Being financially responsible is a topic that’s received plenty of attention recently. And the start of a new school year is the perfect time for parents to tackle this issue with their children – specifically with pocket money.
Pocket money allows children to practice budgeting, spending and saving, and is a great way to teach them about being rewarded for the work they do, and how to be responsible with their money – crucial for their long-term financial success.
But when to start, how much to give, and how to manage pocket money? Australian parenting website, the Raising Children Network, has an excellent referenced article on this topic. For now, here are some hints…
When to start?
There are no hard-and-fast rules. It's up to parents to decide when each individual child is ready for it. Experts agree, however, that it’s never too early (or too late) to start teaching your child about managing their money. If your child is starting to show interest in the concept of coins and notes, your working day, or is helping with the shopping or wanting to buy toys, it may be a signal to start planning for the introduction of pocket money. Perhaps choose a birthday, the start of school, a new year or other milestone as the marker.
How much to give?
Again, there's no magic formula. Consider what you can afford, the age of the child and how it is to be used. Some parents link the amount to their child’s age (i.e. $6/week for a six-year-old, increasing as they get older). Also decide whether it’s to be a set amount each week – or to vary depending on household chores (more on this below). Basically, it’s what feels right for you, and most importantly, what you can reasonably afford within the family budget.
Should it be 'earnt'?
Some parents prefer to 'pay' their child weekly for chores, as it helps children learn the concept of earning money (make sure the tasks are age-appropriate). Others parents believe that day-to-day chores are just part and parcel of being in a family, and prefer to keep pocket money separate. Either way, parents can create opportunities for their child to earn extra pocket money – doing special tasks, for example, or getting good marks at school. This, too, can help them learn about the value and rewards of money, and that it takes time and effort to earn.
How to manage it?
It really depends on the age of your kids, how much pocket money they get and what costs it is expected to cover. It's important to give kids control over (at least) some of their pocket money.
Some tips:
- Have a piggy bank for young children: MyState Financial offers free piggy banks for kids, which is an excellent way to teach them to save and lets them see the rewards of their hard work.
- Keep in mind that losing money is part of the lesson children go through in order to be more careful in the future.
- Allow your child to spend a little themselves so they learn that everything has a price – they are usually proud that they paid for something all by themselves, and they also look after it better.
- Sit down with your child and calculate how long it would take to save for something they want. This activity puts into perspective the value of their money.
Once your child is receiving pocket money, set up a savings account for them. To get them started, the MyState Financial Youth Account is a high-interest everyday account for under-18s (once they turn 18 they’re automatically transferred to MyState Financial’s award-winning Access Account). Just like a 'grown-up' account, the Youth Account allows access over the counter at MyState Financial Branches and Bank@Post, and via ATM and EFTPOS using a Visa Debit Card or Redicard, subject to the conditions of use that apply. Internet and Phone Banking is also available.
To find out more, or to open an account, call MyState Financial on 138 001 or visit your nearest Branch.
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