How to make pocket money meaningful for your kids

Do you have a distant memory of when financial decisions were impossible — weighing up the choice between football cards or a packet of sweets? While things feel much breezier nowadays, when it comes to money management, these early decisions made in the corner shop were pivotal moments in understanding the value and meaning of money.

What age should children get pocket money?

Starting out children young with money is a great way for them to begin to make these tough decisions on their own. Being able to figure out if they can squeeze one more sweet into their haul with the pennies left in their hand will get them thinking about their finances.

Establishing a pocket money scheme from as young as four or five is a useful time period for their minds to begin to grasp an understanding of what they are being taught.

Encourage a physical connection with money

For younger savers, the most important lesson is understanding money’s value. Engaging a physical connection with money is important when educating children on how much they can buy with the shrapnel they have saved. Encouraging them to take some coins into a shop, spend the amount required and reflect on the change they receive is important and formative for a child.

Put a saving limit in place

As your child begins to grow and they have more independence, money plays a key role in this. Giving them responsibility to stick to an emergency savings limit could be a useful way to implement disciplined spending. This emergency budget could be as small as the amount for the bus home. Ensuring they keep this within their account makes the child conscious of what they are spending while keeping in mind the number they can not drop below while they are out and about spending.

Use visual aids to encourage saving

Visual aids are a useful incentive for early savers to understand their funds versus the length of time it will take them to reach their goal. A chart with mini targets is a great way to do this. Not only will it encourage your child to save, it will also visualise the length of time it will take them to reach their goal. This is a useful method to allow kids to decide if it is worth spending their money on their initial material goal after spending that much time saving. They can then independently decide if they should keep it and re-evaluate their decisions.

Piggy banks are a great visual aid and also look great within a bedroom. Children can learn to count the money whilst visually watching the pennies increase and decrease in accordance with spending. They also get to experience the gratification of completing a job and physically placing their earnings within their mini bank and seeing their funds rise.

Introduce a payday to build patience

We all love payday, so why not introduce one for your kids? This will help them save and budget from one month to the next. This is then a chance for the parents to step in and stand firm, eliminating advances on pocket money. This engages an understanding that once the money is gone, it is gone. If advances are given then it becomes important for the child to learn about repayment and budgeting to solidify that money isn’t endless and needs to be earned. Limiting or avoiding advances on pocket money promotes informed spending decisions and discourages money wasting.

Use chores to introduce responsibility and accountability

Any pocket money fund should align with your household’s financial earnings. If the pocket money margin is too high, this could risk a flair of entitlement growing within your child, while setting the numbers too low could discourage them.

A chore roster is a beneficial system for kids to know what they need to do. Accountability is a vital element to earning, and a roster system will help your child understand what is required of them for the money to be earned. It will also help them to understand that if they do not fulfil their role, then they do not get rewarded.

Talk with your child about money

It’s usually a good idea to have open and honest talks with your child to help them understand the meaning of money. Research conducted by the Money and Pensions Service (MaPS) in 2021 found that less than 46% of parents openly discuss money with their children. MaPS reflected that parents who are confident in handling their money are more likely to teach their children about money and saving.

Discussing spending decisions and establishing what your child needs versus what they want will encourage them to consider their money’s worth. It also reinforces that they may regret a poorly thought out purchase once the money is gone. Being open and honest is chief when solidifying money’s meaning within a child’s life.

We’ve discussed a lot of things here, ranging from when to start your child’s pocket money to teaching them some important life lessons along the way. We hope you found the advice useful and that it will help you provide a solid financial education.