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Why Pocket Money Is Important

April 28th, 2019 Posted in child development, learning about money, Parent Advice
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A child or young person having money of their own is an important rite of passage and pocket money can form the basis of excellent financial education in areas such as budgeting, saving and spending. But it doesn’t have to come exclusively out of your purse or wallet.

A big issue (pun intended), I have with automatically giving pocket money, or an allowance, is that it can easily create an entitlement mentality. Anyone who has seen their teenage child hand on hip, open palmed, demanding cash before going out on a Friday night will know instantly what I mean.

The other place where you regularly get money for nothing is from the benefits system and I don’t believe that many parents are deliberately training their kids down that route!

The importance of pocket money - giving kids an allowance image

One of my favourite money experts, Loral Langemeier is quite definitive on the subject:

“NEVER PAY YOUR KIDS AN ALLOWANCE”

Loral argues that the best investment you can give your child is to teach them the value of entrepreneurship and the way that the economy works. So instead of paying pocket money every week, design exercises and activities that are truly focused on basic finance.

OK you may be thinking but how does this work in practice? Here’s an example, you might sit down with your child and organise some basic household tasks or chores such as doing the dishes or clearing the table.  Work with them to assign a monetary value for each one of these tasks.  Each week as they complete the list, pay them an agreed amount minus a small percentage that goes into a savings account specifically for them. This deduction functions a lot like taxes or regular savings accounts they’d have in the real world.

With teenage children you can add a bit more to this model, including how to manage a bank account, deduct expenses that might make sense given their age, or help save for the things that they’d want to buy.

Why do it this way?  Not only does your child learn the importance of how the economy functions, but they also understand the value of their own work and services.  As they develop their entrepreneurial muscles they may want to take on extra work or start a small businesses of their own. Plus you are automatically encouraging them to save.

Martin Lewis founder of Money Saving Expert and regular TV commentator in the UK is a fan of both pocket money and financial education – and he recommends encouraging children to work for their financial rewards, in order to embed a principle that will serve them well throughout life. Rewards for cleaning the family car or doing the washing up after dinner are great tasks to exchange an agreed amount of pocket money for, but it’s less productive to train children to expect payment for tasks they should be doing anyway, like cleaning their room or doing their homework.

In closing this discussion on the importance of pocket money, a quick word about consistency.

If you promise children a specific amount each week or month, make sure you stick to it. Paying pocket money on an ad-hoc basis will teach them that money promises can be broken; and they will value the money they receive less if you seem to attach little value to the act of giving it.

If you find this useful please share or add a comment below

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How to Teach Your Kids to Cut Household Expenses and Save Money

July 4th, 2017 Posted in learning about money, teaching kids about money
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Cutting down on household costs is a goal for many families. It’s where you live and relax, so your home is most likely eating off a big chunk of your budget every month – it’s how it should be. Still, wouldn’t it be nice to keep a bit more of your paycheck next month, live the way you’re used to, and even get your family to help pull the load? Here are some pieces of the best advice we have heard and found useful on how to cut household costs for the whole family.

How to Teach Your Kids to Cut Household Expenses and Save Money - children writing image

Image source: Pexels

If your children are old enough, you should involve them in your finances by talking to them about it. It doesn’t quite cut it to simply say that times are tough or that you can’t afford something; they need the context that you already have.

Energy Savings

It is the most obvious one, so we better get it out of the way fast; a green household is a wealthy household, or at least a more frugal one. There are a lot of ways to saving money on your monthly energy bills without being too warm, cold or left in the dark. Now that it’s summer, you’re able to save a lot more than during winter, so you better get started.

First of all, keep the aircon off by keeping the heat out. A wide open window with curtains blowing in the wind seems perfect for summer, but it will only allow that cool inside air to disappear out into the humidity. Keep it closed when it’s at its warmest, even the shutters should be drawn, and any rooms you don’t use should also be closed off. You might spend your days walking around the house and closing windows after your family, so turn the aircon off, and you’ll see how easily those windows can stay closed on their own.

Give your oven a break; it deserves it. By focusing on cold dishes, you can involve your children more in the kitchen, too. Food full of colors, fruits peeled, cut and decoratively hanging out on a plate, is sure to get them interested.

When the bill arrives, show it to your children and give them an energy tour around the house. Point out the different expenses on the bill, what they mean, and what you can do as a family to make the household use less energy. Explain that there are more advantages to using less energy than financial ones; it will make the planet happier and give you all a better future.

