THE subject of pocket money can cause unnecessary stress at home, so we consulted a financial expert to put the dilemma to bed.
Deciding how much pocket money or allowance to give your little ones, is a tricky decision so we have pulled together some top tips to give you a steer.
Giving pocket money can teach kids skills and confidence in money matters and give them satisfaction – especially if you encourage your kids to earn it!
But if you’re unsure of where to start with pocket money, don’t panic as we’ve spoken to Jasmine Birtles, the founder of MoneyMagpie to give you some tips and advice.
Jasmine said pocket money is a brilliant way to teach kids about money particularly if you give them instructions as to the best way to manage it once they have it.
The expert said: “I suggest a mix of pocket money that is just given and money that they can earn through chores, although some chores should be considered part of normal duties.
“By giving them the opportunity to earn extra they learn that money is earned, not just given, which is a great life lesson.
“If you help them to save some of their money with a savings account or even a piggy bank (if you give them actual cash) then that will also help them learn the value of saving for a goal.”
The Money Magpie director revealed that between the ages of four and five is a good time to start children off with a small amount of money that they can control.
The average at that age is £4.20 but it depends on parents’ income what they give their kids.
I suggest a mix of pocket money that is just given and money that they can earn through chores, although some chores should be considered part of normal duties.
Jasmine added that even a small amount – like £1 a week – is an exciting amount for a little one to handle.
She added: “It’s helpful to let them know the sort of things they can spend it on – maybe it’s sweets and toys, while you explain that you pay for everything else.
“There’s quite a good chart on RoosterMoney which shows average amounts kids are paid. However, it really depends on parents’ income.
“Some people can’t afford much at all while others are flush! Also, as children grow up they could be told that their pocket money needs to cover more items.
“By the time they are teenagers they could have quite an impressive allowance (£10-20 a week perhaps) but are told that they now have to buy their own clothes, or at least some.”
However Jasmine revealed she doesn’t think pocket money necessarily needs to go up every year – and instead, thinks a ‘raise’ every two to three years is acceptable.
Jasmine added that it’s really important to teach children how to manage their money early.
Even if you don’t have extra cash to invest for their future, teaching children about how to earn money, how to save it, how to live within their means and work towards a big goal rather than frittering money away on small things for ’now’ are fantastic ways to ensure that your children will be financially comfortable through their lives.
She added: “The great thing about earning pocket money is that it helps children learn that money is earned – it doesn’t just come out of a hole in the wall or off mummy’s credit card.
“They get to understand that it takes effort to bring money in and that some tasks earn better money than others!
“Being helped to save money gives children an understanding of setting goals, sacrificing small stuff for a future purchase and, ideally, understanding the uses of compound interest (if you can find a savings account that gives enough interest!).”
But the expert revealed many parents would rather talk about the ‘birds and the bees’ than discuss money with their children.
However, she insisted that it’s really important to explain the basics of saving, spending and earning money to children from a young age.
When you have toddlers you can make it a game by getting them to find the cheapest versions of items at the supermarket, she suggested.
Jasmine commented: “If they see you taking money out of the ATM or paying for something with a credit card you can explain that this money comes from your bank account and that you work to get the money in there.
“If children are asking for something big like a holiday or a TV, explain to them that you only have a certain amount of money coming in and that if you spend it on one thing you can’t have another.
“Getting the family together every now and then to decide together what to spend a certain amount of money on is a good way of getting the kids involved and teaching them about money.”
She added that while the aim is not to ‘frighten children’, showing them how you are working for your cash and how you have to parcel it out and make sacrifices in order to afford big things is really good education for them and will help them make similar decisions for themselves later on.
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