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I strongly believe in the concept of pocket money and nurturing financial responsibility among children. A Cambridge University study suggests that children’s financial habits are formed by the age of 7, the UK based Money Advice Service (MAS) urges parents in the United Kingdom not to “underestimate the effect of their own good or bad money habits will have on their children”. As a therapist, I know that so much of what we learn is influenced by the kind of choices we observe our parents making. Our core beliefs about the world, people and interactions are derived from assimilating and role modelling parents. The same is true form our money beliefs and behaviors. Pocket money, though perhaps a western concept is a simple tool to pass on important values about money.
I started my version of a weekly allowance when my son was 3 years old. We would decide before we stepped in to a book shop how much he would spend, similarly before we stepped into a toy shop. Consequently, we would read price tags and often we would postpone an object or choose a smaller object or save money for the next visit. Now, I agree he doesn’t have the concept of the value of money but he was beginning to understand the concepts of more and less, as well as the concept of postponing gratification and saving for later. To me, we are then on track.
Children today, see us spending our money in a very different way than what we saw while growing up. Shopping isn’t restricted to monthly visits or it isn’t the dads who are bringing back shopping (‘sauda’) from the canteen or ‘mandi’. Now we run to super markets, we shop mid-week, any day anytime pretty much in an s-o-s fashion. I grew up in a time when we were often reminded that “money didn’t grow on trees” and how people around us didn’t have much. I guess, my parents still remembered the partition, the Indo- Pak war and the Emergency. They remembered hard ships and that shaped their relationship with money. Am glad that despite the relative privileges I enjoyed, I also grew up with these messages. This generation of children are growing up without the same messages from their parents and while the worst threat can be recession, I doubt my generation makes reference to it with children.
However, moving back to the issue at hand- when and why we should introduce our children to pocket money. The idea of pocket money comes from a need to teach our children the value of money, teaching them to save and recognize how to budget and stretch their money. In the culture of instant gratification and consumerism it isn’t easy to build the idea of financial restrictions when parents are themselves falling into the “consumer trap”. The trick to me lies in building the concept in as early as possible, so that it’s accepted as a way of life for children. Parents are the only teachers on this front as schools offer no programs on this.
Many young children love the idea of recognizing money or playing shop and of actually interacting with the salesperson at the counter. Almost as soon as they recognize numbers, let them transfer that skill to money recognition. Not only will they recognize the numbers they will also build their skills of multiplication and addition. They will understand that money can be exchanged for goods and in time the idea of earning and having an income will set in.
There are different approaches to pocket money. The amount is of course dependent on your family and the spending style you follow. However, usually a week is a long enough budget period for a young child as opposed to a month. Some families like to associate the concept of earning to pocket money and children earn the amount through helping around through the week. I however prefer to decide on an amount at the start of the week and let the child forgo a part of it if he/ she doesn’t pull his weight. To confess, my child is too young for me to create monetary consequences but this would be my preferred choice. It is the old carrot and stick method but my research and work with young people suggests that they are more inclined to fear the loss of a reward they have already received rather than stay focused on the pot at the end of the rainbow (because they think they can find a way around that).
Once your children get the concept of pocket money and after they have finally figured out how not to blow up all their money in one shot, you can introduce a home bank and the ideas of borrowing and lending. This will allow them to understand the concept of planning ahead and of delaying decisions. Even blowing up all their money has an important lesson of recognizing that sometimes are choices are irrevocable. Needless to say they will love the borrowing bit more. However, novel concepts always find an uptake with kids. I remember my brother figured out the concept of lending with an interest and he would lend my mom money and actually charge her interest when he was as little at 6-7 years old.
Another interesting concept that I have found, is to make deposit scheme. Often over birthdays, Diwali and Christmas children may receive money presents. This is a concept where we can encourage them to save a large chunk of that money and the parents contribute a small amount as well into that saving amount and that goes into reserve money for a bigger investment.
I do however, have my doubts over cashless money and giving children the access to cards and mobile phone based banking solutions. Children are biologically not developed enough to have self-control and this would test their impulsivity and indulge their risk seeking needs in very unhelpful manners. This is true irrespective of gender.
The interesting thing is that when I am working with families and young people I find that the traditional concept of pocket money is fast eroding. One of the main reasons I find is that parents are not able to stick to their end and hold the limits. They allow way too many negotiations and use money in a more manipulative manner than most children. All this reflects difficult times for the children as they grow up with the idea that their parents will always buffer them financially.
At the end of the day it is the conversations that count and how we talk to our children about money will make all the difference in their relationship with money. Let’s start talking about family investments, holiday budgets, and family savings more openly. When your child wants to buy something help him to compare and research the objects, help your children see how to be a responsible consumer and to understand the cycle of money. For instance, when buying a Lego, see the various choices, compare it to the Lego that he/she already owns, see if it is too similar to the ones they already own, even try checking the price in two different stores. Parents have a key role in influencing this kind of reflective dialogue with children and to help them regulate their choices about money behaviors.
Lastly, a favorite family ritual is contributing together to a charity or a person who needs something more than us. It is very important to impart the idea that we can use our money for the good of others and beyond our personal needs. This can be donating to a local organization or cause together or buying something for a person in need. Seeing money as a more than a tool for self-indulgence helps raise empathy, which to me is a foundation of a better world.