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Pocket Money

By: Elizabeth Grace - Updated: 8 Mar 2013 | comments*Discuss
Pocket Money

Children learn early on that money is necessary to buy things, but it usually takes them quite a bit longer to understand the finer points of family finances, including how funds are earned and how parents must juggle not only the bills, but also dole out pocket money in a fair fashion. Helping kids to manage money is a smart move for parents and stepparents, who can allot each child a set amount of pocket money and avoid the constant begging that comes when kids are expected to go to their parents for every item that they’d like to purchase.

Budgeting for Kids’ Pocket Money

Whether or not children are allowed to handle their own pocket money, parents and stepparents will surely be budgeting a certain amount of cash for their children’s everyday needs and wants. Kids don’t need a great deal of money, but ideally, they should have enough so that they can learn to spend some and save some. Many parents help children to learn about the importance of spending by asking kids to separate their money into at least three portions. One is for immediate spending, one for short term savings (outings, video games, etc.) and the third is for long term savings (a car, college, etc.). In some families, they add a fourth category, which is for donating, teaching children the value and importance of helping those less fortunate.

Fair Money Management for Families

Whenever there is more than one child in a family, the kids are bound to sometimes feel that the may be getting less than their siblings. In stepfamilies, the tendency toward looking for inequities may be even greater as children examine every detail to be sure that they are getting a fair deal. What children don’t always understand that fair and equal are not always the same thing. If two children are the same age and have the same needs, then their portion of the family budget should match, but in most cases, siblings and step-siblings are of varying ages and needs, so adjustments need to be made to accommodate each child’s unique situation.

Explaining Budgeting to Children

Even fairly young children have the capacity to understand the basics of budgeting if it is explained in simple and straightforward terms. Once kids are old enough to recognize that money buys things, they can begin to be schooled on the importance of managing money well. Explaining that Mummy and Daddy earn money and that they spend that money on things like their house, cars, food, clothes, and toys for the family helps kids to understand that money isn’t just something that they need on shopping trips, but is used to purchase all of the things that they want and need.

Once they understand that much, the next step is letting them know that families must plan how they will spend their money so that there is always enough for the most important things. As soon as parents see their children’s noses crinkle up in disapproval, they can be sure that the kids have begun to truly comprehend the basics of budgets – that in most cases, there is not enough money to buy absolutely everything, so sometimes, the answer is no.

Chore Based Earnings or Allowances?

As with all aspects of parenting, there are differences of opinion regarding whether children should be given allowances or if they should be expected to earn them. Some feel that by earning money by doing chores, kids will gain a greater appreciation of the value of money, while others do not want their children to associate chores with money, instead preferring that the kids learn to help out simply because they are a part of the household. Both lines of thought have merit, and in the long run, what matters most is that parents set reasonable limits on their children’s spending so that it doesn’t exceed what the family can afford and that the children learn to manage whatever amount of money that they have using good old-fashioned common sense.

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