Kids love the independence some money of their own brings! When should you start giving your kids pocket money, how much and what money management lessons can it teach? We take a look.
Make your own pocket money rules… and stick to them
There are only general rules of pocket money, and there are many of them! For example, some money and parenting experts say it should be given freely, others say it should only be given for doing chores. When it comes to your family and pocket money, you can set the rules. Decide as a parent or parents when you are going to start giving pocket money, if it is tied to chores or not, and when and how much it can increase by.
When you’ve set these rules or guidelines (and if you change them), let your children know so they have some pocket money certainty!
Things to consider when setting pocket money rules
These are some of the things you will need to consider when deciding on your pocket money rules.
Decide at what age you will start giving pocket money
Early is good, but keep it small, frequent and simple. According to the South African Savings Institute, lessons about money should start at a pre-school age. This is when your kids are learning numerical skills such as counting, and later addition and subtraction. You can start by giving them a small amount of pocket money each week at this age and letting them spend it on a treat or small toy at the shops.
As your children get older you can increase pocket money, for example pocket money increases by R10 a week on birthdays, or at the start of a new year or new grade in school.
Decide when you will give pocket money
Usually this is either weekly or monthly. Weekly is recommended until kids are old enough to plan their pocket money spending for the month so they don’t spend it all in one day, leaving them with nothing for 29 days!
Set any spending guidelines
Let your kids know how you want them to spend pocket money, keeping it age appropriate. For example, do you want your children to use pocket money to buy anything they want, or should they use it to buy some personal items of their own, such as data, clothes or toiletries. And, do you want your kids to save some of their pocket money?
Decide how much pocket money you will give
The name pocket money suggests it is a little extra, not too much, but enough to buy a few items and save some if possible. How much will depend on:
- Your financial circumstances – pocket money comes out of your budget so make sure you can afford it
- Whether or not you expect your child to buy their own items such as toiletries – the amount must be enough to cover these items
- Whether or not the amount is tied to chores – you can always let your kids earn extra money for doing specific chores as well as giving them “free”pocket money
- Whether or not you want your kids to save some of their pocket money – you might need to give a little extra for this purpose
Help your kids learn the value of money
Pocket money introduces your kids to the big, wide world of money. It can teach them and everyone in the family important money lessons and ingrain good money habits!
Talk openly about money and finances
Introducing your kids to pocket money at a young age means you have to talk to them about what money is and how it works. Talking about money, openly, honestly and objectively is a good money habit. You can do it with your kids, and you can do it as a family and with friends and colleagues!
Learn how to spend, save and budget
Pocket money can help your children learn about the value of money and how much things cost. You can use a simple visit to a shop to show your kids how much an item costs and if they can afford it!
They can also learn how to budget by planning their spending for the week or month.
Saving is another money lesson you can teach your kids using pocket money. For example, if your child wants a pair of sneakers that cost R200 and they get R50 pocket money each month, they can save over 4 months, or save half their pocket over 8 months, after which they can buy their sneakers themselves!
Learn about financial products
You can use pocket money to introduce your children to financial products such as bank accounts and savings accounts.
Encourage your kids to first put some of their pocket money into a piggy bank, and when they are old enough, a bank account. Let them see how the money they save grows, and how they can use it later or keep it saved and let it continue growing. Your family may also want to contribute to your kids savings accounts, or even gift them investments such as unit trusts.
Your kids can earn extra money after hours or during school holidays by putting their skills and products out for offer. For example, your kids may have excellent gardening skills and help neighbours with their gardens, or baby sit for the family down the street. They can also learn how money is earned and how profits are made by selling items they make, such as cakes, cold drinks, small jewellery items or cards. If your school or municipality or metro has kids market days, encourage your children to participate to help them earn some money and learn how to build a business!
Keep it age appropriate and be a guide
You love getting paid, so will your children! And with good money skills they learn from managing their pocket money, they may just be in for bigger bank and savings accounts as adults!