Many parents are faced with the dilemma of whether to give their children pocket money or not.
While some may argue that it spoils the child, giving pocket money can actually foster financial responsibility. In short, you shouldn’t just meet your kid’s financial needs. Instead, let them understand the value of money by allowing them to manage their own cash. But like everything else, pocket money has its good and bad sides. In the end, it comes down to balancing things and helping your child understand certain principles from an early age.
So let’s look at some of the upsides and downsides of giving children pocket money and what steps to take.
A stream of income can help your young child understand the importance of saving. For instance, they may long for a toy or gadget priced at $50. Receiving, say, $5 occasionally, they may realize that this can add up to the amount they need.
Instead of buying them that expensive toy, you can encourage them to save their pocket money towards it. Perhaps, tell them you’ll contribute the remainder if they could save up to a certain point.
You see, children wouldn’t appreciate the cost of things if they didn’t get to pay for them themselves. They may think everything comes cheap, which may become a problem in the future.
Managing their money themselves can help children understand what a dollar can buy, how to let go of what they don’t need and how to compare prices.
For instance, your child might have just $15 but want something worth over $30. “Oh no, that’s way beyond me for now,” they’ll likely say when they learn the price.
If your child has the power to buy something, even if it means waiting and saving, this puts less pressure on you to fund their ‘wants’.
By encouraging your child to work for their pocket money, you are teaching them the notion of what it means to earn. Encourage them to do well in school or help out with some chores to earn their pocket money. Kids get excited about such things. Use it to your advantage and theirs.
Kids naturally are inclined to want things they really don’t need. Think chocolates and ice creams. Tweens and teens may spend on the latest gadget.
It is natural to want to spend however, they may soon realize that they’re left with no money before the month ends.
Be there to provide guidance on what’s better to spend on and what’s unnecessary. You can even give them a list and let them figure out how to budget their pocket money.
Kids with pocket money may show off and bully the less privileged ones. On the other hand, they may ask for more from you if they discover their friends receive more.
This is another reason you should do your best to teach your kids values before handing them money. Be proactive: tell them about these social scenarios beforehand to prepare them.
This depends on each individual family and what the pocket money is expected to cover, for example, is it just for wants? Or does it need to cover food or transport?
You could start with $5-10 per week for primary kids, and more for high school kids.
According to a Cambridge University study, children already develop some financial instincts by age 7. It’s therefore advisable to get your kids started with money as soon as possible, no matter how small the amount is.
Of course, your children can’t be financially dependent on you forever. The earlier they learn how to manage and be responsible with money, the better. As soon as they’re old enough, probably in high school, encourage them to look for part-time jobs.
Pocket money is a great way to prepare your child for the future. But they need your guidance even as you place those few bucks in their hands.