The Guardian recently released looking at several families and their experiences of pocket money. Some of the stories in the article show the pressure that families find themselves under and it’s interesting to see the connection made between pocket money and the costs of childcare as a whole.
Should we add pocket money to our child care costs?
Much of this comes down to how pocket money if given and what it is used to cover. We don’t think pocket money has to be ‘expensive’ and nor should it be. You don’t need to give a lot to teach children some of the core skills needed to manage their money responsibly in the future.
For younger children (below 6), we know that on the whole parents give pocket money as a reward mechanism and often tie it in to using a Reward Chart. The amounts of pocket money are small and the focus is on getting them to start engaging with money at a basic level and understanding that if they do something positive, they will be awarded something in return. It’s also a chance for them to derive some pleasure from getting something with their pocket money – whether that’s a pack of sweets or some mini figures. By the time children are 7 or 8 that has changed and the amount of pocket money given is higher. It can be argued that viewing pocket money as part of your child care costs at that age can be beneficial – not least because it will encourage a pocket money structure that saves you money.
Trips out to the cinema, magazines at the shop, fashion purchases and indeed presents all add up and form part of the regular spend parents make. By making these purchases part of your pocket money routine, we think it helps families manage a budget and helps reduce uncontrolled spending. Many parents on Roosterbank have admitted that prior to getting into a pocket money routine, they have found themselves losing track and discovered that they spend far more a month that they hoped on these items.
We like to call this the ‘Pocket Money Paradox’ – that giving pocket money can save you money. By stipulating what a child is expected to cover with their pocket money – whether that is sweets, music and magazines, or clothes and trips outs (popular with families with kids aged 10+) you are putting the responsibility on your kids to decide what they are going to spend it on and importantly, that once it’s gone, it’s gone.
Teach children that they need to earn their pocket money.
How pocket money is given is as important as what you give – it will also help you save money. Some of the families interviewed by the Guardian discuss the importance of making pocket money conditional. This fits in with our own experiences. As with adult life, the quicker children learn that its not ‘something for nothing’ the better! Linking pocket money to jobs – so that might be cleaning the car or doing extra household jobs can be a great way of incentivising children to earn their money and in turn benefit from the sense of achievement this will encourage. By earning it, they are much more likely to be careful about how they spend it and think before they do.
Make it educational and make it stick.
As our friends at Black Bullion like to say, there is no time like the present to get ‘Money Smarter’. By getting into a pocket money routine, you won’t only save money and get some jobs done but you will also be encouraging your children to take responsibility for their money.
Making it fun will make it stick. Whether that’s a Reward Chart or other incentive for old kids. Getting children to save some of their money by splitting it into two pots will also get them to start thinking about the need to put something aside. We offer children the chance to put their money in a ‘Wallet’ on Roosterbank (to get things now) and a ‘Safe’ to save for the future and reward them the more they have in their ‘Safe’.
Encouraging children to choose a target to save for is another great way to teach them the ‘opportunity cost’. If they focus on achieving a goal and the sense of achievement that will bring, they will be less swayed by other purchases they are likely to regret. If they do go for instant gratification and purchase something on a whim, they will learn it’s at the expense of that target.