PARENTING PLUS:Kids must learn how to spend their own cash
DID YOU ever feel like your children know the cost of everything but the value of nothing?
I believe pocket money is one of the best teaching tools for children who need to find out what economic value really means. Until children have money of their own to spend or save, they will find it hard to make judgments about the relative value of items they want to buy.
Every household is likely to take a different approach to children and money. Some parents prefer not to give any pocket money but will give their children money as and when they need it.
This approach gives parents a lot of control over what their children spend money on. However, it has never been the child’s money and so, equally, they might not see the item purchased as “theirs” in the sense of valuing that item.
Many other families will have a weekly allowance for their children. In the UK, the most recent figures for average pocket money amounts were the equivalent of about €5.50 per week for 8-11 year olds and about €8.50 per week for 12-15 year olds. I couldn’t find any survey figures for Ireland.
The key thing about any such pocket money is that once it is given over, it belongs to your child and can be spent as they wish. While you might encourage a habit of “spend some, save some and give some to charity”, you may not be able to enforce this.
This is hard for many of us, who, especially these days, are lucky to feel like we have any discretionary spending power ourselves.
To explain the difference between necessary and discretionary purchases, it might help to let your children see you making a list of necessary purchases when you go shopping. Then stick to the list.
Once children have money, the true cost of other items that you buy for them can be accounted for in terms of how many weeks’ pocket money it equates to.
The realisation that some toys or computer games they want cost the equivalent of 10 weeks’ pocket money can be a real eye-opener for children.
However, when your children make additional demands for money, it gives you the opportunity to encourage them to save to purchase.
For the same reason, I think it is better not to lend money to your child because then they learn that, when they don’t have the cash they can’t buy.
This teaches them to buy within their means rather than relying on credit and is a valuable lesson in itself – and a good habit to develop for life.
Credit and debit cards can also confuse the valuing of money. Our children will have no concept of how much money we are spending if they witness only card transactions. Returning to cash might be important to give them a clear sense of the quantity of money involved in a particular purchase.
You might also like to let children share some of the cost (a small percentage, perhaps) of even necessary purchases like clothes, school books, presents for their friends at birthdays and so on. This, too, will remind them that everything has a cost and so, correspondingly, they might attribute greater value to the item.
Whether you give pocket money or not, it is important to role-model sensible spending, living within your means, saving, planning and budgeting. If children don’t see that you use money as a tool to buy important things that have real value for you or your family, then they may grow up with a reckless attitude to all things financial.
Wouldn’t it be great if a small silver lining in the cloud of recession was that children learned that money is exhaustible and that saving, budgeting and wise spending are important lessons for life?