules, as you’ll see the rewards years down the track when they’re all grown up.”

Kochie’s top tips for parents teaching kids about money

1. Educate them on the difference between want and need. Sometimes it can be hard to differentiate between what people need, such as healthy food or sensible shoes, or want, such as snacks at the movies and a pair of fancy shoes. By teaching your kids what falls into each category, it can be a great foundation to make sure they have an understanding of what they want to save up for, versus what something that you may buy for them.
2. Teach them how to budget. Once they have an allowance or a job that is coming in regularly, sit down with them and help them budget that amount. A simple budget that they can get started is a version of the 50/40/10 budget rule, where they save 50% of their income, spend 40% and give 10% to charity to give back to the community. Of course, there are many other budgets out there and parents should help the child choose one that fits their needs the best.
3. Don’t be hard on them when they make mistakes. We’ve all been there when we’ve spent a little too much here or there, so don’t punish your child if they make a mistake and spend all their money in one go. Everything is an opportunity to learn and grow. The only thing you need to make sure is that they know where they went wrong and find ways to make sure it doesn’t happen repeatedly.

*Compare the Market surveyed 1,004 Australians aged 18 and over in August/September 2023

⁺ Compare the Market surveyed 1,000 Australians aged 18 and over in December 2022

-ENDS-

For interviews and more information, please contact:

Noémi Hadnagy | m: 0433 377 252 | e: [email protected]    

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