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Pocket Money

by Kathryn

Dear Annie
You've provided an answer to me in the past that was very helpful, so now my boys are a little older another challenge has arisen.

My husband and I decided to give our 13 year old son pocket money (10euro/month) basically for buying the occasional drink or sandwich.

However this summer my husband agreed with my son that the money would be linked to house chores and to keep this equal the same has been applied to my 10 year old - they are earning about 6 euro a week.

Yesterday my oldest son decided he would like to buy a PS3 game with his money (30 euro). I was with him. From my point of view he has to learn how to spend money, way up the pro's and cons.

I explained to him that it was not the best choice that I would prefer he used his money to go to the cinema with his friends (example) or to buy a drink at school or on something special for one of his hobbies but that at the end of the day it was his choice.

I explained that 30 euro was a lot of money and once the money was spent it would be spent. In the shop he hesitated but decided to go ahead and actually is very happy with this purchase.

My husband was not so happy and was highly critical of our son and in fact of my approach.

You have advised me in the past of our 2 differing approaches, but actually how can we find a good way to teach our son about money and the value of money.

I think this is really important that he learns to manage it.

Today he has a bank card (very controlled) and up until now has bought himself some food from the local garage and a belt holder for his mobile phone.

Personally I trust him, he is sensible and has a good head on his shoulders.

Comments for Pocket Money

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Helping Kids Learn To Manage Pocket Money
by: Annie Desantis

Teaching Kids About Money

Hi Kathryn
You are on the right track helping your boys to learn how to manage money - so many kids leave home with no idea how to manage finances and end up in a mess, or have a very steep learning curve.

Firstly from my perspective we have to let our kids make their own choices about how they spend their money. Once they have earned it (or with an allowance) it is their money. Part of learning is making mistakes or choices that may not be the best choice. It is much better that our kids test this out within the security of living at home, than when they are out in the big wide world and discover they have not allowed enough money for groceries!

I had a clothing allowance as a teenager, and one of the biggest lessons I learned was to plan for the season instead of impulse buying. I bought a pair of gorgeous red shoes that were hideously expensive. They were uncomfortable and I barely wore them. I also had very little money left for any new clothes for the next 3 months so it was a very good lesson.

Mistakes Or Learning Opportunities?

Mistakes are not bad unless we keep repeating them. As parents we have our kids best interests at heart and we want them to make good decisions. But we also are very attached to those decisions being OUR idea of what is best.

Of course we help to educate our children about how to make financial decisions, how to think ahead and budget, and how to learn from their decisions.

Regarding your son's purchase of his PS3 - this could actually be seen as a wiser purchase than spending his money on movies and food that are consumed once and then the money is gone. Instead he has chosen to invest in a piece of equipment that will give him an activity to play with his friends for years.

Gaming toys such as PS3's are not all bad. Of course we don't want our kids spending all their time in front of a screen. But there are some benefits to playing these kinds of games - co-ordination, training the brain in quick responses, problem solving, and many of the games are highly educational. Of course you might want to screen out violent games and come to some agreement as to how long he spends on it, but from my perspective it was not actually a bad decision on his part.

We can advise our kids about their spending, and we can give them alternatives or help them think through each scenario, but actually controlling how they spend their money I think is dis-empowering.

Part Two Follows . . .

Helping Kids Learn To Manage Pocket Money - Part Two
by: Annie Desantis

Ideas For Teaching Kids
How To Manage Money

There are lots of ways to help him learn to manage his money differently.

I tried various things with my kids, and one of the things they found most helpful was using jars. (Or you can set up separate accounts.)

Dividing up their money into different categories helps them to learn to budget ahead, and learn to invest. They can have as many jars as they want, but here are some that we used:

  • Weekly spending - sweets, impulse buys etc

  • Saving for bigger purchases

  • Money asside for gifts

  • Money for long term savings - which they banked every time it got to $5

  • Money to help other people

  • Emergency Money - the catagory of emergency could be very broad!

