The role of pocket money in teaching responsible money management
Debt is on the increase, and this generation of children is growing up with a different perspective on money than any preceding generation. Pay day loans, mortgage rates and credit cards are all part of daily advertising, and money is, apparently, readily available to meet all our needs. So how can we teach our children responsible money management, especially in the current lending culture?
Pocket money is part of the lives of most children, although how much they receive and what they can do with it is very much a family decision. But in today’s society, it’s also an ideal mechanism for teaching children how to be fiscally responsible, so some all-round parenting advice might be helpful.I give my 3 children £3 a week pocket money. I have been told a few times that ‘£3 is nothing’ and ‘I’m obviously tight’ but worked out over a month, £3 will set me back £36 in total – which is more than my water bill!
Research shows that when there’s a gap between what parents say and what they do, children will always follow actions before words. So before you even start thinking about the issues around pocket money, it’s worth taking a good look at your own attitude to spending. Do you live beyond your means, or is your debt sensibly managed? Do you like to spend now and pay later with credit cards, or are you more inclined to save for things you want? Whatever your choices, be prepared to explain them to your child and help them to understand the language of money.
The first question you then need to ask is: how much should you give your child? That depends not just on the age of your child, but on what you expect them to do with it. For example, do you expect your teens to pay for their own bus fares, phone and clothes? Or do you think that pocket money should be a freebie, for your child to spend however they wish while you pick up their bills?
You should also consider whether your want to attach conditions to the weekly payout. The term pocket money actually stems from a small money pocket in which people could put money that they were given without having to work for it. Many parents, however, feel that doing chores is a fair exchange, which teaches children the value of work and the fact that nothing comes free.
Also talk to your child about how they spend their money. If you include an element to be saved, are you going to insist on this, or allow your child a free choice and just give advice on saving? The most important lesson your young child will learn is that once it’s gone, it’s gone, and that can be a strong motivation to save. Giving a little extra when you see your child saving for something will help to encourage a good habit.
In a society which is becoming ever-more polarised financially, and as poverty, disease and the effects of war fill our TV screens, you might also want, as a family, to give to charity. Include your child in this, and allow them to be part of the giving.
Teaching your child the power of money is a vital life lesson. Teach it well, and your child will grow into an adult who is not just sensible, but generous and caring in the way they use what they have.