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This winter I had been out for a vacation with few friends along with their family. We reached one of the markets and found beautiful set of wooden toys on display. One of my friend’s son was pestering her to buy a toy for him. She replied saying that it was just last week they bought a new toy similar to what he wants now. But he was adamant of buying. Just to get rid of the situation she said, ’’I don’t have money’’. He replied,’’ Last Sunday you gave me pocket money, I have that. So we can buy the toy’’. My friend was tight-lipped.
Giving pocket money to kids has always been a topic of debate. For some it is important practice and for some it doesn’t matter. Pocket money as described is money given to children to take care of their petty expenses. But how much to give, when to give and at what age are some of the questions which parents have before deciding on whether to handover money to their children. After all, it’s a start of a big responsibility. Money-handling as we all know is not easy. It’s like sand, the more you try to hold, it will slip off your hand. As elders also sometimes we find it difficult to take care of the expenses and here we are talking of teaching an important lesson of life to our children. It is rightly said, ‘’Empty pocket teaches you a million things in life. But, full pocket spoils you in a million of ways’’.
All parents have a different perspective and approach towards this idea. I consulted few mommy friends of mine and they had different views over it. Some were reluctant to give allowance to their children because they were not comfortable about the idea of their children handling money and keeping control over their spending activities. And on the other end of the spectrum, parents felt the need to develop money saving habit from an early age.
So why is it important to give children pocket money?
1. Feeling responsible: How does it feel when you get your salary every month? You feel independent, a sense of pride flows within you and responsibility sets in to utilize that money in an appropriate way.
Similarly, when children no matter what age they belong to, get a certain sum of money feel that they too have control over their expenses. They will feel comfortable and self-assured when they go out with their friends and can spend on movies, snacks or outings. Of course, monitoring is important. It will not make them compare themselves with their peers since they too are getting their share of spending power.
2. Prioritizing: The rationale behind accepting money is discerning between wants and need. It helps them to prioritize. Say for e.g. If their buying list contains skates, football, cycle or a cricket set. It will make them think which is most required and fits in their budget. It helps them control their demands born out of environmental influences. They will learn to self-control. It will help them let go of unwanted temptations.
3. Value for money: It is said that when we have more money, we do not value its existence. And when we run out of it we wish if we would have spent it wisely. Similarly, when children are given money to spend on their petty expenses they shall realize its true worth. And when they save money say in their piggy bank and open it when deemed, they will also understand the prominence of saving.
4. Implied message: Children in a way learn to adjust and make certain sacrifices since they have limited amount to spend. Many kids save money for family celebrations; to buy gifts for parents, siblings & friends. So in a way they not only think for themselves but also give importance to others wants and needs. It is for them to know that they are expected to live an economic lifestyle no matter whether they belong to a rich or an average income earning household. This will help them when they actually start earning and will have responsibility of running a house.
5. Make saving a fun activity: I have once heard a kid saying that money comes out of ATM machine. When I confronted her and asked do you know how it goes there and why it is given to you on request? She said “Yes, it is my mamma and papas hard earned money. They work full day and so they get money from the ATM”. Innocently expressed, but so true! It is important for children to know that none of the tree produces money. It is hard-earned.
Children learn from us. If they watch us saving money they too shall inculcate the same habit. So it is important to help kids teach the technique of saving money. For e.g. you can tell them that as a parent you are saving money for a trip with family in the summer vacation, saving to buy a car or saving for any medical exigencies. This way they too will learn to save for future, which will help them at the time of crises and provide a secure and gratified life.
How much to give?
This is very tricky. Should one fix it weekly, monthly or just give whenever the child demands? Both has its pros and cons. If you give them as per need arises then they will not understand the importance of saving money. Since they know you will give them as per demand, they will not have any accountability to it. Should you decide mutually or as parent take Independent decision? Well, one should take all factors into consideration like:
Check on your family budget.
Make sure that it should not be an exorbitant amount with which the child gets to enjoy luxuries, you otherwise would have restricted.
Take into account the supplementary expenses of your child. e.g. Travelling, eating canteen food, savings, birthdays, games, entertainment, etc.
Check how much are his peers getting. It should be on an average scale. Fix a reasonable amount so that you can avoid topping it since it might send a wrong signal and make your child less disciplined in terms of managing his finances.
It is a practice mostly prevalent in the west of giving pocket money in exchange of doing some household work like helping in cleaning dishes, car, doing laundry, etc.
But it mostly looks like a ‘bribe’ given to kids in return of some work done. Instead it can be given as an additional appreciation for doing some realistic tasks like putting their toys back, scoring good marks, winning a medal, accomplishing their savings target, giving money in charity or behaving in a disciplined way throughout the year.
When to give? It all depends on the maturity level of the kid. Does he/she understand what money is and what are its uses? Can he/she calculate and confident of purchasing from a store?
Research says that Children of 7-8 years of age understand what are coins, notes, cheque, how one earns money and where does money come from.
For younger kids, to get the ‘feel of pocket money per say’ you can take them to shop their items and make them pay cash. This way they will get a sense of money spending.
For older kids, once they start going to school and are travelling on their own can be given pocket money with the expectation of saving. You can take them to banks and explain the basics of transactions.
It is never too early to start giving pocket money. Even toddlers can be given and guided to put that money in their piggy bank. So it all depends on personal approach. One can also take advice from other parents.
Setting rules: A fair play!
Buy a piggy bank for them. Encourage to put an X amount of their choice on receipt of the money.
Pay when you promise. One has to be realistic and consistent.
If you have more than one child, make sure to pay individually so that children don’t fall out over pocket money. Try to maintain harmony.
Pocket money is for the child’s additional spending. Do not force or lay down series of instructions. Advice and monitor them. But let them take their own decisions. To avoid any squandering, set guidelines.
Help them keep a track of their outgoings. Encourage the habit of maintaining a daily outflow diary. This will reassure saving and you too will know the details of their expenses.
Decide a judicious amount in the beginning to avoid any topping or giving advances.
If in any given circumstances you have to withdraw or condense the amount, explain them the reason.
Appreciate them on their good ways of spending. And if you feel they are going wrong somewhere, sit and talk.
Managing money is a skill which every individual should have. By getting children into a pocket money routine will help them start saving with a positive attitude to prepare for their future, when they start earning and have to deal with their own expenses. Our generation is in an era where there is a huge competition to enhance one’s bank balance. One has to be very smart on dealing with financial affairs, to make a successful and secured future. Dealing with one’s own pocket money is just a stepping stone.