Pocket Money- Your Child’s First Financial Responsibility
Kids asking their parents for a few bucks to buy a movie ticket or for entertaining themselves in any other way has always been and continues to be the most common scenes in every household. After all, the teenage years are all about the lots of homework, anxiety and the never-ending requests for money. While there are many parents who always find a way to pamper their kids in one or the other way, with money being at the top of the list, there are some others who think the other way around.
These are the parents, who, at some point in their life, must have regretted some of their past decisions and wished that they would have done things differently back then. Well, it’s never late. Such parents can always do something much better to prevent their kids from going through the same psychological dilemma. There are many ways of making this difference and one of the sure shot ways is to teach the children about the importance of budgeting and money management, thereby avoiding the feeling of being a human ATM for them that throw out as much cash as wanted.
Of all the different ways to teach the kids the true value of money, given them a decent pocket money from an early age appears to be the best and the most effective approach to follow on the part of the parents. By exposing kids to the world of money is a perfect method to teach them about finances and the responsibility of handling them properly. Introducing children to the concept of income, expenditure and savings by giving them pocket money is something that can be done gradually in the early years and in a more structured way of learning as the youngsters grow older.
Despite their age, children exposed to money on a regular basis will definitely learn more than what the parents expect them to learn, by watching how elders spend their money. Upon giving the responsibility to handle some minor monetary expenses, kids will certainly make an attempt to clarify their doubts and start questioning about their new financial responsibility. By guiding the children through proper answers will certainly help them learn more about the fiscal world and help them in forming a viewpoint that low debt, high savings and decent investing is the right approach to lead a financially healthy life. However, before handing over the first monetary responsibility to the kids, the parents need to learn about the right direction to follow on the road to financial literacy.
When to Begin?
Researches might show that parents start giving pocket money to their kids at the age of 7-8 years, but in reality, neither it is too early to introduce the youngsters to the world of money, nor there is any perfect age to start teaching them the basic concepts of handling money. Even the younger children, including the under-fives, can be made to learn the value of money by providing them smaller allowances and asking them to save for smaller goals. By the time they reach 7 or 8, the money attitudes will be set pretty well and money management skills might begin to develop automatically. The early the kids learn about the buying power of money, and managing their daily spending and savings accordingly, the more are the chances of them growing up into financially, literate individuals.
Let them Reap the Fruit of Chores
Pocket money is an excellent tool for teaching the kids that money doesn’t come out magically from the ATM machine; it has to be earned by doing some hard work. By the virtue of being a family member, the kids should be given responsibilities for some age-appropriate jobs like putting dirty clothes in the basket, carrying away dirty dishes from dining table to the kitchen sink, putting the garbage bins out, helping with dusting, making up their beds, cleaning their closet and many other similar tasks. They should be paid a small amount of money, for instance Rs.10-20, for every job they choose to take. If the kids choose to avoid the assigned chores, it simply points out to the fact that they don’t want to earn money and will have fewer bucks to spend in their pocket.
Setting Limits and Rules
Parents must put certain restrictions on the how the kids are to spend their pocket money. Those parents, who struggle hard to save money till date, must surely have spent endless amounts of pocket money recklessly on just anything they seemed to love or like. It is a golden chance to avoid the kids from sharing the same fate. The children must be taught to split their allowance between their wallet and a piggy bank. Lessons on budgeting should help them clearly adhere to the spendinglimits and saving rules, which can be set by the parents in a certain ratio, like 60% for spending, 30% for saving and 10% for donations or personal treats. Parents should also chalk out a list explaining what all is covered under the spending and donation/treat head to make things clearer for the kids.
Teaching children the value of money right from their early years helps in inculcating valuable skills of earning, spending and saving the earned income, and establishes utilitarian money habits that accompany them all through the life. All parents need to do is to establish some ground rules, impose some restrictions and keep an eye on the spending for curbing the bad money management habits, which can grow into major issues in later life.
