We have already established that it is important to teach your children good money habits while they are still young, and the best way to teach them is with the practical example of pocket money. This provides the perfect opportunity to teach your children about spending, saving, the concept of earning and the consequences of misplacing money or using it unwisely.
And if time-outs and grounding no longer work, you can also use the awarding of pocket money as a useful disciplinary aid, especially as your children get older – they will want money to go out with their friends, go to movies, go on dates etc. – and in order to make these ‘wants’ a reality, earning their ‘right to freedom’ will ensure that they do what is expected of them.
There are many debates as to how pocket money should be given, some experts say it should be earned, while others maintain that pocket money should simply be a given. Whatever you decide, remember to lay down the rules first and to stick to them.
Tips on giving pocket money
- Explain to your child what pocket money is for and what it’s not for.
- Pay what you can afford, regardless of what other parents (or your child!) might advise.
- Pay it on a set day.
- Set up some jars to help your child divide the money – for example, one jar for small things they want now and one for saving towards bigger things.
- Put saved money in a dedicated container, such as a glass jar or a money box. Seeing the level grow helps highlight the achievement of being a good saver.
- Try not to give payment in advance – if you do, then treat it as a loan and allow your child to pay you back with interest
- Try not to supplement pocket money – it’s all about teaching your children to live within their means.
Learning to earn
Teaching your children the concept of earning money by “paying” them to do chores is a good way of entrenching the idea of earning a salary. Here are two ways you can “pay” your children:
- Start with an amount, for example R20 a week. Jobs done without encouragement earn them extra, while bad behaviour results in money being deducted.
- Start with a zero balance and pay them for every job completed on time and correctly.
Once you have paid them their wage, let your children make a few mistakes – like spending all their hard-earned money on sweets or a toy. Then when they see something they really want but have no money to buy it, you can use the opportunity to teach them to save.
As children get older, you can teach them about:
- The value of money: the relative price of things
- Spending: accepting that money is gone once it’s spent
- Earning: understanding that earning money can be hard work, but usually that’s the only way to get it
- Saving: using short-term and long-term goals
- Borrowing: understanding the importance of repaying borrowed money.
- Budgeting: drawing up a list of their income and expenditure to see exactly how and where they spend their money
In order to ensure that they can manage the effects of peer pressure, it is good to teach them about delayed gratification, and how saving and waiting for something that they really want makes the purchase that much sweeter – in some cases, your child could even get something better than they originally wanted.
When to give children pocket money
Although research has shown that many parents introduce pocket money when their child is about six or seven years old, there are no hard and fast rules.
Your child might be ready to try managing some pocket money if he or she:
- Understands that you need money to get things from shops
- Understands that spending all the money today means there is no more until the next payment
- Needs money to buy food from the school tuck-shop
However you decide to use the concept of pocket money, remember that you and your relationship with money is your child’s ultimate example, so make sure you set a good one. To find out how to manage your own money better, click here and sign up for our free financial education course.