Sunday, 30 September 2012

Teaching your children the value of money

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Over the years I have seen many conversations erupt online about pocket money and how much your kids should get.  People seem to be focused on how much is age appropriate?, what is it OK for them to spend it on? and should they work for their money?  I think they are all good questions and ones my husband and I have chatted over quite a few times in the nine years since we had JJ.

I have to be honest and say that until dh gave me a lesson in money management I was pretty rubbish with my money. I am not sure why this was, I did not come from a rich family and my parents are extremely hard working with a sound work ethic.  From the age of 14 I worked outside the home and earned my own money but I also spent my own money - yes all of it! I do not really have a recollection of any conversations with my parents about money and budgeting and perhaps that was part of the problem, who knows?

As a child (and even now if I am honest) I also received an awful lot from my parents in the way of purchases (as well as time, love and attention) and maybe this just gave me a thirst for buying things and the thrill that shopping can give. When it comes to spending I know my worst addictive personality traits rear their ugly head, I love that instant gratification of feeling good when you buy something new.  Luckily I am now old enough and wise enough to realise it lasts just a fleeting moment and is not worth it.

Anyway enough about me, back to the kids. From birth dh and I set up a savings account for our children and we would put money in each month (just a small amount) and also pay in money from things like birthdays, if they received a lot. Each child now has a nice little nest egg and in the future when they are allowed access to this money they will be able to buy a car, use it towards a deposit or university or perhaps go travelling with it.  Something big and impactful, we have not scrimped to save this money for it to be wasted on nights out and new handbags!

What we have realised is that it is important for us to set up a second account for each child, one they can manage and have full access to. At nine JJ is very money savvy, we have been encouraging him to do his own cash transactions since he was about three years old. Not only does this improve your child's confidence but it starts to help them recognise coins and realise how much things cost. He is a regular at Game and trades in his DSI games when he is bored of them knowing he can save for a better game, he has also helped with car boot sales and is willing to do jobs for his money. All good I feel.

JJ receives £2 a week and he is allowed to decide what he does with this money, sometimes he buys a Beano comic, others football stickers and more often than not he enjoys putting it in his money box and watching it add up so he can buy something bigger, like a longed for Lego set.

I think the key thing is that dh and I are not afraid to be honest with our kids.  I'll often tell them we cannot afford something or speak to them about the compromises we need to make. They all realise that I work so we can have holidays each year, when they moan about going to after school club once a week I ask them what they would prefer - once a week there and family holidays or the opposite? It is good to help your kids learn that not everything comes easy in life, we have to save and compromise and that is the way the world spins.

My girls are now five years old and they are chalk and cheese with money, as in everything else. Miss E likes to save her pennies and look at them and count them and see she has lots, whereas Miss M wants to spend them all but I don't think it is about greed and the ownership of what is bought, it is about the excitement that being able to pay brings. It appears to make her feel grown up and this summer she has generously offered to pay for everything we have done from her own money. If only she had enough to substantiate that offer.

I'll share with you some principles that dh and I have applied in regards to pocket money and our children. I hope they act as useful tips for you -
  1. Talk to your children about money, do not push it under the carpet.  It is OK for them to understand some things are out of your budget, others are infrequent luxuries and that there are ways to make your money go further.
  2. Get your child to start undertaking transactions in shops or at car boot sales. I have found that this improves both money awareness and also confidence to talk to new people in different situations.
  3. When deciding how much pocket money to give your child, think about your own financial situation, what can you afford and what are you expecting them to buy from the money? Will you give it weekly or monthly and does it need to be earned?
  4. Once you have decided the pocket money you will give, let your child spend it how they wish. Yes really, even if they want to blow £2 on rubbish sweets or something you deem a waste of money. When they have done it and start to ask you for more money or to buy something for them that opens the way for you to have a conversation about how different it could have been if they had chosen to spend half and save half. They will learn I promise.
And that's about it.  Share with me any tips you have for helping your children to understand the value of money.

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