We all know what it is like standing with your kids at the checkout while they’re asking for that new toy – it’s probably junk, but they just want it, need it, now! Pocket money is a great way to teach kids about the value of money from an early age. When they’re saving and spending their own money, they start to think about their decisions and choices.
We’ve come up with four easy ways you can help your kids get the most out of their pocket money.
1. What does pocket money look like to you and your family?
If you’re considering setting up pocket money for your kids, there’s a few things you’ll want to chat about before you get started, such as:
- How much will you give?
- What age will pocket money start?
- How often will you pay out the pocket money?
- How will your kids earn their pocket money?
While some parenting experts warn against using pocket money for doing household chores as they believe these should be done as part of the everyday contribution to the family, others believe it’s fine to use pocket money as a reward. Other ways kids can earn pocket money is through school grades, getting involved in the community or being well-behaved.
You will need to decide what works best for you and your family.
2. Create a plan
Make sure you sit down and discuss pocket money together with your kids. By listening to their ideas and involving them in the process, they’ll be more likely to get on board.
You can also come up with a set of rules that everyone will follow, such as if they will divide their pocket money into spending, saving and giving to teach them how to budget, or set guidelines on what they can or can’t spend their money on.
3. Managing their money
Giving out pocket money in coins and notes can make it easier for kids to physically split their money into savings, charity and spending money – if that’s the plan you have chosen.
Most of the time, it will be easier for you to take their savings and transfer it to their savings account online. You can open a savings account in their name (if they don't already have one) so they can watch their savings grow. An added benefit is that kid’s accounts often offer a high rate of interest and no fees.
Even if you do decide to go down the online transfer path, it’s a good idea to take your kids into a branch every now and then to meet the bank staff and practice depositing and withdrawing money.
Depending on the age of your kids, you may want to start off with a money box that they can see in to so they can watch the savings add up.
4. Set savings goals - together
This is a first for your kids, so you’ll need to provide them with some advice on how they can save their money and why it’s important to set savings goals. A good tip is to have a wish list of items they can save for, such as the Perth Royal Show, a new toy, or to go to the movies with friends. They may set themselves short-term goals for something that’s a bit cheaper, and longer-terms goals if they have their heart set on something that’s a little more expensive.
The list will also come in handy when you’re faced with a kid who wants to have something ‘right now’. You can use the list to explain that the 'must-have' item can go to the top of the list, but it will mean something else will have to drop down the list. They’ll quickly decide what is more important to them when faced with the decision!
Saving up for something special helps kids learn goal setting, budgeting and delayed gratification, and gives them personal satisfaction once they achieve their goal.
At the end of the day, it’s important that you choose a way to implement pocket money that suits your family, your lifestyle and your budget.
Whatever you decide, if pocket money is used well it can be an excellent tool to teach children about the value of money from an early age. If your children learn these essential skills when they are young, they will be better at managing their money later in their life. You can read more about teaching your kids good financials skills from an early age.