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Should children get pocket money?

Posted September 11, 2018 by MoneyLink
https://moneylink.com.au/should-children-get-pocket-money/

The phrase ‘invisible money generation’ has been thrown around a bit lately. It refers to the young children of today growing up in a predominantly cash-less society.

We’re using eftpos and direct debit and credit cards, swiping and popping pin numbers more than ever before … and, as a result, a lot of children are losing their connection with money.

‘Invisible money’

This is a valid concern, but these children will grow up in a world that we’re yet to dream of. Phone apps already make transferring funds accessible. Apple Pay is revolutionising buying for many people. The fact of the matter is that today’s generation of children will inherit a technologically-powered world that we simply can’t imagine … (could money be transferred via fingerprints? Or Microchips in our wrists?).

Recently, the Financial Planning Association of Australia (FPA) conducted a survey of more than 1000 parents. The subject: Pocket money. The FPAs research shows that four out of five Australian children aged nine to 13 receive pocket money – between $5 and $19 a week.

Nearly two out of three young children, aged four to eight, receive pocket money, typically under $10 a week. And more than seven out of 10 older teenagers, aged 14-18, receive pocket money, usually between $10 and $39 a week – some have part-time after school jobs instead. And there’s a great video too, produced by the FPA, with kids talking about pocket money.

One result of the survey showed that parents – by and large – believe digital money has affected their children’s ability to understand its value. But all is not lost – whatever the future of money or financial transactions looks like, kids will still need basic skills – and that starts with pocket money.

Embrace technology as a learning tool

There are some good apps made by banks and financial institutions that can be linked to bank accounts. And they actually make learning about money fun. With simple visual tools – graphs and pictures – they can make it easier for young people to understand savings and spending, especially those kids who don’t have a strong grasp of numbers or maths.

The digital money world comes with complexities –the financial world is more sophisticated now, with various ways to borrow and make investments, as well as conduct day-to-day purchases. It also comes with increased risks such as opportunities for hackers, fraudsters and scammers – and our children need to be sufficiently educated to understand all these concepts. Certainly, schools are getting better at creating formal classes as part of the curriculum.

Starting a managed fund share portfolio can also be a good way to teach children about compound interest, fees and tax, and the cycles of the investment market. Over time,
a small fund can grow into a significant nest egg, maturing just as they need it, for university, or travel or a home deposit.

The basics will always remain the same

But, no matter what the future holds or how complicated it becomes, budgeting basics will remain the same. It’s a fact that, most people’s financial woes start (and end) with them spending more than they have. It’s really that simple.

So, if you can embrace technology and help children to learn wise money management, which includes keeping track of what they spend, not spending more than they earn, planning their spending and aiming to create savings, then you’re off to a great start.

Children are by nature impetuous and have little impulse control, so they’re bound to overspend at first, but over time, steady, consistent parental guidance will pay off.

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