Pocket Money: Financial Lesson for Kids

It’s 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.
Here’s 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 you’re 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.

What’s the right amount to give? Really there’s 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 can’t 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 you’ve 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 they’ve already spend their whole amount for the week,
they’ll 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 won’t 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 it’s for buying something in
particular.

When you’ve 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
they’ll 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 aren’t cheap but your child won’t want to feel left out if they
can’t 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.

Article Source: http://www.a1-articledirectory.com

Biography: Author: Benedict Rohan Website: www.mortgagenation.co.uk Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

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