Parents have an important tool to teach their children financial skills that can last a lifetime.
These days, giving pocket money is controversial. It has remained popular with some parents but others have moved away from the belief that pocket money is the best way to improve children’s financial literacy. Everyone has reasons for giving or not giving.
So should you give your children pocket money? Yes. Despite objections about giving pocket money, I think pocket money has a place in children’s financial literacy.
Correctly given, pocket money can be a very effective tool in teaching lessons about earning money, saving, spending, donating, investing and even budgeting. Receiving pocket money may not be the first time your child is exposed to a money transaction but it’s likely to be the first time the transaction affects them directly.
Unlike going to the grocery store and paying for the groceries with money given by mum and dad, receiving pocket money is real because the child gets to keep the money. The child gets to decide what to do with the money later. If they have to save to buy their favourite toy, children also learn delayed gratification in the money context.
When these skills are developed over time, your child will cultivate good money habits that will help them make good money decisions in the future. I’m a firm believer in giving children pocket money but I don’t agree with the conventional way of giving pocket money. If we want to realise the benefits of pocket money, we must be prepared to put some thought into it.
The conventional way is flawed
After overcoming the hurdle of deciding whether to give pocket money, many parents will then go through what I went through when I first gave my children pocket money. I call this the conventional way.
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