Learning about money
For some, this style of money management in young kids is not to their taste, preferring a more laid back attitude to money. But as nations and households alike are battling to balance their books, I think the current feeling is that children should be taught more, not less, about budgeting. There is even discussion of putting it in the national curriculum. Of course, not every household income allows for the regular doling out of money to children, even if it is only a few pence.
But for those of us lucky enough to have room in our expenditure, the idea that we can help our children learn to save up for the things they want, to understand that they can’t just buy what they like, when they like, may well feel appropriate.
When should you introduce pocket money?
As the daughter of a man who lived through the war years, I had the budget bug instilled in me from an early age and perhaps inevitably adopted the same approach introducing pocket money for my boys at the age of seven.
If you do go down the pocket money route, the main dilemmas you’ll face are when to introduce it, how much to give and whether there are any strings attached.
There seems little point introducing pocket money before children can count and recognise the relative value of coin denominations and notes, so anywhere between the age of five and seven is a typical start age.
Get a sense of the going rate
How much to give is an entirely different matter. It will probably be most affected by your circumstances but it can help to talk to your children’s friends’ parents to get a sense of what the going rate is. But be warned, you may be horrified at what you hear.
I had an interesting discussion with a friend of mine about pocket money recently and discovered that the amount we gave our children – both are the same age and both parents in similar financial situations – differed by almost £6 a week.
You also have to consider, if you have more than one child, whether they get the same amount or if it increases with age. Most families seem comfortable with the older child starting earlier and having more, as long as it’s explained to the younger child that they’ll be on a higher amount when they get older.
The link with behaviour
But the really sticky issue comes when you decide if it should be ‘earned’ or not.
Does your child have to behave well to be sure of their allowance or complete a certain number of chores to receive it?
"Anywhere between the age of five and seven is a typical start age."
I know some parents who do a bit of both, their children receiving a flat rate but one that can be topped up if they do extra chores. Parentline Plus’s advice is to make sure you are not paying for chores you would expect them to do anyway – any chores you’re willing to pay for should be above and beyond what they are asked to do around the house day to day.
In my mind, pocket money should encourage the concept of saving from early on: you can’t have what you want now, but save up for it and you can. And while pocket money can help with short-term savings it is also worth remembering long-term savings too.
If extended family undermines your good intentions of instilling a saving mentality in your kids, by handing over £20 whenever they see the children, one way of handling this could be to encourage them to put these bigger quantities into a savings account instead.
Whether it’s a dedicated account, bonds or now a Junior ISA, these types of long-term savings and investments can be used to great effect to help your child at a later stage in their life. You need to be aware though that long-term savings accounts are exactly that, and they can tie your child's money in until they mature, which is often not until they turn 18. But, it might be the difference between more Lego now and lodgings when they’re a student.
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