For many children a new year means a fresh opportunity to earn pocket money. For mums and dads, pocket money can be a valuable tool, helping to teach children simple money management skills that could last a lifetime.
A recent study by the Commonwealth Bank found Australian parents collectively hand over around $1.4 billion worth of pocket money annually. It sounds like a lot however it works out to about $10 per week each for children aged 4 to 15.
The majority of parents – 81%, believe that children don’t understand the value of money unless they earn it. So most kids receive pocket money in exchange for completing simple chores like washing the dishes.
It’s not just pocket money that pours into the nation’s piggy banks. Around one in seven children tap into other ways to raise a bit more cash – the most popular being presents, the tooth fairy or as a reward for getting good marks at school. These appear to be lucrative sidelines, with Australian children each earning an average of about $276.18 from these sources over the past year.
All this cash can really add up. The thing is, only one in three children tuck some money away on a regular basis. The same proportion hardly ever or never put some pocket money into their bank account. Instead, the cash tends to go on food, snacks and lollies, with clothes, presents and music downloads also eating up a good chunk of our children’s money.
That’s a shame because children can learn smart money habits from a young age, and with a few simple strategies you can encourage your children to develop a healthy approach to money.
A worthwhile first step is opening a savings account for your child. There is no shortage of high interest savings accounts available just for kids though with some you need to meet certain conditions to earn a decent rate – like depositing a minimum amount each month. That’s not such a bad thing as it rewards kids for growing their savings.
It also helps to talk with your child and help them work out a goal they would like to save towards – maybe a new toy or a friend’s birthday gift. Explain how long it will take them to reach their goal based on the amount they save each week, fortnight or month. There are plenty of online calculators that can help here.
Parents can further encourage children to save by acknowledging milestones with small bonuses. For example, you could offer to tip a few extra dollars into their account once they’ve reached a particular balance.
I realise that many of today’s working parents are time poor but setting aside a few minutes to chat with your children about money matters makes sense. In our increasingly cashless society, kids need to understand that money doesn’t simply pop out of a hole in the wall, and being able to buy the things we need and want is possible with a bit of planning and commitment.