With all the excitement that the long-awaited return to the classroom brings, it’s important that one valuable lesson doesn’t slip to the bottom of the list – the question of managing pocket money.
With children having spent a large part of the year indoors, the temptation to blow lockdown savings – which grew by a whopping 144% over this period – on the way to school and at weekends may create the perfect storm for overspending. As children head back out to the ‘real world’ – with the lure of the tuck shop or after school shopping trips threatening to entice them into spending all their hard-earned pocket money savings – now is in fact the perfect time for parents to reinitiate important conversations with children on the topic of safe spending and budgeting.
First on the agenda should be a frank, open discussion about your child’s understanding of pocket money. For many children, the term itself implies a weekly or monthly treat to be spent on goodies, rather than something that should be carefully saved and budgeted. With their understanding of money limited to weekly indulgences, it’s hardly surprising that money often flies out of their wallets the moment it is put in. The term also confuses matters in a cashless world where pocket money doesn’t have to be pocketed.
One way to challenge this mentality is to substitute the term “pocket money” for “allowance”. Not only does this encourage them to view their money as a resource to help support their needs and expenses (rather than a bottomless pool of cash), it prompts them to think more carefully about their purchases and – by extension – gives them a sense of ownership and responsibility over their finances.
With this in mind, parents should seek out opportunities to provide valuable, hands-on money management lessons in real-life scenarios, which is how children learn best. For instance, why not see whether they are up to the challenge of saving at least one third of the pocket money they receive over the first academic term, donating a third and being able to do what they like – within reason – with the rest? Not only is this a fun, practical way of learning to exercise restraint and patience with money, having a sizeable pot of savings to help tide them over the Christmas holidays will teach them the invaluable lesson that saving really does pay-long term dividends.
And these positive money challenges don’t have to be limited to teenagers. With research from the University of Cambridge revealing that most children’s money habits are formed by just the tender age of seven, it’s never too early to kickstart their journey towards financial independence – even for primary school-aged children. To get them started, why not start the week by giving them a nominal sum of money and encourage them to use their budgeting skills to make it stretch the whole week? By doing so, parents can begin to nurture positive money habits from a young age, taking the vital first steps towards raising financially confident young adults.
Money is a daily part of adult life, and learning how to manage it is inevitably a skill all of our children will have to master at some point in their lives. So, as the academic year gets into full swing, let’s view this as a fresh new start and harness it as an opportunity to help our children develop positive money skills, practice responsible spending and become financially confident young adults, well-equipped to tackle the financial challenges of modern-day life.
nimbl’s top five pocket money tips:
- Let them try: children learn best by doing, so give them the freedom to spend and save independently to help them appreciate the value of money and have a regular catch ups to summarise what they’ve learnt
- Pocket money rise: talk to your child about what they can do around the house to bag a pocket money rise – great practice for asking for a salary increase when they’re older!
- Set savings goals: consider rewarding your child every time they reach the savings milestones you’ve set together
- The rule of thirds: encourage children to save at least a third of their total allowance every month, as this way they learn the importance of having a financial safety net from a young age
- Make it fun: put your children in charge of your shopping list next time you visit the supermarket to make real life scenarios more relatable