A low energy bill means more money to spend on other things, as well as less financial worries. If the worries get the best of you, or if you have an unexpected and big amount to pay, it could be better to look at different ways of covering the debt initially. Get loan details here and make sure you read this article on questions you should ask before taking up a loan.

Grocery Savings

When you want to cut down on the amount you spend on groceries, you have an ocean of opportunities. Besides from using those coupons, and planning your weekly or monthly shopping ahead, you should also try to substitute your meat meals with beans and rice – at least for a day or two of the week.

Getting children onboard with this is usually not a problem, but if it is, a good advice is to bring them with you to the grocery shop. Not just to run around and be in the way of other shoppers; involve them in the grocery shopping, point out the prices on different products, and explain that you’re trying to save as much as possible.

If they are old enough, it’s a good idea to let them do a bit of the shopping once in awhile. Send your two oldest off together or make them bring a friend and a bicycle – just make sure to write a list and give them a limited amount of money. That way, they’ll be forced to manage the money when finding the right products and it will make them more aware of the prices, too.

Try to stick to the more budget-friendly grocery shops, by the way. The better you know a shop, the more likely it is that you’ll also know where their best sales are, how low you can go, as well as their in-store policies in general. The largest shopping of the month should be done when it’s relatively empty and when you’re not hungry or stressed – it seems obvious, but it’s a tough rule to follow.

Budgeting

A parent who manages his own budget is one thing, but that doesn’t mean your child is secretly watching and absorbing all of your knowledge. They need to learn these lessons too – and you should be the one teaching it to them. Giving them an allowance every week or month is something most parents find useful; it teaches their children the value of money as well as the skill of budgeting.

How to Teach Your Kids to Cut Household Expenses and Save Money - painted piggy bank image

Image source: Pexels

Some choose to give allowances after certain chores are completed, which may work well for some, but not everyone. It might end up teaching your child the wrong type of lesson; specifically that if they don’t get an allowance, they don’t have to complete their chores either.

Unbelievable as it might sound to us hard-working grown-ups, this is a deal that could be worth it to them. The bed will still be warm and cozy at night, and there will be dinner on the table in the evening – so why do these tedious tasks when all they have to do give up is a couple of dollars per week? The lesson they learn is not what you had in mind at all.

If allowances based on completed chores works for you, then continue with this system. If not, on the other hand, you should consider giving them allowances for the sake of learning how to budget and expect them to keep helping out at home nonetheless. Nobody gives you money for making your bed, taking out the trash or walking the dog; it’s just something we need to do.

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3 Ways To Inspire Your Child To Make Good Financial Decisions Through Life

April 14th, 2017 Posted in financial education, kids and money, teaching children about money, teaching kids about money
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3 Ways To Inspire Your Child To Make Good Financial Decisions Through Life - kid with money image

Flickr

Time spent educating children is time that is never wasted. Unfortunately, despite school teachers and the school faculties best intentions, it’s difficult to fit in every lesson at school that it takes to become a responsible, sensible person in later life . Kids have a lot to deal with, not only growing up and coming to terms with their identity, but also increasing levels of responsibility as the years pass on.

Filling your child’s head with knowledge is fantastic, and will surely help them in later life. But giving them guiding principles to live by through inspiration and demonstration is more valuable than anything you can tell your kids. So how do you kindle this burning fire of curiosity that children seem to so naturally emanate? Here is a list of 6 different methods you can use to not only teach your child or pupils positive life lessons, but to bond with them as well.

  1. Take an interest in them.

Kids are naturally attention hungry, especially from those they rely on. If you water them with this special ingredient of available openness, listen to what they’d like to achieve in life, and stimulate a few ideas based off of what they say, you can really open their mind from an incredibly young age.

For example, let’s say your daughter says she’d like to ride horses and play with ponies all day when she’s older. Perhaps you could suggest she’d like to be a vet, and help all animals who are poorly feel better! Or perhaps she’d like to open a sanctuary for horses and donkeys. Sit back and watch as her eyes widen with excitement. Keep this up and she’ll start believing she can do anything, which, of course is absolutely true.

