Many children believe Money Grows On Trees.. Or that it is available in limitless quantity in the bank.
When daddy needs money, he just goes to the bank, and collect!
Good financial habits should be inculcated from an early age.
A small boy says all his friends have pocket money, except him. Should the parent start giving him pocket money, like his peers?
Yes, It is a way to teach the child to manage money and make responsible choices. Managing his pocket money has an educational value,
A report says… young adults who were given an allowance during their childhood (to manage) are more likely to save than those who were not.
With the other method of giving money whenever the child wants something, he learns nothing… things like delayed gratification, resisting temptation, not following the crowd in taking decisions, etc
Regarding the age to allow a child manage his money, there is no ‘one rule fits all’. Children vary in their personal constitution. The most important thing is to link financial responsibility to spending money.
Parents need to clearly express their expectations: “Now you pay your outings at the cinema and at the restaurant, gifts at friends’ parties, music you download, etc.
The allowance also allows the child to learn saving by setting goals to acquire a higher-value asset. For example, if the child wants to buy a video game, he must calculate how many weeks he will have to save to pay for it, and put his plan into action.
The child learns how to save to reach a target, and not spend money on a whim, or capriciously. He learns to prioritize, make choices: if he puts money aside for his bicycle, he will have to do without certain things, such as going out to the movies with his friends.
Children learn better when otherwise monotonous activities are made to look like a game. The pocket money should be provided at regular intervals, preferably the same day, if it is weekly . In order for the child to learn how to manage, plan and set saving-goals, he must have a regular cash-flow.
That makes planning easy for him.
Every effort should be made to make the savings habit easy to imbibe – like agreeing with the child the portion set aside for different things – savings (towards a goal), tithing, whatever.
To have the greatest impact, the parent must of course lead by example. We all know children learn more from what (they see) you DO than what you SAY.
Advances are exceptions for unforeseen or unusual expenses, and should be an opportunity of teaching financial accountability. What is borrowed must always be paid back, on time, as promised.
It is also good help him to plan how much it will have to save each week to reach his goal. Also, it is good to give him the freedom to make mistakes so that he can assume the consequences of wrong decisions, and learn the lessons. If a purchase he splurged on was not worth it, it was his money that he wasted. If he spends his allowance in two days, there’s no question of putting his hand back in the parent’s pockets.
Remember my article By Their Toys You Shall Know Them? Many adults grow up without ever learning, when they were kids, the importance of being in control of their acquisitive greed for immediately satisfying every want (not need).
Should children be forced to save? It’s a matter of what the parent decides, and of course the personality of the child in question, but this should be encouraged strongly.
To intensify the savings culture, the parent could opt to also match up a portion, each time the child saves.
The money thus accumulated can be used, not only to grow the bank account, but also to achieve a particular goal, such as riding lessons or a new toy.
The desires of young children are often unlimited. As soon as one is filled, another appears. So if we give in to all of their demands, we embark on a never-ending cycle , And they grow up not understanding that you can’t have everything you want in life, whenever you want it.
A way forward is to tell the child that if you really wants this bicycle or this smartphone, you will have to save to get it.
Despite having the means to buy everything the child wants for him, he should still be asked to contribute a portion to certain purchases. For example, he may pay the difference between the amount that is considered reasonable for a lawn tennis racket and the price of the one he covets. This teaches responsibility for money and is good preparation for adulthood.
Children, like adults think more before spending the money they earned / worked hard for, than the money they were given. Requiring a financial contribution can therefore encourage our young people to make more informed purchases, and take a form grip of their financial life, from an early age.
Basically, money lessons are easily assimilated while we are very very young. Remember the story of the baby elephant and the chain?