Pocket money can be a great way of teaching your kids the value of cash. Morag Turner investigates
However much pocket money you give your children, handing over cash is always a risk. Somehow those coins seem to disappear into toys boxes, school bags and, of course, down the back of the sofa, never to be seen again.
But there are some very effective ways of getting to grips with your children’s finances, imparting important lessons along the way.
“Teaching your children how to budget and save doesn’t need to be difficult,” explains Sally Francis of financial advice service Money Saving Expert. “Of course, there will always be a place for the traditional piggy bank and it’s important for them to actually count out coins in their hands sometimes, but as kids become more tech-savvy they respond well to using online tools.”
Rooster Money is one such app that allows parents to keep a record of their child’s finances by setting up an online account and awarding a weekly allowance. Once added to the account, children can view their balance from their own computer and watch their savings grow. Parents can make a ‘boost’ as an additional reward, remove money if they need to and also encourage kids to save by putting money in the ‘safe’.
Not only does this keep a track of how much pocket money has been accumulated, it also helps kids to really consider how they are going to spend and save it to reach a target purchase.
But Rooster does not provide any actual payment; no real money is ever deposited. It stores a record of what is owed and ‘the bank of mum and dad’ hand it over when their child is ready to use it, deducting the amount from the account.
But if you feel your child is ready for more responsibility and would rather make transfers to an account, then the Go Henry app is a great option as it offers a prepaid debit card.
Parents link each of their children separately, creating an account and card for each. Pocket money can be deposited regularly, along with one-off top-ups whenever you like. Relatives can link in, to pay birthday money for example, and funds can also be transferred back to the parent account.
The card is used like a normal debit card – cash withdrawals can be made at ATMs as well as online purchases, but mum and dad retain complete control and can set spending limits. There is no overdraft or credit facility, so no risk of expensive mistakes. Working with Visa, the app is completely secure and safe to use.
Most banks start giving children this type of facility once they are 11, but, like Rooster, Go Henry enables children as young as eight to manage their money.
“The money habits formed as kids can be the foundation for how your children relate to money when they’re older,” says Robin Taub, author of A Parent’s Guide to Raising Money-Smart Kids.
“The opportunities to have conversations with your kids about money will present themselves in your everyday life. The trick is to recognise those moments and take advantage of them,” he says.
Sally Francis agrees: “When you are at a till paying for shopping, explain what you are doing and how much things cost,” she suggests. “And once your child can understand the concept, start giving them pocket money. Children as young as four can grasp the basics of counting money and saving it.” And hopefully start building a sensible relationship that will last a lifetime.
Managing their cash
– Talk about why money is essential. Children need to understand that the coins in their piggy bank have a value.
– Teach them that pocket money must be earned – it’s not a right. Decide what is expected of them and how much cash they will receive each week if they stick to this.
– Create a pocket money agreement. This could be a hand-drawn chart on the fridge or created via an app, but a clear agreement makes it easy for children to work towards saving goals.
– Allow kids to make the odd mistake with their money. If they want to spend it all on one toy then let them. The regret that they feel once they have run out of cash for other things will teach a valuable lesson about budgeting and saving.