A new debate is emerging across Australia as financial experts warn that many parents may be missing the real purpose of pocket money.

Rather than simply handing out cash, experts say pocket money should be used as a tool to teach children essential life skills such as budgeting, saving and responsible spending.

Studies show that fewer parents are regularly giving pocket money, while those who do are increasingly linking it to household chores and responsibilities.

Financial educators argue that children learn valuable lessons when they manage their own money, including understanding the consequences of poor spending decisions.

With cost-of-living pressures affecting family budgets, experts say the amount given is less important than teaching children how to make smart financial choices.

Parents are being encouraged to focus on building financial literacy from an early age, helping the next generation develop healthy money habits for the future.