Pocket money is a good way to help your children begin to understand money management and this practice can begin with children from as young as three. I suggest two dollars per age of your child so a five year old may get $10, a ten-year-old $20 per week. If that is too much for your budget (I know it was for mine for a long time, then make it $1 per age of your child)
I am often blown away at the large amounts of money parents are willing to impart on their child’s pocket money and I don’t think giving children money that they haven’t earned is a good habit to get into. We live in a society where our children’s sense of entitlement is getting out of control and we need to create change now! If we truly love our children and want them to be prepared for the real financial challenges of adulthood there are lessons that need to be taught from a very young age.
Here are some tips for teaching your child basic money management;
- Have your children split their money into three and have a jar that is labeled “Spend” and jar that is labeled “Save” and a jar labeled “Share”. Each week sit with them and divide their money into each jar.
- Have your children set goals for things they want to buy and teach them to save for them. As tempting as it may be to buy what your child wants, when they want it, believe me, they will appreciate and value it so much more if they have had to save for it themselves.
- Teach your children to keep track of the money that they have using a notebook that they keep in their room.
- Teach your children not to spend as soon as they receive money
- Show children the magic of compound interest (I wish I had learnt this from a young age!)
- When shopping at the supermarket show your children the same product comes in different brands and point out the difference prices
- Show your children that the water and electricity has to be paid for and let them see you paying for it online.
- Teach your children the difference between needs vs. wants so that they think before making a purchase.
Don’t teach your children to fear money because this fear will place limits on them later in life. You want to show your child that they actually have control over money if they make wise choices, work hard and do some careful planning.