How much pocket money should I give my kids, and how often? At what age do children “usually” start to get pocket money? These are common questions that parents have had to think long and hard about. Let’s go through some fundamental principles together for kids of different age groups.
Toddler – 3 to 5 years old
Principle 1: Explain the Meaning of Money
Children of this age have little to no idea of money, possibly aside from the knowledge that they can trade money for things desired from watching their parents use paper money to shop. The fact that money is merely a tool that enables us to exchange it for items of a certain value, but not anything in the world can be measured in terms of money, should be made very clear to our children.
Principle 2: Teach Kids to Distinguish Different Money Denominations
Parents can consider teaching kids about different types of money in a hands-on session or mini-games, letting kids know the difference between coins and notes, or having them tally up how much cash is in their wallet. This can help foster your child’s early awareness of money and build a foundation for future financial education.
Childhood – 6 to 12 years old
Principle 3: Give Your Kids Regular Allowance
After establishing our children’s early concepts about money, we may start giving them a regular allowance so they can practice managing their money through hands-on and real-world experience.
We can teach our kids to split their allowance into two parts: “savings” and “spending,” where one portion must be saved for future usage and the other part can be spent on what the kids want. Children will start to grasp the ability to budget for their pocket money and learn to appreciate what they have and the importance to save. As kids learn to budget and spend, make sure you are paying close attention and provide guidance where appropriate!
Principle 4: Give Kids the Opportunity to Earn
In addition to allowances, parents can give their kids rewards for finishing various tasks and chores, helping them to understand that earning money requires effort rather than just “holding their hands out.” For example, parents could assign certain housework to their kids and offer rewards when they are finished within a certain time frame. Instead of children passively waiting for parents to give them money every time, parents can take the opportunity to train children’s daily life skills, develop their independence and initiative, and allow them to enjoy a greater degree of autonomy and satisfaction and earn their own keep.
Principle 5: Open a Children Banking Account
Opening a bank account for your children is a good first step to beginning proper and structured financial education for your children. Children will develop a sense of ownership of their bank account (along with the money saved in it) and learn to manage it. Parents should guide and try to encourage their children to pay close attention to incomings and outgoings in their accounts, while also introducing to them basic finance and banking concepts such as interests and ATM machines in real-life situations.
Principle 6: Set Financial Goals
Children have things they desire to own once they reach a particular age. Instead of making a yes/no decision or making conditions for meeting that desire each time, parents can use every chance to discuss with their children and agree on a savings goal, make a plan and determine the target timeline on how to get there to satisfy the desire. As such, children will develop the habit of setting goals and working toward achieving them, which would help them not only financially but in life as well, while receiving positive reinforcements once they achieve their goals driven by a sense of pride and accomplishment.
Conclusion: Develop the Right Financial Awareness in Your Child Now – for a Lifetime of Benefits!
Children of various ages display different traits, but financial education planned and tailored well can surely meet the needs of all ages. It’s never too early to start this financial journey for your children, as your role as parents to guide them through the path will bring lifelong and immeasurable benefits!
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