Make your kids moneywise

By admin
27 April 2014

The earlier you teach your children to budget properly, the better. We give you some practical advice on pocket money and teaching your child to save.

“Mom, can I please get one? Please, Mom?” Whether it’s your preschooler wanting R5 for one of those machines that spit out plastic toys, your primary- school kid asking for a new soccer ball or your teen begging for a Playstation game, children’s endless wish lists can put a serious dent in your pocket if you don’t budget for it.

But instead of just dishing out cash on demand, why not get your kids to budget on their  own by giving them pocket money?

Experts say it’s the best way to get children to understand money and responsibility from a young age – and it will take some of the pressure off you.

A 2007 survey by international market research company Synovate showed 34 percent of South African youngsters get a set amount of pocket money every month while 26 per cent are given an amount that varies according to what their parents can afford.

Just 48 per cent of children do chores to earn their pocket money while 91 per cent of South African parents actively teach their children the importance of saving money and how to do it.

But how much pocket money should you give them and at what age, and should it be chore based?

Our expert says each parent should evaluate all the factors and make a decision based on their income and the needs of their child. And, he adds, kids as young as two should be given pocket money.

“Young children don’t know the difference between a R1 coin and a R200 note. All they know is that money buys things, but allowing them to save and spend gives an early start in helping children become independent and learn to make good choices,” Randburg-based educational psychologist Ken Resnick says.

He says there’s no right or wrong way when dealing with pocket money and that each parent should decide how they’re going to deal with it.

Sue Hanekom of Villiersdorp, a mother of two, has an interesting strategy. Her twin sons, Ricardo and Martino (12), each receive a bean every time they do a chore around the house such as clean their room, make their beds, do the dishes or feed the pets.

“Come month end I count the beans and they get 50 c a bean. It usually works out to about R150 a month each,” she says.

Sue feels this teaches them the importance of hard work and that you don’t get something for doing nothing.

“I was so fed up asking and threatening them and doing all those things parents usually do to teach their children responsibility, but now the problem is solved,” Sue says.

“Now every morning their beds are made. After supper there’s no more nagging them to please do the dishes. The dogs get fed and their room is kept clean.”

Sue says she hasn’t been doing this for long so she can’t yet tell what the long-term effect will be.

“But it’s been working well so far – and my vocal cords are getting a well-deserved rest!”

You can start giving kids pocket money from when they’re as young as two, although the average age is about five or six. Young children can start to learn about money and what it means to earn it by for example giving them 50 c for taking their plate to the kitchen after they’ve eaten.

“One way to get them to understand the value of money is to keep a box of sweets in the house you can call the ‘shop’. It’s open only at a certain time of day and they can use their money to buy whatever they want. But for every coin they spend, one should be put in their piggy bank,” Resnick says.

As they get older they should start to use their pocket money to pay for small toys and items from vending machines themselves, he suggests.

“Get them to take pocket money along when they go shopping with mom. It makes the trip a pleasure for mom. Kids can buy whatever they want with their money and this stops all the nagging that usually accompanies a shopping trip with a child.”

Giving them pocket money is about more than just keeping kids happy; parents should see it as an opportunity to educate their children so they can make informed money choices. Children often don’t understand the difference between what they want and what they need, so it should be explained to them. Tell them what they’re responsible for buying with their own money and what you’ll buy for them such as toiletries and clothes.

Also explain to them where money comes from and that you have a limited budget with which you have to buy everything for the month. Use the family unit as an example to explain specific household expenses and how you decide which things to spend money on. If your children are given pocket money for the chores they do around the house, Resnick suggests it’s best if they’re “paid” only for additional tasks and not for those they should be doing in any case.

“They should get paid for things such as picking up dog poo, washing dishes and feeding the pets but not for basic things they should be doing anyway such as keeping their room tidy, getting dressed on time and brushing their teeth.”

Another option is to set a minimum amount of pocket money – say R30 a week – then offer an extra R10 each for any other chores you’d like them to do that week. This way your children will learn the importance of contributing to the running of the household as a family member, and not just see chores as a way to earn money.

But how much pocket money should a child get?

It all depends on parents’ financial situation, Resnick says. “But as a guideline, kids up to three should get R1,50 a day, those aged 3-4 should get R2, kids aged 4-5 should get R3,50, and so on. A 12-year-old can earn R10 a day and this can increase as they get older.”

Resnick suggests once your child approaches the teen years you should sit down with them and draw up a proper budget. Increases can be given on birthdays. If your child asks for an increase at other times ask them for a written explanation of why they need more money and what their financial plans are for the future.

Top pocket-money tips

  • Give pocket money on the same day each week. This will teach kids financial discipline and they’ll be able to plan better.
  • Let them make spending mistakes and don’t criticise them when they do – we’ve all made and learnt from our mistakes.
  • Show them how to draw up a budget, on paper or on a computer, so they can see what happens to their money.
  • Never take away pocket money in anger. The only time you should do this is if your teen is caught using it to buy cigarettes or alcohol.
  • Help them draw up a budget. You can give the jars labelled “spend”, “save” and perhaps “donate”. The money in “spend” can be used for everyday items they want, “save” is for short-term needs such as going to the movies with friends or longterm goals such as buying a new games console, and “donate” can help to teach them social responsibility.

Teach them the importance of saving

The Children’s Mutual, a British company that specialises in kids’ savings, suggests your children split their savings just as an adult would. Sit down with them and explain the following saving terms.

  • Short-term savings - These are savings for items your child plans to buy in the next two or three weeks. It could be a toy, CD or cinema tickets.
  • Medium-term savings - Encourage your child to save for family presents, spending money for the next school holiday or big items such as a new cellphone, bicycle or special clothes. You can encourage this type of saving by promising to give them an amount that matches what they’ve saved.
  • Long-term savings - Explain the importance of saving over a long period of time and how banks’ long-term savings accounts work. Also tell them how much they’ll have in two or three years if they save a certain amount every week and explain the amount increases as interest is earned. Help them set a goal and if they often receive gifts of money from family members encourage them to put this into their long-term savings account.

- Kim van Reizig

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