Should we be giving our kids pocket money? There are lots of benefits to teaching your children about money, giving them their own pocket money to buy toys or other things they want can be a great way for them to learn all sorts of life lessons.
Whether or not you link pocket money to doing chores or there are other conditions which children have to fulfil in order to get their pocket money. Once they have the lessons of managing their money can begin.
Studies have shown that children who are given pocket money are less likely to get into debt as adults as they understand about money management and the delayed gratification that comes with saving.
- Financial Foundations: Pocket money introduces children to basic money management and the value of hard work, fostering early financial literacy and independence.
- Skill Development: Through saving and spending decisions, children learn about delayed gratification, practical arithmetic, and prioritization.
- Potential Pitfalls: Without guidance, there’s a risk of impulsive spending, overemphasis on materialistic values, and susceptibility to peer pressure.
- Understanding Real-world Expenses: There’s a challenge in ensuring children comprehend the real cost of essentials, as pocket money often focuses on discretionary expenses.
- Navigating Family Dynamics: In multi-child households, it’s crucial to handle allowances fairly to avoid feelings of inequality or rivalry.
What are the Pros of Pocket Money
Pocket money, also known as an allowance, can be a valuable tool for teaching children about money management, responsibility, and the value of hard work.
|Financial Literacy||Children learn basic financial concepts, such as saving, spending, and budgeting.|
|Decision Making||With a limited amount of money, children must make choices about how to spend or save, teaching them decision-making skills.|
|Value of Money||Earning and managing their own money helps children understand its value and the effort behind earning it.|
|Saving Habits||Children can be encouraged to save for bigger items or goals, instilling the habit of saving from a young age.|
|Delayed Gratification||Learning to wait and save up for desired items teaches patience and the value of delayed gratification.|
|Responsibility||Managing their own money fosters a sense of responsibility and independence.|
|Work Ethic||If pocket money is tied to chores or tasks, children learn the correlation between work and earning.|
|Charity & Generosity||Children can be encouraged to set aside a portion of their allowance for charitable causes, fostering empathy and generosity.|
|Mistakes & Consequences||Making small financial mistakes with pocket money can teach valuable lessons without significant consequences.|
|Negotiation Skills||Children might negotiate for an increase in allowance or for specific purchases, developing their negotiation skills.|
|Goal Setting||They learn to set and achieve financial goals, whether it’s buying a toy or saving for a bigger purchase.|
|Understanding Needs vs. Wants||Distinguishing between essential purchases and luxuries is a key financial skill that pocket money can help develop.|
What are the Cons of Pocket Money?
While pocket money (or an allowance) can offer numerous benefits, there are also potential downsides.
|Entitlement||If not managed correctly, children might feel entitled to money without understanding the value of work or effort.|
|Overspending Habits||Without proper guidance, children might develop a habit of spending all their money as soon as they receive it.|
|Peer Pressure||Having pocket money might lead to unnecessary spending due to peer pressure or the desire to fit in.|
|Reduced Intrinsic Motivation||If pocket money is tied to chores, children might only be motivated by the money rather than understanding the intrinsic value of contributing to the household.|
|Financial Dependence||It might delay the understanding that money needs to be earned, leading to a lack of initiative in seeking part-time jobs or other earning opportunities in later years.|
|Potential Conflicts||Disagreements over the amount of allowance or how it’s spent can lead to conflicts within the family.|
|Lack of Real-World Understanding||A fixed allowance might not reflect the variability of real-world earnings, where income might not always be consistent.|
|Overemphasis on Materialism||Regular pocket money can lead to an overemphasis on purchasing and material goods, rather than valuing experiences or saving.|
|Missed Teaching Opportunities||If parents don’t engage in discussions about managing money, simply giving an allowance can miss out on teaching opportunities.|
|Inequity Among Siblings||Different allowance amounts or perceptions of favoritism can lead to sibling rivalry or feelings of inequity.|
|Unintended Pressure||Children might feel pressured to save or spend in certain ways based on parental expectations, rather than making their own decisions.|
Reasons to Give Your Children Pocket Money
Here are a few specific benefits of giving your children pocket money.
Learning the Value of Money
Money is a tricky concept for children to grasp and the easiest way to teach them is undoubtedly to get them to use money themselves.
This could be getting them to plan meals within a certain budget, or allowing them to spend a certain amount of money each week buying their snacks.
Or of course they could be given pocket money and learn what to spend it on, so that they can begin to realise how much the drinks, treats, toys and games they want actually cost in comparison to one another.
Saving, Spending and Giving
Giving every penny a purpose is a great way of managing your money. With children you can start to teach this concept by having different pots for saving, spending and giving.
Having a saving pot teaches children how delayed gratification works. They have to give up something now so that they can get something in the future.
Having physical jars or an app with different money pots allows children to see their money growing. And having something they are saving for is great for teaching them both the value of money and how a bigger sacrifice now means they will reach their goal more quickly.
There are also some great side effects of saving towards and achieving a goal. Not only do children gain a great sense of achievement when they finally have enough to buy that toy they really wanted but they have gained a greater understanding of the value of money and the value of their possessions.
Having a giving pot is an opportunity to teach children the importance of giving to those who are less fortunate than they are. You could even agree to match their donations to give an added incentive for them to save. And choose a charity together that you can give the money to.
Alternatively the giving pot could be a sharing pot so that the money they put in is used for shared activities or buying gifts for others.
Teaching Independence and Responsibility.
One of the benefits of giving pocket money to children is that it reduces the pester power they have. If they have their own money then it is up to them if they buy that magazine in the corner shop or not.
If they do then they can’t buy the toy for longer or they won’t have money to spend on treats later in the week.