3 Ways To Inspire Your Child To Make Good Financial Decisions Through Life - image of an excited girl

Flickr

  1. Help them envision their future life.

Helping a child envision their future life is something that is immensely beneficial to opening up their horizons. Of course there’s no need to come to concrete answers, and this exercise should be fundamentally fun. However, sometimes it’s great to stimulate their imagination. For example, you could ask what sort of pets they’d like as an adult, what countries they’d like to visit, or you could go to a website like Pink Realty to give them an idea of the house he or she would like to throw family parties in one day.

  1. Show them the benefits of saving money.

Kids are impulsive, and most adults are too. It’s a good idea to show them, through subtle, unintrusive ways, the best way to manage money effectively. You don’t have to sit them down and teach them the finer methods of understanding balance sheets, but perhaps giving them a small allowance to earn (if old enough,) and letting them spend it once a month only will teach them the value of saving in order to acquire higher value items, or replacing items they didn’t think they lost. You can also tell them in a way that will make them proud of you how your savings have helped you pay for unexpected bills etc, and they will slowly (hopefully) start emulating your habits in their teenage and young adult years.

These three combined steps will not only help your child begin good habits in a way that will bring you closer together and give them a slight understanding of how you run your family, but they will desire to emulate you. Kids are impressionable, so make sure to use this to their advantage.

This will hopefully provide the correct attitude that will stop them making big mistakes in adulthood. You can be sure then that you’ve covered at least some of the bases your tough job of parenthood requires you to address.

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The ‘Pocket Money for Chores’ Debate

January 18th, 2013 Posted in kids and money, Parent Advice
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The ‘Pocket Money for Chores’ Debate - should you give your child an allowanceIt’s an age old parenting question, but one which still causes a huge amount of debate: should you give your child pocket money or allowance for doing chores?

The best answer we can give you is, ‘it depends’.

One obvious reason for linking the two is to encourage a work ethic. Giving pocket money for chores teaches a simple lesson: if you do the work, you get paid. If not, you don’t. Since children in the UK can only take on part time work at the age of 13 (except for certain ‘performance’ related jobs), pocket money provides a good way to teach this lesson at an early age.

But wait a moment… shouldn’t your children be helping out with the chores around the house anyway? A key part of being a family is working as a team and recognising the hard work of others. Giving money for chores runs the danger of creating a selfish attitude, and you also run the risk of hearing comments such as: ‘So you want me to take my school bag upstairs? What are you going to pay me for that?’ Also consider what happens if a child decides they aren’t bothered about getting pocket money a particular week. Does that mean they can get away with not doing their chores?

You can immediately see the pitfalls with the system. So what is the best way to overcome them?

Each family is likely to have a slightly different approach, but one of the best systems we’ve found is to pay your child a base amount of pocket money, which is unrelated to chores. This basic amount will teach them vital decisions about money and saving – whether they save their money to get something they really want, or whether they spend it straight away for instant (but often fleeting) gratification (that’s another issue entirely)

In the meantime, children should be asked to do basic chores around the house, but can be given the opportunity to earn extra ‘rewards’ by completing chores which are beyond their usual scope. Cleaning the car, for example, is a chore many parents agree they would like to reward their children for taking on. This reward can be monetary, but could also take other forms. One good option we came across is a sticker system. Every time your child goes above and beyond what is expected of them they are allowed to put a sticker on their chart, and once they’ve reached an agreed number, they’re allowed a treat. This could take a variety of forms: maybe a special purchase you both agree on, or possibly a special trip. The advantage of this system is that the rewards are flexible and can be varied depending on the individual child’s preference.

Of course, no matter what pocket money system you use, it is almost inevitable that your children will complain about their chores at some point. But if you talk the system through with them, explain why it’s fair, and, most of all, keep it consistent, you should find that these instances become far less common.

Do you agree? What are your own experiences with pocket money and chores? Share your thoughts below.

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THREE SIMPLE KEYS TO EMPOWER YOUR KIDS FINANCIALLY

February 16th, 2011 Posted in financial education
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by Elisabeth Donati, author of The Ultimate Allowance – Founder Creative Wealth Intl., LLC

Creator of Camp Millionaire & Creative Wealth for Women Workshops

You may be thinking to yourself, “Is there something I can do to make sure my kids don’t move home after they move out?” In other words, you want a way to make sure they grow up to be financially self-reliant. I’m here to say, ‘Yes, there are some relatively simple steps you can take to ensure that your kids leave home knowing what to do with that green stuff they will be in charge of making, managing and multiplying in the future.

