Pocket money a good lesson in financial management for kids National economics editor Jessica Irvine. Picture: Kristi Miller Source: News Limited If we are looking for the root cause of the financial illiteracy of our kids - the skyrocketing mobile phone bills and dubious work ethic - we need look no further than the red-suited, snowy-bearded jolly old fellow. Think about it. From the earliest of ages, he teaches our children that the things we want, like toys, books and clothes, come for free. One of the things parents care most about is securing a good financial future for their children. But so often we focus only on providing financially for them now, with gifts, toys and presents. But one of the best gifts you can give your children is the financial knowledge they will need to succeed later in life. It's never too early to start talking about money. Pocket money is a great way to start the conversation. A recent survey by the Commonwealth Bank found Australian parents pay their children an average of $10 a week in pocket money, Of kids aged 4 to 6, half get paid pocket money, at an average rate of $7.17 a week. By the time they are aged 7 to 9, three quarters of kids get pocket money, at an average of $7.04 a week. Kids really hit the pay dirt from the age of 10. Most kids aged 10 to 12 receive pocket money, at an average of $11.37 a week. From age 13 to 15 years, the average is $14.11 a week. The Commonwealth Bank estimates the pocket money economy is worth $1.4 billion a year. And yet the bank also found most kids spent most of the money on food, snacks and lollies. Just one in three kids save their pocket money. Clearly we are failing to educate our kids about the true value of money. But just as it's never too early, it's also never too late. Here are my top tips for parents to help you decide how much to pay your children in pocket money: 1.Don't just pluck a number out of the air. Talk to your child about what rate they think is reasonable. Ask them, how much do they think they should get and why? That will really get them thinking. 2.Explain where the pocket money will comes from. Tell your child, for example, that when mum goes to work every day, her boss pays her money and we use that to pay for our house, our groceries, your clothes and your pocket money. It's good to establish early the idea that money doesn't grow on trees. It is the reward from hard work. 3.I think it's really important that a child's pocket money is paid conditionally on them performing chores or tasks. The survey showed 71 per cent of parents already do this, making pocket money a payment for chores done. 4.But it's also important not to make it a complete drag! It's not supposed to be a way for you to offload cleaning the toilet, for example. Talk with your child about what they are good at and what they enjoy doing. Do they prefer helping with food preparation, or are they good at sorting clothing to be washed? Let them think about what they are good at and pay them for that. This entrenches the idea that not only is money a reward for work, but you should work at what you are good at. 5.Consider the idea of performance pay. In addition to their base pocket money, why not really incentivise your kids by offering pay for extra work? You could consider things like 20 cents per extra shirt ironed, 50 cents per dishwasher unloaded, maybe even a dollar for a load of clothes folded neatly. You'll soon get to see what enterprising little souls kids are, and you might save a lot of time and effort yourself. It's a win win. 6.My number one tip is not to underestimate your children. Kids understand more than we give them credit for. Beginning the conversation now about the value of money will save your trouble later on when they come home with sky high mobile phone bills. Teach your kids the value of money, and not only will they be better off financially, but you will be too. Age/Percentage of children receiving pocket money/Average per week WHAT THEY DO TO EARN IT Tidying the bedroom - 56% Washing the dishes - 36% Tidying the house - 36% Setting the table - 30% Taking out the rubbish - 27% Looking after pets - 19%