Spending Money

Money used for the purpose of small current expenses; also called pocket money. This term often refers to a small amount of cash on hand for incidental expenses or discretionary use.
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Overview

Spending Money—also known as pocket money—refers to a small amount of cash earmarked for incidental or discretionary expenses. These expenses are typically minor, non-essential costs and can vary from person to person. Spending money is an informal and flexible financial resource, set aside separately from essential living expenses and savings.

Examples

  1. Weekly Allowance: Parents might give their children a set amount of money each week, known as allowance, for their personal use.
  2. Travel Funds: During a vacation, people often allocate a portion of their budget for small purchases, souvenirs, or local delicacies.
  3. Office Petty Cash: Companies often maintain a petty cash fund to cover minor office expenses such as coffee, snacks, or small supplies.

Frequently Asked Questions

What is the difference between spending money and savings?

Spending money is intended for immediate, minor expenses or discretionary purchases, while savings are set aside for future goals, emergencies, or significant expenditures.

How much should one set aside as spending money?

The amount varies depending on personal financial conditions and spending habits. It’s wise to create a budget to determine a reasonable amount that won’t affect essential expenses or savings goals.

Can spending money include digital payments?

Yes, spending money can include both cash and digital forms of payment such as prepaid cards, e-wallets, or low-balance debit cards.

Why is it called ‘pocket money’?

The term ‘pocket money’ originates from the idea of keeping a small amount of cash in one’s pocket for convenience and small purchases.

How can children learn from receiving spending money?

Giving children spending money as an allowance can teach them financial responsibility, the value of money, budgeting skills, and the importance of saving.

  • Allowance: Money given to a child by parents on a regular basis, intended for the child’s personal spending.

  • Discretionary Income: The amount of an individual’s income that is left for spending, investing, or saving after taxes and necessities are paid.

  • Petty Cash: A small amount of cash kept on hand by a business for minor or incidental expenses.

  • Budgeting: The process of creating a plan to spend your money, assigning specific amounts to different expenses or savings categories.

Online References

Suggested Books for Further Studies

  • Smart Money Smart Kids: Raising the Next Generation to Win with Money by Dave Ramsey and Rachel Cruze
  • The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber
  • The Financial Diaries: How American Families Cope in a World of Uncertainty by Jonathan Morduch and Rachel Schneider
  • Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez

Fundamentals of Spending Money: Personal Finance Basics Quiz

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