Pocket Money - How much is enough?

There was once a time ( a long, long time ago…..) when children were happy with hopscotch on the sidewalk and an ice cream cone as a special treat on Sunday.

Now fast forward a decade or three and the children of today are growing up in a consumerist society – dominated by brands and material goods. It is now, more than ever, vital that children learn the value of money from a young age. By introducing a pocket money system into the household, parents can help their children come to terms with the importance of saving and learn the life essential skills of money management.

It is estimated that the average Australian child receives $8.15 pocket money a week and the Australian Bureau of Statistics estimate that over 175,000 children aged between five and 14 are involved in some type of paid work outside their own household – making it even more necessary for parents to educate children about how to manage their finances.

Two Australian families exemplify just how beneficial giving pocket money can be, and the benefits it can reap for a household.

Case Study: Crystal Clear Benefits

Michelle and Wayne Beckett are parents to13 year old Crystal and they both value the advantages pocket money contributes to the household. Crystal receives $25 per week for doing chores such as taking out the garbage, walking the dogs, vacuuming the house and cleaning her room. "We have given Crystal money from an early age, as we believe it has taught her to appreciate that if you work hard, you can enjoy the benefits. While Crystal does compare her pocket money allowance with her friends, she does not ask for more pocket money than she already receives." Michelle and Wayne encourage Crystal to save her pocket money but when given the chance, Crystal's typical purchases are clothes.

Case Study: Where there's a Will there's a Way

Mary and Jason Wills have two children, 16 year old Clayton and 14 year old Georgia. The Wills' are strong advocates for pocket money and have taught their children the importance of a strong work ethic from an early age. They believe an allowance "teaches them the value of money, saving, the banking system and patience." Clayton and Georgia have been receiving pocket money since they were 10 years old. They currently receive $10 a week deposited directly into their bank accounts. Mary and Jason believe that this amount will increase as they get older. The teenagers also get a chance to earn extra money if they contribute above and beyond the general household chores such as mowing, weeding or ironing.

By giving your child a small amount of pocket money each week, this can help teach them how to better manage their finances and to plan for the future. Below are some valuable tips to encourage and educate children on how to save.

Practical Tips for Parents, provided by Michael Cant, Group Executive, Retail Banking Services

Money Talk

Talks about money with your child - children often see adults spending money but they do not always understand the process behind this. As a result, children can develop misconceptions about how money is managed. It helps to show them what bills must be paid and how much they cost, so they can obtain a more balanced view of the time and planning taken to manage finances.

Money Motivation

Give your child the opportunity to earn money - regular daily chores around the house such as making the bed, watering the plants and washing the dishes. help children to take responsibility for a task and be rewarded for their contribution. Additionally, for tasks outside of the day-to-day running of a household, why not create opportunities for your child to earn extra pocket money?

Using the Right Language

Money can be a difficult concept for children to get their head around, so it helps to use examples your child can relate to. For example, $1 would buy you 12 snakes, while $5 would buy you 60 snakes. By making simple contrasts and using visual cues, it makes it much easier for your child to begin to understand the value of money.

Money Matters

Impulse buying is something we are all guilty of doing, so educate your child that this is not always the best option. Children can get very excited when they see something they really want. However it's important to explain to your child that if they really want something - they will need to wait for a special occasion such as their birthday or, alternatively, save up their pocket money to buy the item. Create a savings chart using some cardboard and display it on your fridge, outlining how much your child will need to save each week to reach their goal. Then if they achieve their goal, place a sticker so they can see how close they are to reaching their final goal. This helps teach your child the value of money, the time and planning involved in managing your finances, and the rewards and benefits of saving and reaching a goal.

Saving Money

Set up a savings account for your child - encourage them to save a percentage of their pocket money each week and reward them for saving by giving them a small bonus (it doesn't have to be monetary), if they reach their monthly target. Setting goals will motivate your child which is a valuable quality they will need in the future.

Spending Money

Teach your child to plan and calculate the costs of purchasing an item - for example when your child wants a particular item, such as a bicycle, take your child to various stores to identify the exact price of the item. Once the price is identified, sit down with your child and calculate how long it will take to save for that purchase. This activity puts into perspective the value of money.

Money is not Everything

Most importantly teach your children that although money is important in life, it is not everything. You can reward your children in other ways, such as giving praise, taking them on a small outing, or cooking them their favourite meal.

KIDS SAVINGS CHART

A great way for your child to keep track of their savings and stick to their savings goal is to have a savings chart. The savings chart can be downloaded and printed from the Commonwealth Bank website.

KIDS SAVING CALCULATOR

Commonwealth Bank has a useful online tool – the ‘Kids saving calculator’ where children can go online and calculate how long it would take them to save for a particular item. The tool can be accessed on the Dollarmites website, by clicking on the ‘Grow Your Money’ section. http://www.commbank.com.au/Dollarmites/

 


motherinc.com.au thanks The Commowealth Bank of Australia for sharing the above research statistics and tips.

1 http://www.spinneypress.com.au/223_book_desc.html

2 http://www.theage.com.au/articles/2004/04/03/1080941723812.html

 

 

 
Banner