Cost-of-living: Pocket money for children starting to increase as inflation cools

In a naturally protective instinct, parents try to shield their children from the harsh realities of the world. But, in some cases, it might be to the youngsters’ detriment. And one place where the opportunity to learn over-rides the old-school approach of ‘that’s just the way it is’, is pocket money. That weekly reward where kids suddenly felt ‘cashed-up’ because Mum and Dad have slipped them some money for doing a household chore or two has been feeling the pinch. Pocket money has fallen victim to the rising cost-of-living living over the past year as households struggle with the effects of rampant price hikes in tandem with rising interest rates. But kids who found themselves cash-strapped due to pressure on family finances, can take comfort in new data that shows allowances have started to increase over the last six months as inflation starts to temper. And experts say that rather than feeling guilty about kids getting less, parents should welcome fluctuations in pocket money as learning opportunities to improve financial literacy. The average weekly pocket money amount for WA children aged between 8-17 increased from $9.32 in March to $11.46 in October — up 23 per cent, according to spending data analysis by CBA-owned pocket money app, Kit. Victoria, Queensland and South Australia also recorded more than 20 per cent growth over the same period. The national average amount increased 14 per cent to $11.07. While still a way off the highs of 2022, when the average weekly pocket money for a WA child was about $12, the data suggests spending habits are slowly getting back on track. “Parents may have cut back on pocket money, but now that inflation has been tempering in the last six months, they are starting to increase it again,” Kit managing director Yish Koh said. “Although we’re still not back at where we were in 2022.” Ms Koh said WA had seen a similar trend to Victoria and Queensland with small declines in pocket money between 2022 and 2024. Dr Ranjodh Singh, a senior lecturer in the school of accounting and finance at Curtin University, suggested the latest rise in pocket money was less to do with inflation moderating than families returning to the status quo. “I think it’s a classic economic phenomenon where people held on for a while due to the shock in prices and then eventually they found they had to let go because people have to live, kids have to live,” he said. “It’s not because inflation’s easing — people are just thinking OK, I still need this stuff.” Dr Singh said he believed kids were partly responsible for driving the increase as they vie to keep up with their classmates. It’s not just social outings where they are feeling the squeeze, he said, noting even the humble school canteen and food trucks at sports carnivals were becoming increasingly expensive. “It’s not easy being a kid these days, especially it comes to these peer comparisons. If your friends are buying things, you don’t want to be left out,” Dr Singh said. “I think kids are part of the demand to increase pocket money because they can’t really get anything.” An annual nationwide survey of young people released this month by Mission Australia revealed the soaring cost-of-living is now the most pressing issue on WA teenagers’ minds, surpassing even climate change. It is also front of mind for the State Government, which this week revealed a $1.1 million program to make WA museums free across summer. That came on the back of offering families free tickets to Perth Zoo. An analysis of WA prices also reported this week showed the cost of bread, milk and cheese in Perth each rose more than 24 per cent between March 2021 and September 2024 quarters — roughly in line with the national average. But prices in Perth far outstripped the national benchmark in several areas, including housing and childcare costs. Ms Koh said the age-old rule of giving children $1 per year of age was no longer appropriate given the inflation challenges. “If seven-year-old kids are getting $7, what you can buy with $7 today versus even four years ago, it’s way less. The kids are getting in real terms a decrease in pocket money,” she said. FINANCIAL LITERACY While a difficult conversation for parents, experts say pocket money changes are not necessarily a bad thing. “When we feel the squeeze from our expenses, we adjust. When we give kids less money or more money, either way we can’t make them appreciate the world around them — they’re going to experience that as they grow up,” Dr Singh said. “This is the piece about financial literacy, telling them about how to adjust their behaviour depending on what the economy looks like and what their personal budgets look like, and that’s very important. “It’s a good thing that pocket money goes up and down because it will teach them how to adapt.” High-profile adolescent psychologist Michael Carr-Gregg has already seen this playing out. He said many kids were adapting their spending habits, budgeting more efficiently and becoming more “savvy” consumers. “This shift is partly driven by their observations of economic pressures on their families, which has led to a greater appreciation for saving and smart spending practices,” he said. However, he said the fact that many young people were concerned about their ability to afford basic necessities underscored the need for increased financial literacy programs. “In light of this, it’s crucial that we foster open discussions about money management within families,” Dr Carr-Gregg said. “Teaching children about budgeting, saving, and responsible spending can empower them to make informed financial decisions as they grow.” Finder personal finance expert Sarah Megginson said parents could empower children by explaining why they’re changing decisions around allowances. “When budgets are tight, we tend to want to protect our kids from that stress by not talking about it . . . but kids are really perceptive,” she said. “It’s really good to be open and honest with your kids, as much as is age-appropriate with them, about the different things happening with your finances, so they start to understand the different pressures you’re under.” More than one in 10 parents admitted their kids received a pay cut in 2023, according to Finder’s parenting report for that year. Scarborough mum-of-two Trina Cunningham gives her sons Harry, 11, and Oscar, 7, pocket money based on a chart of their household chores — most of which range in value from about 50¢ to $1. She believes the chore chart is teaching them they have to earn their money, just as she and her husband both work full-time. “(The boys) see both of us go to work and work hard for what we have and what we do,” Ms Cunningham said. “We just got a pool put in and that was a couple of years worth of saving and making sure we have enough to be able to pay for that pool or go on the holiday. “So I think it’s teaching them the same sort of thing. Well, if you want that specific Lego, then you have to put the work to earn the money for that.” Ms Cunningham said she had recently started having casual conversations with her eldest about how the cost of living is impacting the family’s financial decisions. “Things might come up with my husband and I talking at the dinner table saying, ‘We need to save for this,’” she said. “We went to Singapore recently and there were discussions around what’s this going to cost us.”