Many children can learn the
of money by receiving a weekly or monthly amount of pocket
money. Parents often give their children an amount of money that they may
spend as they wish. This gives the children a of independence and lets them learn from experience at an age
when financial mistakes are not very costly.
A child may receive their pocket money each week or each month. The amount
is not so important, but parents should make clear what, if anything, the
child is expected to with the money.
At first, young children may spend all of their pocket money soon after
they receive it. If they do this, they’ll learn the hard way that spending
must be done within . Parents should not give more money until the next
of money is to be paid.
Older children may be responsible enough to larger costs like those for clothing. The object is to show
young people that managing money demands choices between spending and
saving.
The amount you give may become more complicated as your child gets older
and starts asking his or her friends how much they receive. The friends
may to get much more than your child does. If possible, have a quiet
chat with other parents to establish the going , and then decide what you think is reasonable.
Many people say it is not a good idea to pay your child for work around
the home. These jobs are a normal part of family life. Paying children to
do extra chores, however, can be . It can even provide an understanding of how a business
.
As your children get older, they may want more expensive extras, such as
sports shoes, a computer game or an Mp3 player. You could suggest you'll
pay some of the money if they contribute three or four weeks' pocket money
the cost.
Pocket money gives children a chance to experience three important things
they can do with money. They can it in the form of gifts or giving to charitable organizations.
They can spend it by buying things they want. Or they can save it. Saving
helps children understand that costly require sacrifice, and that you have to
costs and plan for the future.
Encouraging children to save part of their money can also
to future saving and investing. Many banks offer free savings
accounts for young people with small amounts of money. A bank account is
an excellent way to show children the power of compound interest.
Compounding works by paying interest on interest. For example, one euro
at two percent interest for two years will earn two cents in the
first year. In the second year, the money will earn two percent of one
euro and two cents. That may not seem like a lot. But an investment that
earns eight percent compounded yearly will increase one hundred percent in
value in about nine years.