More young adults are not only leaving college these days because of financial problems (student loan and credit card debt) but they are also moving back home after they graduate because they simply don’t make enough money to go it on their own.

The primary cause is simply that kids don’t have a clue what to do with their money, or anyone else’s for that matter. Most of them are very good at spending money, but it’s a rare 20-something that understands the dangers of credit card abuse or the power of saving and investing. Heck, for that matter, most adults don’t understand these concepts either.

Imagine this scenario…

Your son (or daughter) comes to you one day and says, “Mom, I have decided I really want to grow up and become a major league ball player.” You say, “Wow, that’s cool. Good for you.” And you go back to doing what you were doing. Your child looks at you and asks, “So, would you get me a ball so I can learn how to throw it?” You say, “Maybe later.” He says, “What about a glove and a bat?” You respond, “Nah, I don’t think so.” He’s a frustrated at this point and asks, “OK, but will you at least teach me the rules?” You say, “Oh, you can learn the rules later.” Now he is really angry; he’s fuming inside and feels stuck. Finally he gets really mad and yells, “But MOM, how am I ever going to become a great ball player if I don’t have a ball, bat or glove to practice with and I don’t know the rules?”         

This is what parents do, most unknowingly, to their children everyday in regard to money. We grow them into adults but rarely give them the equipment or rules to practice, and get good at, The Money Game!

Let’s look at three simple steps you can take to empower your children with the tools, knowledge and practice they need to grow up financially free.

FIRST, you must set the best example you can for your child. Since human beings learn best by example, it is critical that you first examine what you’re teaching your children through your actions because they really do speak louder than words. How can you expect your child to save and invest if you don’t? How can you expect your child to grow up with a healthy understanding of money if you don’t have a healthy understanding of money? How can you expect your children not to use credit cards if the only way they see you buy things is with a credit card?

The important thing to remember is that children learn from us three ways: by what they see us do, by what they hear us say and through the experiences they have with money. J know that they are always watching and learning from you in ways you probably aren’t even aware of.

If you’re like many adults who don’t understand money, you’re not alone.  You weren’t taught when you were young either, however, now’s the time to make a commitment to educate yourself. There are books and seminars everywhere. A great place to start is a program called the Millionaire Mind Intensive. For more information, visit http://www.peakpotentials.com/a/tofreedomandbeyond.

If you’re doing well financially, good job. Keep asking yourself how you might ‘show’ your kids about money with your daily routine and include your kid’s friends. Kids often learn better from people other than their parents so look for opportunities to influence all the kids in your circle.

SECONDLY, talk to your kids about money. Take every opportunity you can to open up a line of conversation about family expenses, credit cards, debt, interest, investing, business, real estate, the stock market, financial beliefs, etc. Some examples of when to talk to your kids about money are:

•   When you take money out of the ATM, talk about where the money comes from, why you can only take out so much, etc.

•   When you pay for the groceries with a credit card to get points so the whole family can go on vacation, make sure they understand the importance of paying the bill off EVERY SINGLE MONTH!

•   When you pay bills, let them help you write checks or pay the bills online. Teach them how to check the accuracy of each bill.

•   When you deposit money into your bank, visit your investment advisor or accountant, take your child along.

The worst thing you can do is assume that someone else is teaching your child about money. What children learn from parents who don’t talk about money is that talking about money isn’t OK. A healthier way to look at money is simply as a tool to reach your dreams (a Creative Wealth Principle); it doesn’t mean we’re better or thinner or smarter than others. It’s simply a tool.

THIRDLY, consider giving your child an allowance, but not the kind you may be thinking of. In my book, The Ultimate Allowance, I teach you how to take the money you already spend ON your child and run the money THROUGH them instead. I’ve read that it takes an average of $275,000 to raise a child through age 17. If you run even a portion of that money through your child, imagine the practice he or she is going to get. By making plenty of financial choices—good and bad— they learn the ins and outs of money management before the consequences aren’t so damaging.

In summary, remember that human beings learn best by example. Your children are watching everything you do with your money, listening to everything you say about money and internalizing all the experiences they are having with money, so pay attention to the example you are setting.

And finally, please talk to them about everything financial. It’s the best investment you can make in your child’s financial future and we promise it will ‘pay off’ in the end!

For more information on all of our unique financial literacy products and programs, please visit The Ultimate Allowance and Creative Wealth International or give us a call at 800-928-1932.

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