Giving your child pocket money is a great way to introduce them to the basics of managing money. Some parents use it to teach their children that money is earned, and others feel that it is not necessary. Whatever said, giving your child pocket money or allowance has some benefits as she will learn important life skills in the process of having and spending it. Below, we discuss why and how pocket money you should give your child.
Should Children Be Given Pocket Money?
Every parent uses different methods of giving their child pocket money, but what remains constant is the fact that pocket money is a good way of teaching your child a few things she can use in her adult life. Here’s how pocket money helps your child:
1. Financial Planning
Pocket money can help your child learn how to plan her finances from an early age. She will be able to learn the benefits of money management – saving and spending her money wisely.
2. A Sense of Accomplishment
When you teach your child how to save her money for a set goal, say, for a cricket set or a dollhouse, she will be filled with pride when she buys it from her own savings. When your child works hard to save up for something, she is most likely to have a sense of accomplishment for buying it on her own.
3. Learning the Value of Money
Some parents feel that it is a good idea to pay their child for doing household chores. Experts caution against it, as your child should be taught to contribute to the household as part of her family duties. However, you can always encourage your child to do some additional work that you can pay her for, say for watering the plants or walking your dog or the neighbour’s dog. This act of working for money will encourage her to understand that money is earned.
4. Limiting Pester Power
Every parent (and marketer) is aware of the power of pestering that children can have – they pester and throw tantrums to get what they want. This habit can be brought under control through pocket money -your child will have a limited amount of money to spend, making her careful about what she wants to spend it on.
When Should You Give Your Child Pocket Money?
Your child’s age is a huge factor when deciding the best time to start giving her pocket money. The average age when your child best begins to understand money and its use is around five to six years. It is essential that you take the time to examine your family values with your partner before you introduce your child to the concept of having pocket money, because it will play a vital role in her future.
How Much Pocket Money Should You Give Your Child?
This will be based on your financial abilities. You do not have to start off with a huge amount; in fact, a small amount is preferable. You can decide how much to give your child based on her age. For example, if you calculate Rs. 10 for every year of your child’s age, your 5-year-old should get Rs. 50. This amount can increase with every added year to your child’s age. You can also decide whether you want to give her pocket money on a weekly, fortnightly, or monthly basis.
Pocket Money Tips for Parents
Thinking of giving your child pocket money? Remember:
- Sit down with your child and first explain to her the concept of pocket money. You and your partner should decide the rules for your child beforehand. For example, you can tell your child that the pocket money is for entertainment, or for buying something they fancy, but make sure that you tell her what counts as entertainment and what things they can buy, so she won’t spend it on something useless.
- Discuss how much of her money should go into savings, how much is okay to spend and how much she should put aside to donate to those less fortunate.
- Decide her pocket money according to your financial condition.
- If your child wants extra money, encourage her to try and earn it.
- Decide how often you want to give her her pocket money and let her know the same.
- Help your child set up different jars for her pocket money – one for spending, one for saving, and one for charity.
- Do not give your child money in advance or give extra money. This way she will learn how to manage on a budget.
While parents worry that their children will be wasteful with the money they are given, it is important to remember that your child will make mistakes and this is the time she will learn without having serious consequences. Teaching your child how to manage money is a very important skill that will benefit her for her entire life.
Also Read: How to Teach Kids about Money