Its an age old problem for parents how to handle pocket money for their kids. How much should you give them? How often? What should they spend it on? All these questions have troubled parents for generations. Heres a brief guide to using pocket money to treat your kids as well as teach them valuable lessons about finance.
Pocket money is great for children. Having their own money gives them a feeling of independence and control as they choose how to spend or save it, as well as giving them a sense of responsibility.
School age is probably the best time to start thinking about pocket money. By this time your child will be able to understand the basics of cash and transactions. Help to teach them the value of money by involving them when youre out shopping. Tell them how much things cost and how much your budget is, and let them hand over cash at the till in exchange for the goods. This will help them understand and appreciate their own pocket money.
Whats the right amount to give? Really theres no right answer to this. It all depends on your own family circumstances and how much you can afford to give. Children will always complain that others at school are receiving more than them, so speak to other parents to find out what the average rate is, then decide for yourself what you think is a reasonable amount for your own child. Explain to your child that every family is different and cant always give as much as other families.
How often should you give? Again, this is a matter of choice. Weekly is probably best for younger children. A month can be a long time for a child, but a week is a reasonable length of time without being too short. In this way, your child will quickly see how much it all adds up after only a few weeks if they are wise with their spending.
Once youve decided on the amount and frequency, stick to it. Children need ground rules and boundaries. If you bend the rules by giving them extra when theyve already spend their whole amount for the week, theyll quickly learn that they can get whatever they want from you and the value of money will lose its meaning. Children also have a strong sense of fairness. Siblings who have been good and careful with their pocket money wont be happy if they see a brother or sister getting extra after spending their pocket money unwisely. Having said this, it would be reasonable to give extra for special occasions such as buying a birthday present for a family member. If so, highlight to your child that this a special extra amount and that its for buying something in particular.
When youve got a pocket money system in place, help your child to understand the value of budgeting and saving their weekly amount to make it go further. However and this is important the money should be theirs to do with what they want. This is the only way in which theyll learn how to handle it. Point out the various options that they have spending it all every week on little treats, spending wisely and putting some aside for the future, or saving it all up for a period of time to buy something special and let them decide what they want to do. Buy them a piggy bank to give them somewhere to put their money if they do want to save, and praise and congratulate them when they spend or save their money wisely though, to encourage them to develop good financial habits.
When your children get older and their needs and tastes more expensive, pocket money becomes a grey area. Clothes, trainers, CDs and computer games arent cheap but your child wont want to feel left out if they cant have them. There are various things you can do to help your children buy more expensive treats while still appreciating the value of money. For example, offer additional pocket money for helping out around the house for tidying their room, doing the dishes or washing the car, for example. You could also come to an agreement that you will contribute towards what they want to buy as long as they save a certain amount for it themselves.