Children's Day Special: Timing pocket money right

Children are what you make them, goes an adage. And like every parent, you too want to give your child the best. But in today’s maddening consumerism, mall mania and instant gratification culture, things can go a bit crazy, especially when it comes to their pocket money.

On the one hand children have pester power, and on the other you find it easier to give them money than time. Then there is always that kid in their class who gets way too much dough as pocket money, indirectly putting more pressure on your purse strings.

Since, you don’t want your child to have an inferiority complex either, just because (s)he gets less pocket money than others. Dealing with pocket money issue can be more difficult than trading in the futures and options markets. Keeping this in mind, we tell you a few things about pocket money and help you bring some method to this madness. To know more, read on.

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[caption id=“attachment_524089” align=“alignleft” width=“380”]  Children have pester power, and on the other you find it easier to give them money than time. Reuters[/caption]

Right age to begin:

Six to Eight: The right age to begin pocket money will vary from family to family, but anything before the age of six isn’t advisable. Ajitha Anand, a Mumbai-based, child counsellor, says, “It’s a good idea to start around the age of six. I started giving my son pocket money when he turned six, that’s the time when children start to understand the denominations of currency notes.” Six to seven years is a good idea, but how much you give also matters.

Anand said, “It should not be a very large amount at this age. Rs 10 a week is good enough. The child should be free to buy whatever he wants, as long as the parent monitors the spends. At that age, it’s usually going to be chips and chocolates.” As far as, toys goes, they should be given apart for the pocket money, at least at this age.

This is also a good age to impart the values of giving. Anand said, “Out of this money, the child should be encouraged to keep aside a very small amount every month in a box, and at the end of the year, the collection should go towards a cause.” When your child gives a gift or meal with this small amount to an under privileged child, it sensitises your child to know how privileged (s)he is in life.

Pre-teens: Unlike the age group the six-seven year old peddle pushers who pretty much listen to the parents as to how much money they get and how it’s to be spent, by the time they are in pre-teens, things change a little. Anand said, “As the child grows older, the amount of pocket money should also increase.”

By this age, the child starts comparing the amount that he gets as compared to his classmates. Suresh Sadagopan, a Mumbai-based Certified Financer Planners, said, “The amount of pocket money parents give their children vary considerably. A middle class household would give Rs 1,000 -2,000. An affluent family may even choose to give Rs 10,000.”

If you end up giving way too little, there is a possibility of that working negatively on the child’s mind. While at the same time, if you fall for his pester pressure and give way too much, he could be tempted to spend on wrong things. “The truth is it’s never really about the amount of money the child gets. It’s really about the fact that the child (pre-teens and teens) wants to belong to a certain group. He wants to prove he belongs,” Anand said.

This is the time when individual identity formation sets in, and knowingly or unknowingly the kids label themselves based on what they have. “Any parent who gives a huge amount of pocket money to their child is actually not preparing the child for the future. The child will soon become too proud based on the money he gets, which does not work in real life. This is a good age to teach how money should be handled, and values to be imparted,” Anand said.

Sadagopan agrees about imparting good money management fundamentals right from this age. “When you give pocket money set a few ground rules. These funds are for the month, and if the money is spent in 15 days, and the child comes back asking for more, more should not be given. This would teach the child proper budgeting and restrain (delayed gratification),” he said.

Teens: By the time the child reaches his teens, the demand for pocket money will increase substantially. “Getting the child a savings banks account during his pre-teen and teen years is a good idea. In fact, get a child exposes to banking as early as possible,” said Sumeet Vaid, a Mumbai-based CFP. Most banks offer savings accounts for kids, with child debit cards and cheque books. “Debit cards work very well when the child goes for camps and international school trips. They don’t have to carry cash,” Vaid, said.

Debit cards may or may not work for the child daily spends (depends where the child uses the card) but the best part is that you can monitor the spends on the debit card, since you as a parent also have access to the account statements.

By teens the child needs to learn to manage bills like that of his mobile. “Set a monthly budget with the child and if he sticks to the budget or saves more amount consistently for a few months, you could reward him with a one-time bonus,” Sadagopan said. The one-time bonus amount is a good idea to bring about money management consistency. The child should also be encouraged to save small amount towards larger financial goals, every month. For instance, if the child wants to buy a guitar, he could save Rs 500 a month and be able to fund his guitar in seven-eight months.

End note:

Should you go for the popular American system of allowance based on housework? No and Yes. “Associating pocket money with daily chores is not a good idea. This child has to know that he is part of the family and it’s all about team work. Everyone has responsibilities and all need to pool in,” Anand said.

If all the chores are money based, the child gets a feeling that (s)he’s earned his right to the pocket money and that won’t go very well down the years. “At the same time, some chores during vacations (when children have more time at hand) can be associated with the financial reward,” Anand said. This will ensure they understand the dignity of labor.

Having money conversation with children about money is a good idea. “If the child fails at budgeting or overspends, shouting is the not the answer. At this age when they fail with money management, the cost of learning the financial lessons is very small. As compared to when they are adults and fail at money management,” Sadagopan said.

We really won’t tell you the exact amount you should give your child. It will depend on your life style, the school your child goes to, your social standings and the like. But, these are a few things to keep in mind about pocket money.

Do wish your child a happy Children’s Day today!