Tom’s pocket money is paid once a month.  Two or three days later it is all gone with only a pile of candy wrappers and plastic components from construction toys scattered across his floor to show for it.

Pocket money used to be just that; enough money for a child to reach into his or her pocket to buy child-sized items when they were on a rare shopping trip. The purchased items would be a few trifles such as single sweets or a cheap plastic toy and the whole point of pocket money was to demonstrate the benefits of delayed gratification and good money management.

These days the toys are becoming so sophisticated and expensive that the delay until gratification could reach into adulthood. Sweets rarely come in small packages any more and the purpose of a one cent coin is lost completely.

Worldwide, the average child is now receiving an allowance of around $5 per week.  Pocket money has been reportedly handed out to those as young as 1 year old and to “children” as old as 32.  Half of them blow the lot on ice-cream, chocolate and other sugar filled delights.  The remainder either buy comics, magazines and computer games or a small proportion, one in five, choose to save their money.

Some families tie the size of the allowance to the completion of household chores, however the experts point out that this also ties the adults into a lifetime of negotiation. Teenagers, especially, will gladly leave their bed unmade and put up with the temporary penalty of a reduced allowance.  It is far better, say the financial gurus, that parents should reward their offspring for good money management.  For example year on year increases in pocket money should be dependent on a good record of prudence during the previous year.

Yet another approach is to guarantee a high level of allowance, say $10 per week, provided a small donation is made to charity, $5 is placed into a savings account and that account is maintained sensibly. Managed withdrawals from the account for planned purchases will maintain the level of the allowance however the penalty for raiding the savings account is effectively to halve the weekly allowance.

The problem with Tom is that he has other sources of income.  Because he is bright, he gets a regular income from bonuses for good school results.  His grandma always doubles whatever his parents give him for an A or B in tests and even when he voluntarily stopped his own allowance for 6 months as a protest against meddlesome adults, he always had cash to spend.

His sister, Suzie, is two years younger, comes from the same gene pool and regularly saves up to $100 before she buys anything at all.  Maybe boys will be boys or perhaps Suzie got the message and Tom didn’t.  We haven’t given up on Tom’s financial education yet, he’ll be trying out the new, improved “non-discretionary purchase allowance supplement” for the next few months.