App, cash or bank account: What’s the best way to pay kids pocket money?

The question of pocket money can be a vexing one. To pay or not to pay? If so, how much, and in return for chores done? Now, thanks to the many new apps that have sprung up in this space, another question can be added to that list: how to pay pocket money? In cash, via an app or into a bank account?

I’ve taken quite a journey with pocket money. When my eldest kids were younger (they’re now in their mid-teens and working rather than receiving pocket money) I paid in cash. But this was back when people still carried money in their wallets.

The question of pocket money can be a vexing one.

Then, inspired by the Barefoot Investor, I made them split their weekly pocket money into money to spend and save. It’s a great way to teach kids about saving. The need to not only have cash, but the correct change in coins so they can divvy it up, is not so great.

Inconvenience aside, I’m a big fan of paying kids under 10 with physical notes and coins. Before they learn about the convenience of tap and go, kids need to understand the value of money. Holding it in your hand makes money real in a way that holding a piece of plastic or staring at figures on a screen simply can’t. The tangibility of physical money makes them value it when they earn it and experience loss when they spend it, which encourages a savings mindset.

I still pay my 11-year-old in cash and manage the chore of correct change by withdrawing rolls of coins from my bank’s business change machine to cover an entire month’s pocket money.

But I’m confident I’ve embedded the value of a dollar in him, so as he approaches high school and with cash becoming less widely accepted, I think it’s time to make a change.

A solution favoured by many parents is to use a pocket money app that comes with a pre-paid Visa or Mastercard. But when compared to traditional banking products the fees are high. The most popular app, Spriggy, charges $60 a year for up to four kids, while those who joined before July 2022 pay $30 per year, per child.

If your child loses their card (and what kid isn’t going to do that at least once?!) there’s a $10 card replacement fee every time. Other apps charge fees of around $2.00-$2.50 per child, per month, while the new CommBank-backed offering Kit is fee-free.

On the plus side, these apps have a kid-friendly interface and the best feature education modules to teach kids financial literacy. You can set up and track pocket money chores and get visibility over your child’s spending. Certain purchases, such as alcohol or tobacco, are restricted, and kids can set up their own savings goals.

Are these features and benefits worth the hefty fees? I’m not convinced. They also add to the parental load as just another item on the to-do list that demands time and attention. But the biggest drawback for me – especially in an environment of rising interest rates – is that they don’t pay interest on your child’s savings.

These apps also provide a solution to a problem that no longer exists. When my older kids were tweens, it was impossible to get a bank card for kids under 14, but now some traditional lenders will issue a debit Visa or Mastercard with a fee-free bank account for kids as young as nine. When linked to the bank’s kids savings account, it’s possible for your child to earn 4 to 5 per cent interest on their savings.

For me, that ticks all the boxes. I don’t need (or need to pay for) the added bells and whistles. I just need a fee-free account with a card, a banking app that allows my son to set savings goals and a bank that pays a great interest rate on those savings.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Michelle Bowes is a personal finance journalist and author. Her book, Money Queens: the teen girl’s guide to money, is available in bookstores and online now.

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