LIFESTYLE

Why Giving Your Kids Pocket Money Too Young Is A Bad Idea

Plus other ways to teach children about the importance of money.

29/04/2017 14:21 SAST | Updated 29/04/2017 14:23 SAST
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Who taught you about money? About the value of it, about loans and interest, and about saving for something you want? If you're lucky it might have been touched on in school, but for most of us we learnt about money the hard way -- by earning it, spending it, and maybe even getting in a little debt.

Teaching your kids about the value and importance of money from a young age will encourage a healthy relationship with their finances for the rest of their lives.

"You are never too young to learn about money. As soon as children start wanting things, such as special toys, parents can teach the idea that you need to have money to pay for it," AMP financial adviser Dianne Charman told HuffPost Australia.

"However, the ideal age is about six to eight years. This is when kids start to understand basic maths and that things aren't free. You need basic maths principals to understand the concept of saving and accumulating money."

The next step is to get kids to understand how they can get money, which is by doing jobs.

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Doing odd jobs (beyond chores that are considered being part of the household) is a good way for kids to earn money.

"My personal belief is this shouldn't include making their bed or feeding the dog -- they are jobs they do because they are part of a family and need to contribute. Special jobs that they earn money for are above and beyond what is expected. Can they help mum or dad with a project? Can they make something? Can they walk the neighbour's dog? Or perhaps when they are teenagers, can they babysit?"

Pocket money is almost a rite of passage for kids, but giving it to them too early could mean they won't understand the value of it or come to expect to be given money 'just because'.

"Starting pocket money between eight to 10 is a good idea because it can usually be linked to something they want and are willing to save for, not just for the sake of it," Charman said.

With regards to how much to give, some people suggest kids should get $1 for every year old they are (so $10 if they are 10 years old) but I believe it comes down to the family budget of what they think is a reasonable amount."

"Try to keep it visual for your children -- a separate bank account of their own they can track. Remember, if you as the parent have saved money since they were born for their 21st or the like, keep it separate and don't stop this saving either," Charman said.

Charman suggests teaching children to do the math on their transactions so they get into the habit of 'balancing their own books'.

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Make savings visual.

"Let them see the result of their spending and saving by making sure they keep track of the money going in and out of their online account. In the age of internet banking, I also suggest to parents to start a ledger book to visually demonstrate to their kids the entries going in and then check their bank account to see if the balance lines up. It's a great habit to form and could be a Friday night ritual to try out."

When kids are a little older it's a good idea to introduce saving for a longer period of time to instill patience. This'll put them in good stead for saving for things like a car or house deposit when they are adults.

"Kids need to have good savings habits to be good spenders. What we want to teach about savings is to build up their nest egg for items in the future. It is also about teaching the concept of goals. What do you want? How much is it? How long will it take you to save for that? Make it a game and make it fun."

"They can mark it off on a calendar. Or a visual poster, similar to a rewards chart, where they can put a sticker on it when they reach certain milestones. Saving is not about deprivations -- it is being aspirational and children need to have that mindset. When they do spend we also need to teach our kids to be savvy spenders. You want them to think about whether they are getting the best price? Do they really need the top model? Get them to do some research as it will help form great habits later in life," Charman said.

Charman also suggests getting kids to ask family members or other people what their best money stories are on savings and spending.

"I use this as an exercise and it always has great results. Ask what was the best thing you ever saved for? It usually brings a smile and delight to the person telling it."

"Money is part of our everyday life. Children need to get comfortable with it from a young age. Money is a tool to do things that you want. Make it fun, make it visual, make it part of life. Don't let them have money that runs through their fingers," Charman said.

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