Small People Earning Small Money

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Small People Earning Small Money

Pocket money is such a critical first step in teaching your children healthy financial habits. But you need to set it up properly right from the start to have the biggest benefit.

It is their first taste of managing a consistent income stream and it will help them develop the fundamentals of being able to handle a regular wage as an adult.

No other topic will dominate parent/child financial matters more than the sensitive issue of pocket money. It is an annual ritual which pits the negotiating skills of parent against the “guilt” tactics of the child as they bargain for more.

The funny thing is that no matter what the outcome you, as a parent, are always left with the nagging feeling that you’ve been conned.

We would ask our kids to provide a budget on where their pocket money is being spent… a scaled down version of our family budget. Children, like adults, should know where their money is going before they ask for more.

It is important also that the child learns to work to earn money rather than relying on just a handout. Also their savings habit will improve if hard work has gone into gaining the money.

We had a “rule” in our household that at sometime all our kids had to work at McDonalds. Not only do they earn a regular income from a part-time job, but McDonalds is superb at teaching them how to deal with the public, customer service and cross-selling.

These are all important attributes which can be transferred to any job in the future.

When to start your child on pocket money

The time to start paying an allowance is an individual decision as children’s maturity and understanding varies greatly. Some say the earlier you start the better, say around the age of five. This is a good time because they are just starting school, which makes them feel very grown up, and are able to take on extra responsibility.

Some parents worry about how much to give their children in pocket money. It doesn’t really matter. The fact that you’ve started giving pocket money is what counts. To a five-year-old, 20 cents a week can be a lot of money.

Some parents we know pay $5 a week to primary school kids and $20 when they are in high school. Others still use a system of a dollar per week for each year of age. But this could be too expensive for some parents, especially those with a lot of children.

It is an individual decision but it needs to be based on the amount of work the child does for the family and the age of the child.

The amount of money will also depend on what expenses it is meant to cover. For example, one friend of ours pays their 14-year-old $200 a month in pocket money but the child has to pay for all her expenses (including clothes and shoes) except for school uniforms and books. We think this is excessive and we also want to retain some influence over our children’s expenditure.

Experts say that even more critical than the amount is deciding on what basis the pocket money should be given. A majority of parents pay their children for good behaviour or for performing well in school.

Paying pocket money with no strings attached is a dangerous precedent to set. As they get older, children will then have to learn the hard way that you never get something for nothing. Why not get them used to the idea of working for payment at an early age.

Likewise, it is imperative children realise that everyone in a family has jobs and responsibilities as part of a team which aren’t paid for. If they are lucky enough to have their own room, for example, then they should keep it tidy and certainly not be paid for doing so.

Rather, pocket money should be given for extra jobs performed on a regular basis. But make sure you discuss with the child which jobs have to be done as their agreement to job allocation will certainly create more enthusiasm.

A couple of other things we did;

. Start off with weekly pocket money but when they become teenagers change it to fortnightly and then monthly. It forces them to budget better and not blow the money at once.

. Don’t cut off pocket money as punishment. It encourages the idea that bad behaviour is negotiable and not simply unacceptable.

. Make a job checklist so everyone knows who does what. This avoids arguments until the routine is firmly entrenched.

. Set a rule that a certain portion of pocket money, say 50 to 75 percent, must be saved. But then sit down and work out a goal for those savings

. Encourage them to give a fixed part of their pocket money to charity. They should chose the charity and it helps instill community values.

Comments

0 #3 Johnny 2012-09-19 09:55

I AGREE MAH HOMIES! FIGHT DA POWER!

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0 #2 2011-09-06 03:49

Great articles that i ever read...is very interesting and informative. As reminders for the parents to their children on how to manage or handle of small amount of money. Money is our wealth just like our home sweet home to live with a cozy world.Thanks!

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+1 #1 2011-09-05 13:18

Good article.

My 3 year old has his job every night, closing all the blinds and curtains in the house. When he does this he gets 3 (because he is 3!) coins (he doesn't care which ones) to put in his money box.

We have twice been to the bank to change his money ($59 and $129) - half of which goes in his bank account and the other half he gets notes and then we head to the toy shop where he buys toys he has been talking about for months. The left over money goes back in his money box for next time.

It pleases me greatly that he seems to have already overcome my instant gratification issues!

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