Episode 12 of the Change in your Pocket series looks at pocket money, and how you can use it to teach your children about the value of money and how to manage it.
– Video supplied by BrightRock
Welcome to The Change Exchange where we are exploring ways to make our kids more financially savvy.
Most parents don’t want their children to make the same financial mistakes they made, so they need to find ways to teach their children about the value of money and how to manage it. Pocket money is an excellent way to do this. Not only will your children learn the value of money, but it can also have the added bonus of incentivising your kids to get some of those chores done around the house.
So when should you start giving your child pocket money? Basically as soon as your child can count. When your child is very young, you can give him or her a few coins to buy a treat. Children love the sense of independence of paying themselves and they learn that money has a value. The bonus is that it encourages maths skills – they learn to calculate and count change.
There’s a lot of debate about whether you should link pocket money to chores around the house, and different families have different views on this, but I want my children to learn the relationship between work and money, so our children have certain chores that they need to complete each week in order to earn their pocket money. Basic duties like making their beds, keeping their room tidy or hanging up their towels do not earn them pocket money – those are expected as part of good housekeeping. The pocket money is for things they do for the family – walking and feeding the dog (they score extra money for the poop scoop!), unstacking the dishwasher, washing dishes and laying the table.
The next question is how much pocket money you should be giving your child. This depends largely on the economic situation of the family, the age of the child, and what the pocket money is for. For young children it may be money to buy a treat once a week or for the school tuck-shop. As they become older and start setting goals, the pocket money can used to teach saving – for example they can save towards a special toy or item of clothing.
Once they become teenagers, pocket money can become a way to teach budgeting by providing an allowance to cover their toiletries, clothes and entertainment. In the first month they may blow it all on airtime, but within a few months they will have learnt to make the money last – as long as you stand your ground and don’t give them extra cash!
Children learn best from example. You can’t teach your children to budget if you are not doing your own household budget. Discuss the household budget with your children and if appropriate, allow them to give ideas towards how to allocate that budget.
And here’s a tip: holidays are a great opportunity to involve children in budgeting by providing a set amount that the family can spend over the holiday and then researching activities or ways they would like to spend it.