It’s the bane of modern parenting – meeting the constant needs of our kids and enduring the incessant pester power for money and “stuff”. Couple this with our anxiety that relenting is teaching our kids the wrong values and our uneasiness that they get everything way too easily. Giving children pocket money can provide a solution to this quandary, and at the same time pass on valuable life skills under our guidance before we dispatch our offspring into the unforgiving real world.
So what is wisewomen’s views on the giving and receiving of pocket money, how much, how young can we start and on what basis do we make it available? Simple answer: Pay it! Why? To teach four important lessons to your budding consumers...
The first 2 I’ve borrowed from Malcolm Gladwell in his book, Outliers “The Story of Success”. He outlines three criteria that make a job meaningful - complexity, autonomy and a link between effort and reward. Forget the first – no parent wants a complex system, but the other 2 are pertinent in the context of a workable pocket money regime:
1. Autonomy
Much as we may resist it at times, our children need to learn to fend for themselves so they can flee the roost as well functioning adults. They yearn for independence. Paying a weekly or monthly allowance into their bank account helps them to take their first steps towards handling their finances, so that when they enter the workforce the novelty of their first pay packet doesn’t send them into a tailspin of frenzied squandering.
2. Link between effort and reward
Don’t give them money for nothing – make it clear that the receipt of a weekly or monthly amount is dependent on fulfilling their pre-designated chores around the home. No chores, no reward. This lesson will hold them in good stead down the line and hopefully engender a strong work ethic.
The next two reasons are equally relevant to the first 2:
3. Prioritising
Ever been shopping with a pre-schooler? The nagging can drive you mad. But give them $2 and tell them they can spend it on whatever they wish and they suddenly become more discerning. It works with any age - although as they get older you may have to part with a higher amount!
Giving children a regular fixed dollar sum that is their responsibility to manage, teaches them constructive life-long lessons in budgeting and reining in their shopping habits. Just don’t bale them out when the money runs dry as no lesson learnt there…
4. Savings habits
Saving doesn’t come naturally to everyone – like lots of things it is a discipline to be taught and learnt. Honing the practice of “Pay-Yourself-First” (ie: transmitting a nominated amount to their online savings account first thing every month), gives them competence in the basic steps of money management and building wealth. Having these skills will help them to avoid the all too common problem of people living beyond their means and drowning in debt.
In summary
What do we want for our children? For them to develop into measured competent adults who can handle their finances responsibly so that they can achieve their life goals. Pocket money, trivial and insignificant as it may initially appear, plays a vital role in preparing our kids for the outside world. It also opens up scope for conversations with them around responsibility, discipline, saving and budgeting.
So how much pocket money do we give them? You and YOUR budget are the only ones who can answer that question…