How Much Pocket Money for My Kid? Here Is How I Picked

A client project gave me the winning formula

Raphael Schagerl
ILLUMINATION

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Recently, I dived deeply into a client’s investment strategy to verify their portfolio withdrawals could likely sustain their retirement dreams.

I never imagined this professional task would also unravel a personal puzzle of mine:

Figuring out the right amount for my son’s pocket money.

Here’s the backstory

From the moment my son started receiving money gifts — birthdays, holidays, special occasions — we’ve been tucking it all into a low-cost exchange-traded fund (ETF).

It’s been a little financial adventure, watching his investment grow.

Now, what does retirement funding have to do with a child’s allowance?

The lightbulb moment came when I realised that the principles of drawing a retirement income from investments perfectly mirror the concept of doling out pocket money from my son’s ETF.

In both cases, you “just” need to figure out the right amount to withdraw periodically — without ever depleting the original sum.

The following plot illustrates a simulation of the ideal percentage we could pull out annually for him to spend while…

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Raphael Schagerl
ILLUMINATION

Experiments in becoming more successful & creating more value for others | On a mission to retire my wife within 3 years ➜ https://retiremywife.substack.com/