Pocket money can be a very powerful tool to teach your kids how to be financially savvy in the future. However, this is reliant on whether this tool is used correctly. Just giving your children money to spend how they wish can have the opposite effect and lead to them learning bad financial habits. If you take a look at https://www.gohenryreview.com you will see a great app that can help you and your kids.
Some top tips for giving kids pocket money to ensure that they learn from the process include:
It is generally recommended to save at least 10% of your income. These savings will come in handy in the event of an emergency or act as a nest egg. Savings should not be spent unless it is really needed or a goal for saving money has been achieved. Teaching your kids to save is crucial to financial stability and freedom.
Give your kids a piggy bank so that they can save up their coins. Open a bank account in their name and allow them to physically deposit a percentage of their income every time you give them pocket money. Let them watch the bottom line grow as they earn interest on a positive balance.
You can also get them to save for a specific expensive item that they want instead of buying it for them. This may mean depositing most if not all their pocket money every month or week. Teach them that the reward is well worth the wait.
Very few adults invest their money and therefore never reap the rewards of this financial tool. You can teach your kids to invest in their future by contributing to their savings and their goal to buy a specific item. For example, for every £10 they save, you can contribute £5 to their savings account.
Alternatively, you can contribute a percentage of the cost of the item they wish to purchase once they have reached a certain monetary savings goal. This will teach your kids that investing money now will reap huge benefits in the future.
It is very important to give your kids money on a regular basis – say once a week or monthly. You should refrain from giving any additional funds during the week or month and ensure that they wait for “payday”. If they need immediate cash, you can provide them with a loan with interest. The loan amount plus the interest that you charge will be deducted from their next pocket money payment.
This is is a very important way to teach your children to live within their means and not to rely on credit and loans to get through life. Make sure that they understand that they would have had more cash in hand if they could have just waited a little longer to get their pocket money.
It is important not to take for granted that your kids are learning these lessons simply by applying these pocket money tips. Explain to them what savings, investment and lending is all about and the benefits or pitfalls of each as you go along. You should also take the time to show them how you employ each of these to your own finances. Keep in mind that children are often more likely to learn from imitating your actions than simply doing what they are told.
You should also ensure that the tools that you employ are age appropriate. Savings can be applied to all ages although a younger child may benefit more from the use of a piggy bank whereas older children should have a savings account. More complicated savings tools are also more appropriate for older kids and teens. Investment and lending tools should also be taught at an older age.