There is a constant debate between parents regarding the importance of pocket money. Both the parties concerned have come up with their own set of questions and answers to attack as well as counter attack the opposing teams. However, I am in favor of giving pocket money to kids so as to allow them to exercise freedom and deal with the different things (good and bad) freedom brings with it. Let them learn from their own mistakes. It is necessary to teach things like responsibility, the benefits of saving and the value of money to children. This is possible only when they earn their own monetary income. Parents can talk to their kids to make them understand the way money works and the kids will also find it easier to relate to what their parents say because they can identify with those situations.
The following points talk about the benefit of giving pocket money in further detail:
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It teaches responsibility
A responsible kid will grow into a responsible adult who in turn will affect our society positively. Giving pocket money to a kid will help him to understand the importance of being responsible with money matters. Kids have a tendency to be very careless about money but the minute your money will turn into ‘their’ money; they will start being more careful about where they keep it and what they do with it. No one really learns by looking at others so let them have their share of experiences to learn from.
It encourages saving habits
Unless a kid gets his own money, he will never understand the importance of saving because he will always know that his parents can give things he needs. Instead of giving him pocket money and buying him everything he wants, encourage him to buy something he likes (the more expensive the better) with his own money. That will help him to understand the concept of saving and help him to stay away from debt after growing up.
Keeps him grounded
Make your child understand the meaning of pocket money. Let him know that he will have to use it for the entire week/month so that he spends accordingly. Even if he finishes his allowance in advance, do not give him more money. Let him learn to spend within his means the hard way.
To understand the connection between money and work
Instead of just handing him his pocket money, you can also encourage him to help around the house and work for it. This will aid him in recognizing the importance of getting a job to support himself and he will also understand how intrinsically money is linked to his life.
It can help him to understand the concept of loans
As a parent, you can also help him to recognize the way credit cards work so that he is careful with them from the very beginning. The next time he runs out of pocket money, instead of giving him an advance, give him a loan. This will help him to understand two things. Firstly, he will stop asking you for money and start being more careful about his expenses. Secondly, you can use this example to make him understand how credit card works can increase debt from an early age so that he remains careful.
It helps him to understand the difference between needs and wants
Everyone needs to differentiate their needs from their wants. Giving your child his pocket money will help him to understand this difference because he will have to make choices at every step with his limited allowance. Let him take his own time to understand this difference. Even if he makes a wrong choice the first couple of times, he will find his way back.
You can introduce him to the bank
Giving your child pocket money is a great way to introduce him to the bank (once he is old enough). Encourage him to save his pocket money by promising to take him to the bank once he saves enough. Kids just love to be treated like grown ups so I am sure he’ll look forward to it. Teach him the way a bank operates. Encourage questions. The more he understands now, the better his credit will be.
It will teach them the real value of money
This is probably the most important aspect of giving pocket money. Kids don’t value money because they get everything they want from their parents. Since they have it easy, they don’t understand all the labor that goes behind all that money. By putting them in your shoes, you will show them the ground reality and they will automatically be more careful with money.