5 great tips for making pocket money work
Giving them pocket money is the first step to teaching your children financial common sense. Here are 5 of our best pieces of advice
Give a sensible amount
Your own financial circumstances will be a determining factor in how much pocket money your kids get, but other factors to consider are the child’s age and what they are expected to buy with their pocket money.
Older children, for instance, might be buying cellphone airtime and toiletries. Little ones will only be buying cheap toys and treats. For younger kids, the rule of giving kids a monthly allowance of R10 per year of age works well.
Set the ground rules
Parents need to agree on their pocket money rules first, and then share them with the kids. Having pocket money teaches children that their spending decisions have consequences: if they spend their whole stash on the first Saturday of the month, they will have no money until the next pocket money day.
For them to learn this lesson, parents need to give them the freedom to make their own mistakes with small amounts of money. However, some parents might introduce rules regarding sweet buying, or toys that are not in line with their family values.
Reward good financial behaviour
Kids need to know that they are rewarded for saving and for making smart purchasing decisions. Give your child an age-appropriate lesson in how interest works. If you open a (sum)1 account, your child will be able to watch his savings grow.
It also reward kids for keeping a positive savings balance, as they are not eligible for a management fee. Parents sometimes introduce other incentives, like paying half the cost of a high value item when their child has saved up for half himself.
Keep the money safe
Very small kids might have a piggy bank or similar, but the safest place for your child’s money is in a bank account. Carrying cash is risk; a PIN-based debit card like the one your child gets with a (sum)1 account is much safer.
Talk about money
Searching the newspapers for specials or surfing the web to compare prices will teach a lesson in shopping around for good deals. Working out how much he’ll have to save each month to buy the item will introduce discussions around saving and budgeting.
Discussing money with your kids helps you teach them important lessons. For instance, if your child is nagging for an MP3 player, discussing the costs and features of the different models brings up the concept of value for money.