Children's Pocket Money: Calculate from Needs, Not Estimates

Many parents give pocket money based on estimates or by comparing with the neighbor's child. As a result, the amount can be too large or too small, and it often becomes a source of conflict. In fact, pocket money should be based on measurable needs.

This guide will help you calculate pocket money from real needs, separate needs and wants, and set ground rules with consistent consequences. All the figures used are examples with clear assumptions, so you can adjust them.

Calculate the Child's Real Needs

The first step is to record all of the child's expenses for one week or one month. Record every rupiah that goes out, including school snacks, transportation, phone credit, and stationery. From those records, group them into routine needs and incidental needs.

Routine needs are expenses that occur every day or every week, such as lunch money, transportation, and stationery. Incidental needs are expenses that don't happen often, for example study tour fees or shoe repairs. Pocket money should cover routine needs, while incidental needs can be discussed separately.

Use real records, not estimates. If the child has never recorded before, do the recording together for two weeks. Average the daily expenses, then multiply by the number of school days in a month. That is the basis for monthly pocket money.

From the table above, the child's total routine needs are Rp690.000 per month. This figure can be an initial benchmark for pocket money. However, you need to separate what is truly a need and what is a want.

Separate Needs and Wants

Needs are things that must be met so the child can learn and go about activities properly, such as food, transportation, and stationery. Wants are things that add enjoyment, such as extra snacks, toys, or entertainment app subscriptions. Both are valid, but their portion and source of funds need to be distinguished.

Pocket money should only cover routine needs. For wants, the child can use leftover pocket money if there is any, or save from other sources such as gifts. That way, the child learns that wants are not automatically funded.

Make a written agreement about the list of needs covered by pocket money and the list of wants that must be paid for themselves. Post that list somewhere easy to see, for example on the child's bedroom door. This agreement becomes the reference when the child asks for extra.

Set Ground Rules and Consequences

Ground rules must be clear, simple, and agreed upon with the child. Write the rules in bullet points, for example: pocket money is given at the start of each month, the child must record daily expenses, and leftover pocket money may be saved or used for wants. The rules also cover what happens if the pocket money runs out before its time.

Consequences must be consistent and not change back and forth. If the child spends the pocket money before the end of the month, don't immediately give extra. Apply the agreed consequence, for example bringing lunch from home until the end of the month. Consistency is the key for the child to learn responsibility.

Besides negative consequences, also give rewards for good behavior. For example, if the child successfully records expenses for a full month, give a small bonus or praise. Rewards don't have to be money; they can also be extra playtime or choosing the family meal menu.

1. 1Determine the pocket money amount based on the total routine needs already calculated.
2. 2Make a list of needs covered by pocket money and a list of wants that must be paid for themselves.
3. 3Agree on recording rules: the child must record every expense in a book or app.
4. 4Set a schedule for giving pocket money, for example on the 1st of each month or every Monday for daily pocket money.
5. 5Determine the consequence if the pocket money runs out before its time, for example bringing lunch until the end of the period.
6. 6Do a joint evaluation every month to adjust the amount and rules if needed.

Teach Recording and Evaluating

Recording is a basic skill in managing money. Invite the child to record expenses every day, even if only in a simple notebook. Parents can check the records every week and give feedback. If the child has difficulty, help with examples or provide an easy-to-fill recording format.

At the end of each month, do a joint evaluation. Compare actual expenses with the plan. If there is a big difference, discuss the cause and find a solution. This evaluation is also a moment to adjust the pocket money amount if needs change, for example moving up a grade or having a new activity.

Involve the child in decisions. When children feel involved, they are more likely to follow the rules. Ask their opinion about the pocket money amount and how to manage it. That way, pocket money is not just a handout, but a learning tool.

Adjust to Family Conditions

The pocket money amount doesn't have to be the same as other families. Adjust it to the family's financial capacity and the priorities already agreed upon. If the budget is limited, focus on meeting routine needs first. Wants can be fulfilled gradually according to ability.

It's also important to consider the child's age. Elementary school-age children may need daily pocket money in small amounts, while middle school children can be given monthly pocket money with the responsibility of recording. The older they get, the bigger the child's role in managing pocket money.

If you want to plan family finances more comprehensively, including children's education funds, you can use the calculator available on FamConnect. This calculator helps calculate education fund needs and adjust them to the pocket money given.

This guide is general in nature and is not legal or personal financial advice. Every family has different conditions, so it's important to adjust the figures and rules to your own situation.