Giving pocket money to your kids does more than just allow them to treat themselves each week. Did you know it can also be useful at teaching them how to manage money?
Young children can learn how to value money when it is given to them on a regular basis. Not convinced giving them pocket money is the right thing to do? Below, we will reveal some of the biggest benefits of using pocket money to teach kids how to manage money.
What are the benefits of pocket money for kids?
There are lots of reasons pocket money can be good for kids. From teaching them financial responsibility to helping them discover the value of hard work, let’s look at a rundown of some of the biggest advantages of pocket money…
Teaches financial planning
One of the main benefits pocket money has for kids is that it teaches them financial planning. This is a crucial skill they will need when they reach adulthood, and it could save them a lot of stress later in life.
When they receive pocket money, kids need to decide how to spend it. They need to determine how much they want to save and how much they have available to spend. As they get older, you can start to set them targets, such as using their pocket money to pay for some of their expenses. Learning how to manage their money lowers the risk of financial issues in adulthood.
Teaches saving and budgeting
Saving money isn’t always easy, especially when you’re an adult. However, if you teach crucial savings skills from a young age, it makes saving more of a habit. If your kids get used to saving a portion of their pocket money now, they will have no problem saving as they grow up.
Another key skill pocket money can teach is budgeting. Kids, especially younger ones, aren’t exactly known for their high levels of restraint. So, anything that helps them to learn about delayed gratification is going to prove beneficial.
If you don’t teach kids about money early on, it can greatly impact their independence. They may become reliant upon others to help them out financially. Being financially stable means that you have a lot more options in life. So, how does pocket money teach kids independence?
When you give your kids pocket money, it is up to them how they manage it. They need to make the right choices to ensure they can afford the things they want and need. Through making their own choices, they gain vital independence that will help them as they progress in life.
Teaches about spending responsibilities
Pocket money teaches kids about spending responsibilities. They learn that they need to pay towards expenses and set money aside for emergencies. While it can take a while, your kids will learn how to start prioritising their financial responsibilities and become more prudent about the money they do spend.
Teaches the value of money
Kids don’t always understand the concept of money, particularly when they are younger. If you want them to start learning the value of money, giving them pocket money can help.
When they see that money doesn’t come for free and it only goes so far, they will learn to be better at handling it. They will also enjoy receiving the regular payments and become more driven to make their own money.
Shows appreciation and achievement
Pocket money can also be used to show appreciation and achievement. Perhaps your kids helped out around the house more than usual? Providing them with pocket money for their contribution can show your appreciation. The GoHenry app lets you set paid tasks. As your child completes them, they will receive the agreed payment. It also rewards them for their hard work and motivates them to help out more.
These are just some of the benefits giving your kids pocket money can provide. So, how does it compare to other rewards?
Pocket money vs other rewards
There are a lot of ways to reward kids for good behaviour other than by giving them pocket money. Other popular rewards include:
- Days out
- Food treats
While each of the above can be highly motivating to kids, they don’t teach anything other than reward. With pocket money, it teaches them about money management. It also arms them with the knowledge they need to help secure their financial future.
If you are looking to simply reward your kids for doing their chores, other rewards are ideal. However, if you want to help them learn and develop financial independence, pocket money is the best option.
Are there any disadvantages to giving pocket money to kids?
There are a few different pros and cons to pocket money. The main con is that your kids might start to expect to get money for nothing. This can happen when you give them pocket money without teaching them anything. If they get a set amount every week and they don’t need to earn it, your kids may not truly appreciate the value of money. Of course, giving pocket money or paying for chores is a personal choice. Some parents choose to do both: they give their children pocket money, which can then be topped up with paid chores.
There are a lot of reasons why pocket money should be earned. So, if you do plan on giving it to your kids, make sure you go about it the right way.
What’s the best way to give pocket money to your kids?
The best way to give pocket money to your kids is through a pocket money app. At GoHenry, we offer a kid’s prepaid debit card and an accompanying app. The card enables your children to actively participate in the digital economy and spend in the same way they will as adults. It also provides a safer place to store their money as it won’t get lost down the back of the sofa.
GoHenry’s in-app Money Missions can also accelerate your child’s financial education via interactive games and quizzes on topics such as saving, spending and budgeting.
While there is some debate on whether pocket money is beneficial for kids, when handled correctly it can teach them to be financially responsible. As you can see above, there are plenty of potential benefits pocket money can provide. The more clued up children are about money and how it works, the less likely they will be to fall into financial difficulties later in life.
If you're wondering how much pocket money you should give your kids, check out our handy guide.