I hope everyone is having a lovely weekend.
I think one of the most important things I can teach my children is how to manage money. In our consumerist world where we are often told that our dreams can be bought and bought NOW... and the true price of this seems to be a very high personal debt level.
Anyway, I know many people have many approaches to pocket money but I thought I'd share my approach.
See, I've decided not to tie pocket money to chores. Simple reason is that I just don't see the two of them as related. My children have always done chores anyway and its something we do to help each other, our friends and our community. The intrinsic value of chores are a sense of belonging.
But I'm starting to digress....
The other reason why I don't tie pocket money to chores is that it helps me teach my children about money without having to think about chores either. For me, my children have "earned" their right to money by becoming proficient at the very basics of it - the adding and subtracting by 1s, 5s and 10s.
Once my children have become proficient at the basics, the next step for us is for them to now become proficient at managing that money. That means learning about financial goal setting, saving and using alternatives.
The biggest rule we have is no goal, no pocket money. I've found that the times I've blown my budget has been when I didn't have a clear idea of my goals and what I'm saving for.
So my children have to have goals -their goals can be anything they like and I encourage them to go for something that is slightly out of reach of their $6 a week pocket money.
Currently, my 6 year old son's goal is to buy a Nintendo DSi. An extremely difficult goal BUT he is adamant that he will be able to do it. (His 7 year old sister had saved and bought her own Nintendo DS so I think its a competition thing for him too. hehe) He set this goal in June 2010.
Photo by Emily
Talking about Saving
I have told my son that in order to get his Nintendo DSi, he would have to save his $6 a week for almost an entire year. He will be 7 years old and in a different grade by the time he can get his goal. This means that he can't use his pocket money for other things - like buying food at special canteen days or buying little toys from op (thrift) shops. He listened very carefully, asked me a few questions ("what if I get given toys as a pressie, would that be okay?"), then nodded very seriously and said he knows he can save for an entire year.
Looking at alternatives
I then gave him alternatives - he could buy a second-hand Nintendo DSi because its a bit cheaper (he was not sure about this idea - he's very worried that the second-hand item may be pink....you can tell he has an older sister....).
I also told him that he could supplement his pocket money by selling some of his current (good) toys (he didn't like that idea).
He also stated that he could also save any birthday money that he gets from relatives.
Now comes the willpower
So now, its been over 5 months since he set this goal. And he's had to make some tough decisions since. The latest one was when he decided to forgo buying a special lunch at school (his school does not have a canteen and so the entire school gets very excited on those occassions when food can be bought).
I have always made it a rule that if my children want to buy food, then it has to come from their pocket money. After re-counting his savings, my son squared his shoulders and went "no, I want to use my money for a DSi - not for food at school."
But then there are exemptions
I have to say though, my son did not exercise his willpower at first. He did succumb to the odd lolly every now and then. The last 3 months he has done EXTREMELY well and has not spent a single cent of his pocket money or birthday money.
However, there was one notable exemption that did make me VERY proud of both of my children. That was when they decided to donate some of their pocket money to help a little girl get treatment for cancer.
What we are all learning
Its interesting to see how my son is processing and thinking about money and savings. For him, he seems to rely a lot on willpower in his management of money. Compare his story above with that of my daughter's who at the same age relied (and still does rely) more on alternatives.
And in all cases, my children are learning to prioritise their spending. So many people make the mistake in thinking that money gives you choices. But I don't think that's quite right. Its what you do to that money that gives you choices.
I'm also learning through this exercise how important it is to talk regularly to my children about goals, savings and alternatives. There are times when they've surprised me with how quickly they can grasp complex concepts and their determination to achieve their goals.
If you have any stories about pocket money, I'd love to hear them!