24 May Help your children learn the value of money
When it comes to understanding money, it is never too early to start teaching kids about earning money, saving money and budgeting.
If you think it’s right for your family, giving kids regular pocket money is a great way to develop their money skills, as well as encouraging independence, patience and goal setting.
Why is give kids pocket money?
Your child learns a lot by watching you and how you deal with money. Spending, saving, withdrawing or donating money – they’re all chances to teach your child more about the basics of money management.
A recent study by finder.com.au found that in Australia 63% of Australian kids are receiving pocket money but only 1 in 3 of them actually have to do anything for it. This is not what pocket money is meant to be about because this means children are failing to learn any lessons about money.
What lessons can be learned?
- the value of money: the relative price of things
- spending: accepting that money is gone once it’s spent, and wants versus needs
- earning: understanding that earning money can be hard work, but usually that’s the only way to get it
- saving: using short-term and long-term goals
- borrowing: understanding the importance of repaying borrowed money.
What should pocket money be paid for?
Many parents see the concept of offering pocket money in return for help around the house something of a ‘win-win’. Parents get some help around the house and can feel confident that they’re raising children who know their way around a washing machine and other vital household skills as well as distributing the work load around all family members.
However, other parents believe doing chores is part and parcel of being a family and choose to give their kids pocket money for other reasons like getting good marks at school, on their birthdays, or as a special treat.
The real key to pocket money is to ensure that it is paid on a regular day, is a consistent amount and the conditions under which pocket money is earned are clearly outlined and understood by the child.
Talking to other parents can help you get an idea about what other people are doing. You can find out what jobs they pay their kids for, how much they are paying and how often they pay their kids. Getting other parents’ opinions can help you work out a system that suits your family.
How often should pocket money be paid?
The frequency of payments is entirely up to your family and will depend on what suits your family’s situation.
You could start with weekly payments for younger children, and then extend to fortnightly and then monthly payments for older children and teenagers. This will help your child develop budgeting skills as they will need to manage the money over a longer period of time as they get older.
When a child gets to an age where they could start part-time work, say 15 or 16 years old, you might consider cutting back their pocket money to encourage them to look for a job.
Tips on giving pocket money
Here are some pocket money tips:
- Explain to your child what pocket money is for and what it’s not for.
- Pay what you can afford, regardless of what other parents (or your child!) might advise.
- Pay it on a set day.
- Put saved money in a dedicated container, such as a glass jar or a money box. Seeing the level grow helps highlight the achievement of being a good saver.
- Try not to give payment in advance.
- If pocket money is to cover entertainment, talk about what kinds of entertainment.
- Try not to supplement pocket money – it’s all about teaching your child to live within their means.
- Check out our previous post on apps to help your children save and other ways to help them become money-savvy!