Friday, 11 October 2013

A note on pocket money...

In this age of want's, must have's, apparent need's and can't-live-without's are we in danger of teaching our children that there is no value in waiting, being patient and working for a reward over a period of time?  

I'm just as guilty as the next parent, we've all done it - bought some outrageously expensive item for our child because it was easier than saying no or worse still, a reflection on you as a parent, suddenly being compared to the other parents who've coughed up and your child can't understand why little Johnny has it and he doesn't.

Almost as if it was yesterday, I remember my Mum setting up 'shop' in the living room when we were just old enough to understand the concept.  This seemed too good to be true, a sweet shop in our own house!  Jar's of jelly beans, pots of pink marshmallows and bowls of all sorts of sparkly wrapped chocolates and toffees.  Saturday was the day, we couldn't wait!  

It wasn't all as fabulous as I'd first thought however, my Mum pulled us both aside and gave us our 'pocket money' for the day.  We were shown the prices (she was clearly making a loss!!!) on each jar or pot and she explained to us in basic terms, that we had say 5p and each sweetie was 1p.  That meant, we could get five sweeties but once we had bought all five sweeties, we wouldn't have any money left and that meant that the shop would close until next week.  

If we chose to, we could save some of our money until the following week, and it would gain interest meaning we would have more money for more sweeties the following week.  I do wonder whether Saturdays were as much fun for her as they were for us buzzing around on a sugar-rush all morning, silent chuckle!

I wasn't convinced on the whole saving concept and promptly spent all my pennies in one go.  I munched my way through all my sweeties and probably went out into the garden and ran around like a Tasmanian devil until I'd run out of steam.  My sister on the other hand, not only saved some of her money but she also saved some of the sweets that she'd bought and proceeded to taunt me as she slowly made her way through them over the course of the week, all very smug as she did so!

The lessons were learnt however and before long, the living room sweet shop shut its doors for the last time and we were off to town on a Saturday morning. I'm sure our pocket money was increased slightly in line with the retail prices but the basic rules remained the same.  If there was an item out of our price range, we simply accepted that we either gave up on the idea or saved some of our money for next week or the week after that until we could afford the 'biggie'.  

When you feel it's time to start teaching your children about money and the value it holds not only in currency but also in lessons on saving and understanding that this culture of 'right now' isn't really going to do them any good later in life, take a look at the tips below to get your children engaged in the process:

Decide on a fair amount and stick to it:
Decide whether pocket money will be issued on a reward basis linked to a chart that represents their behaviour or, a set amount given each week without question.  There is no right or wrong here, use the process in a way that works best for your family.  Don't give in to requests for extra money, the amount is set and if you feel it is appropriate, they can earn extra if they are old enough understand the lesson in doing so.

Start with a home-based shop and a set of 'litte shopper' rules:
By teaching your children about money and the process of shopping, need, want, cost and saving, you can start to plant the seeds of savvy living.  You could teach your children about interest and how it works, even introduce a loan further down the line, but be sure that you explain to them that the following week, it needs to be paid back with interest.  This usually causes some tears but the lesson is important if you feel your child will understand the lesson in the long run.

Use technology to get your children interested in money:
There are some fantastic apps and online resources that act as virtual piggy banks, offering more than just a place to track pocket money.  Take a look at Roosterbank or gohenry, both offer some really fun and engaging ways to get your children interested managing their money effectively from a young age. 

Don't forget about gifts and special occasions:
It can be tempting to let your children blow their entire birthday booty on various toys, games and sweets but remember to show them that saving some of the money they're given as gifts or rewards is just as important as saving some of their weekly pocket money.  Think 'bonus' and your children will remember the lesson one day when they are working towards a work target and there is a nice juicy bonus waiting for them at the end, do you want them to blow it all or save some or all of it for a more worthwhile purchase in the future?  Get in early and teach them about making good financial decisions.

Show interest:
Reward your children further by giving them 'interest' on the money that they save.  You could inflate this slightly when they're younger so that they see the real benefit in doing so.  You could then discuss a bigger purchase with your child, something they are really keen on buying and help them to understand that by saving regular amounts, the interest will help them to be able to buy their dream toy or game a lot faster than if they were to blow all their money at once.

The choice is always theirs:
As parents, it is your job to 'set the boundaries' and then, although sometimes difficult to do, you need to step back and allow your children to make the choices they want to make along the way.  You can remind them each week about the choices they have, do they want to spend it all and have nothing left, would they like to save a little to buy something bigger next week and better still, would they like to use their long term saving jar to work towards buying a really special treat that would otherwise be unobtainable.  

Children are children and they will make lots of 'wrong' choices driven by 'want' but by gradually teaching them the consequences of their choices now, you will be helping to provide them with the essential tools and understanding required to manage their own money better in the years ahead.

For now, I'm just looking forward to setting up that little shop in the living room and watching my girl's eyes light up with excitement.  Mortgages, credit cards and loans can wait a little while.

Happy parenting!