  • Holidays - they realized they needed more money available over the holiday period or if we were taking an overseas trip

Sometimes we had fixed percentages that went into each jar, sometimes my kids went week to week deciding how much went into each category for the week. For example in the weeks leading up to Christmas, most of their money went into their gift jar.

Some parents insist on a percentage going into long term savings that the child does not use until a certain age, or that money can only be used to create more money - perhaps funding a lemonade stand for example.

Part Three Follows . . .

Helping Kids Learn To Manage Pocket Money - Part Three
by: Annie Desantis

Recommended Books

Learning to invest and plan for the future is something few kids learn.

There is a really good e-book available for free to my readers that has some excellent ideas about how to help kids manage their allowance. Various child or parenting "experts" were asked to contribute a chapter, and I was one of them, so I can offer copies of this for free to my readers.

Click For Your Free Copy Of Allowance Secrets

There are some excellent strategies in Allowance Secrets, from varied perspectives, so you can think about and talk over with your husband to decide a middle ground. Amanda also does some fabulous programs for teaching children to be entrepreneurs!

You husband is more conservative in his thinking and wants the boys to make sensible decisions, or perhaps is more attached to how the boys spend their money. So he might expand his thinking about the whole topic with reading other ideas, that have not come from you!

He probably comes from a very different family background where most likely Dad made the financial decisions and family life was fairly strict. We sometimes need different information to expand and revise our thoughts, but often the people closest to us are the ones we are least likely to listen to!

Another really good book that I highly recommend is Rich Dad Poor Dad. Robert Kiyosaki has also written a book for teenagers your son might be interested in, but I would recommend you get the main book first. You may well find that his approach will bridge the gap between the differences in how you and your husband deal with the whole issue of money with your children.

Part Four Follows . . .

Helping Kids Learn To Manage Pocket Money - Part Four
by: Annie Desantis

You also mentioned your son has a bank card - is this a credit card, or just a debit card he can use to access his own money? (In Australia we often refer to credit cards as bank cards). If it is a credit card, then I would re-think that one!

If it is just a card so he can access his own money, then that is part of taking responsibility for his spending. Of course it also makes is easier to be impulsive, but he can always leave it at home so he has an extra step to take before actually using it. Sometimes when we go home and think about a purchase instead of acting on impulse, we see the bigger picture again, and might choose differently.

What Money Behaviour Are You Modelling?

The other thing to be aware of is how YOU and your husband are with money. Your sons are learning a lot by how you are with money yourselves. If we frequently impulse buy, then it is pretty hard to expect our kids to do anything differently!

Involve Kids In The Household Budget

We can also help our kids learn about what is involved in running the household. Let them participate in the family budget and they can even have a say about where money is allocated.

I got my kids cooking from a very young age, and one of the things they had to do was not just cook the meal, but plan and shop for the ingredients. I was a single parent at the time, and we lived on a very limited budget.

We even experimented with the entire grocery shop being their decisions - and had some uncomfortable days at the end of the week where dinner was cereal! But it taught them some very valuable lessons - and helped them to appreciate the bigger picture of how the house functions.

Kids often think money just appears because parents work, but have no concept about how it needs to be allocated.

The more we empower our kids to understand about money, to take responsibility and learn from their actions, then we give them a very good start in life. More and more in the future we are going to need our children to be creative about generating money - the world is changing very rapidly and we need creative entrepreneurs!

Money Is Just Energy

Money is just pieces of paper or metal that we exchange for other things. We have a lot of negative stuff around money, such as there is never enough, money is bad, money causes problems, the world is drowning in debt.

But we can raise our kids to think of money as just energy to exchange, and to take responsibility for creating a healthy flow of energy, then they can play a better part in caring for people and our world.

Good luck with it all, I'd love to hear back how you are doing and what you try with your boys!

Annie D :)

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