Financial responsibility begins in the home with early budget management
Pocket money, saving and explaining the value of work are still central to teaching financial literacy to children
Small children typically respond better when something is more tangible, which can be more difficult in this digital era, but piggy banks can still be found
Balancing a chequebook may be a skill largely consigned to the past, but learning about money still remains a vital life skill for children to acquire. Given that it’s unlikely to be taught in school, it’s largely up to parents to pass on some financial lessons, at least if they ever want to wean their children off the “bank of mam and dad”.
But are parents doing enough? A recent survey from Danske Bank shows that just half of all parents regularly talk to their children about how to spend and manage their money – even though almost everyone responding thought that their child would benefit from such discussions.
So there’s an obvious disconnect between what is happening and what should be happening.
But, even though parents may feel ill-equipped to pass on financial advice, particularly given so many are still reeling from decisions they made themselves during the boom, a couple of simple steps can make a difference.
In theory, pocket money is an ideal way to teach your children about money. It’s a set amount of cash and they learn to understand what that money can buy them and that, if they want to make a big ticket expenditure, they will have to save up for it.
Joanna Fortune, a clinical psychotherapist with Solamh parent child relationship clinic, agrees:“I think it’s a good idea because it has many child development benefits: it encourages independence, it helps with budgeting and gives an appreciation of the value of money.
“It also allows children to decide on things they like, to make choices, and to know that if they really want something, they have to save for it,” she says.
But how much should you give? Statistics from Danske Bank show that 80 per cent of parents give, on average, €27 a month to 12 to 16 year olds, with 11 per cent giving more than €50.
Fortune advises that the amount you give should be influenced by your own family situation and not by what other children are getting. Not only that, it’s important for children to get the message that when it’s gone it’s gone and it won’t be topped up again.
“If you want it to be an effective development tool, you have to stick to your budget if you’re helping them to budget,” she says.
A regular payday also helps with budgeting and reinforces the message that the money has to last a week.
But should pocket money be used to encourage children helping out at home?