4 Reasons why Should Child Get Pocket Money

An integral component of education is instilling pocket money management skills. The concept of pocket money for kids has seamlessly integrated into our daily lives, but do parents truly comprehend its educational significance? After all, it's not merely about providing funds for immediate needs; it's a mechanism for nurturing financial literacy and a chain of invaluable skills.

What exactly is pocket money for kids, and what role does it play? Should a child get pocket money, how much? Let's delve into these questions in greater detail.

Money milestones by age

At what stages do kids hit money milestones? Children exhibit an interest in money from a young age. At 2–3 years old, they eagerly examine crisp banknotes and stack coin towers. During this phase, pocket money holds a physical appeal for kids – beautiful pieces of paper and tinkling metal circles.

Observing their parents, kids realize that money facilitates the exchange of various goods at stores. This realization leads to questions like, "What's this?", "How much money is this?", and "What can I buy with it?". Naturally, this curiosity evolves into a first independent step around the ages of 6-7.

Around the same period, they begin to comprehend the importance of saving, having their own money, and managing it. Their first independent financial task might involve purchasing an item from the school cafeteria. How much pocket money should kids get? Running to the cafeteria during break to grab a treat necessitates calculating the cost of the purchase, making the payment, and handling change – skills that help them keep up with their peers.

If a child is allowed to learn money management skills, by age 8 they can engage in what are known as "simple transactions." So, how much pocket money for kids at this age should be? There should be enough money that they can run to the nearest store for a candy bar, pay for transportation, or buy a gift for a friend. However, the question arises: who foots the bill?

There are three possible sources: savings (such as cash gifts for holidays), earned money, or pocket money for kids provided by parents.

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4 Compelling reasons for giving kids pocket money

From a psychological perspective, there are four compelling reasons to provide pocket money for kids. Let's explore each one in detail.

1. Fostering social Interaction

Money serves as a tool for structuring interactions among individuals. Relationships with others, including peers, are shaped in part by money and this is one of the main reasons why kids should get pocket money. Take the example of a school cafeteria: seemingly trivial transactions like sharing a snack unite the children's group. In the company of friends, an ordinary treat becomes more delightful, and a cafeteria trip transforms into a mini-adventure. Imagine the emotions of a child invited to join but unable to because of a lack of money. Depression, embarrassment, confusion – how does one decline? How does one weather the teasing of classmates? How can a return invitation be expected? Avoid cornering your child by denying pocket money, which could lead them to grapple with this dilemma for a prolonged and distressing period.

 2. Learning decision-making through purchases

Another significant reason why a child should get pocket money is to foster money management skills. Proficiency in managing money doesn't materialize out of thin air; it's acquired through positive and negative experiences. Understanding why one must plan expenses often involves learning the hard way – spending all your money on trivial items and then regretting it when a necessary purchase arises. Through smaller sums that won't dent the family budget, a child can gain valuable experience. When they face a scenario where they have delicious chewing gum but no funds for a tram ticket, the lesson is learned: allocate money for transportation before spending on sweets. If you wish your child to develop sound money-handling habits, the question of whether to provide pocket money should hardly be a dilemma.

3. Self-awareness of desires

Pocket money for kids gains the autonomy to indulge their wishes independently, without parental involvement. They can purchase that coveted pair of sneakers. Even if this acquisition appears unreasonable to parents, allowing a child to fulfill their desires is preferable. The ability to recognize and actualize one's desires is a hallmark of a mature personality. In the long run, such an individual will possess clear aspirations and a drive to achieve them.

4. Cultivating the notion of value

Another compelling rationale of pocket money for kids is the cultivation of an understanding of the value of possessions. Many parents have encountered instances where a child carelessly handled an expensive item, inadvertently damaging it (such as dropping a phone leading to a cracked screen). Or when a child is gifted an expensive toy and proceeds to dismantle it using office scissors and a kitchen hammer. Such incidents stem from a lack of comprehension regarding an item's worth. Pocket money, often insufficient to buy a desired toy, can instill the realization that valuable items must be safeguarded.

Determining the appropriate amount of pocket money

Under what conditions should kids get pocket money – in return for academic achievement, assistance around the house, good behavior, or simply as a matter of course? In Germany, for instance, parents provide their children with 10–15 euros per week as a standard household allocation.

In our own country, parents often hesitate whether to grant their children an allowance when all of the child's necessities are met (school lunch is covered, supplies and toys are provided on schedule, transportation cards are topped up, etc.). It's important to recognize that the conversation extends beyond basic expenses, encompassing discretionary spending and saving.

Allowing room for discretionary spending imparts valuable money-handling experience (spending on treats or investing in something valuable). Meanwhile, saving money helps nurture the skill of budgeting within a child.

When you allocate a specific amount of pocket money for kids, understand that this is an investment in your child's education.

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An additional reason for providing pocket money

Teach your children proper money management. Introduce them to the envelope method, provide a piggy bank, and download a financial planning app to your phone. Engage in open discussions about money in the presence of your children; avoid making it a taboo or secretive topic. Rather than concealing temporary financial challenges, explain their reasons and outline your efforts to rectify the situation.

Address their money-related queries, share educational videos online, and read informative articles about financial literacy. These actions will significantly enhance your child's money management abilities.

When contemplating the appropriate amount of pocket money for kids, in cases of recurring unjustified spending or when your child doesn't account for their expenses, strive to avoid confrontation and instead approach the situation calmly. Instances of extortion or lending money at school may require your intervention. Sometimes, the motives underlying such actions aren't immediately evident.

A child's financial literacy and pocket money are intrinsically linked. One cannot exist without the other. Ultimately, the ability to manage money effectively nurtures an array of valuable skills, including proactive planning, responsibility, prioritization, and optimal resource allocation. By affording your child the opportunity to develop these proficiencies, you're making a significant investment in their future. If you want your child to grasp the value of money and its management, the answer to whether parents should provide money is a resounding "Yes, they should!"