Pocket Money: Use it wisely

by SHWETA KAMAT
Posted on 2008-08-11
Pocket money is an issue that often concerns parents. “How much pocket-money should I give my child?” is one of the most common questions asked at parenting seminars.
Giving pocket money is the best way to develop liberty in children at a young age.
“The main reason for giving children pocket money is to help them learn how to manage money while they are still young,” says the parent of 22-year old Sagar.
“It may also help children feel that they are important members of the family because they are given part of the family’s spending money,” believes another parent.
As youngsters, children save up for short-term goals such as buying a favourite toy. At the teen stage, he or she is ready to focus on saving for larger goals such as a new computer or a car and long-term goals such as a career and future.
Teens are becoming more and more independent but still need plenty of advice. With more money to spend and more opportunities to spend it, teenagers can easily get into financial trouble.
So before money burns a hole in your child’s pocket, teach him or her a few financial lessons. With the help of parents teenagers will soon develop the self-confidence and skills they need to successfully manage money in the real world.
Here are some tips for parents by Mr Rao, a businessman and a parent of 15-year old Yati.
• Provide two jars for children when you give them pocket money – one for spending and other for saving/investing
• Teach kids about goal-setting: By encouraging children to save for a big item such as a bike or skateboard, children learn a great deal about planning and looking ahead, the value of budgeting and experience personal satisfaction by reaching a goal.
• Link pocket money to age and stage of development and their needs.
• Encourage your teen to deposit a portion of every paycheck in a savings account before spending any of it.
“Finally your ultimate goal is to teach your teen how to achieve a balance between money coming in and money going out,” Mr Rao added.
He also says that one should encourage their teens to get a part-time job that will enable him or her to earn money for expenses.
When used wisely, pocket money is an excellent way to develop independence in children and young people. And by the way, it maybe smart to cut or reduce pocket money when they turn twenty and above and encourage them to get a part-time job so they begin to pay their own way.