Value of Money and Saving

Q: “I’ve two children 7 and 4. I want to start giving them pocket money so they realise the value of money and saving, how should I best go about it?”

Teaching kids about money is a really essential life skill and pocket money is a great starting point for teaching them about it.

Children learn their attitudes and values towards money from you, as you are their first role model and your children learn a lot by just watching you and how you deal with money. Spending, saving, withdrawing or donating money are all chances to teach your children more of the basics around it.

They also learn about money from the way you speak about it too, so start to notice how you talk about money in general in front of your kids and decide if that’s really the message you want to pass on to them, regardless of how old they are.

Teaching, guiding and showing children how to handle money is a really worthwhile exercise as it’s also a practical way to develop their sense of independence, confidence and self esteem too.

Pocket money, regardless of the amount, helps to teach children about having to make choices, about saving up and about learning to wait for things they want.

Today’s children are exposed to the power of advertising all the time and it has a very strong influence on them so it’s important to explain about how advertising can make them want things that they don’t really need or can’t really afford or may just be completely unsuitable. Help your children learn the differences between needs, wants, and wishes as this will prepare them for making good spending decisions in the future.

Many parents introduce pocket money when their children are about six or seven years old, while some parents don’t feel comfortable giving pocket money at all so there are no hard and fast rules just as there are no “right” or “wrong” ways to teach kids about finance and money, just your way.

But if you notice some of these things then your children might be ready to try managing some pocket money:

They understand that you need money to get things from shops.

They understand that spending all their money today means there is no more until the next payment time.

They need money to buy their school lunches or to buy their favourite comic.

They are learning about money at school and are playing with it.

Lots of parents ask me how much pocket money they should give their kids but this depends on your circumstances and what you think is a reasonable amount.

As long as your child understands how much they will get (and how often) and you are consistent, they can start learning how to use the money whatever the amount.

It’s also a good idea to be very clear about what their pocket money covers and explain it to them so there are no misunderstandings and tantrums and whether they have to earn it or not. Pocket money is really just a small amount of spending money to spend on what they like! It’s when they get older that you can introduce an allowance or new ways of earning it.

Base your decision on:

What your family budget will allow

How much pocket money your child’s friends receive as this gives you an indicator to roughly the going rate, but if it’s too much have confidence in your own judgement and stand firm.

Here are top tips and pointers if you are thinking about giving your children pocket money:

Explain to your child what pocket money is for and what it’s not for.

Young children need clear guidelines as to what they are allowed to spend their money on. Agree with them and write or draw the items, displaying the rules on a board in their bedroom or in a book. I will have some fun pocket money sheets available as a free download from my website  www.positive-parentsclub.com  help you get started soon.

Decide whether or not pocket money will be withheld as a punishment for certain behaviours and this should be agreed right from the start. Use stickers/ extra story/ 5 minutes extra playtime to reward good behaviour not money (as it sends out the wrong message if you link good behaviour to earning money. Children need to be well behaved because you have high expectations of them, not because they get paid for it!)

Pay what you can afford, regardless of what other parents (or your child!) might advise.

Pay it on a set day.

Set up a number of clear jars, to help your child divide their money up for different things. For example, one jar for small things they want now and another for saving towards bigger things and another for a charity. Seeing the level grow is a brilliant motivator and helps to highlight their achievement of being a good saver.

A positive parenting tip to encourage respect and independence is to ask your children when they’d like to receive their money as it gives them a feeling of being grown up and in control.

It’s also a good idea to be clear about your ground rules and to put in some clear boundaries and limits on what they are allowed to spend their money on, for example, you may discourage them from buying lollies if that interferes with your views on healthy eating.

Discuss ways of saving money and perhaps open a savings account at your local building society that you can help them manage.