Do your kids run out of pocket money?
Overspending: what to do when your kids ask for more pocket money.
There are plenty of benefits to paying pocket money. It can give children a sense of independence, a sense of social inclusion and the enjoyment of choosing “fun” things to buy. Managing pocket money is also terrific budgeting and saving practice. Plus, small amounts of pocket money can allow kids the chance to make their first financial mistakes in a relatively safe way.
There would be very few (if any) people who have not made some mistakes with money over the years. Generally the younger you are when you make mistakes, the less expensive and serious those mistakes are likely to be. So as much as we like to look after our children and keep them happy, it makes sense to ignore, for the most part, their pleas for extra pocket money, early payment of pocket money or a straight-up bail out to cover their overspending. When you do say “no” to the “please could I have some more cash” request, though, follow it up with an offer to help. For example:
- Talk to them about prioritising their spending. From longer holidays to bigger cars, and many other things in between, most of us are able to think of ways that we would spend extra money. Kids are the same; they may well have more “wants” than they have the ability to buy. Talking to them about prioritising their wants – that is, making a list of their spending desires in order of importance – can be a good way to help them organise their spending.
- Help them to print out and put together a savings tracker, so that they can plan for and look forward to reaching their goals. Once they have decided on their important goals, a savings tracker can help to keep them top of mind. Keeping it somewhere prominent - on their bedroom wall, for example – could be that visual encouragement they need to reduce the day-to-day temptation of spending small amounts of money on other things.
- Show them how to put together a regular budget, so that they can stay in control of their day-to-day spending. As adults, it can be all too easy to lose track of exactly where money goes; it is even more challenging for kids who, after all, have had little practice at it. A written budget, which allocates regular money to all their important goals, can help kids stay in control of their spending.
- Find their spending leaks. Putting together a budget (above) and comparing this with their actual spending habits will help to highlight the areas of overspending. For some kids it might be one large cost, such as a mobile phone plan, and for others it may be lots of small costs, such as takeaway food or music downloads, that add up to a large amount. By helping your child to identify what their personal overspending habits are, they will be able to work out some ways to plug the spending leaks.
- Discuss with them strategies for smart spending and saving. As kids get older they might be feeling pressured to keep up financially with their friends, and this can lead to accidental overspending. As we have discussed in a previous post, there are plenty of ways to spend less without doing less. Taking advantage of free Wi-Fi areas to send emails rather than texts, for example, can help keep their mobile phone bill manageable. Packing a home-made lunch rather than buying from a tuck shop is also cost-effective. If you and your child sit down together and brainstorm ideas, you’ll be able to put together a customised smart spending plan in no time.
The reality is that your kids may think that the extra cash would be better than the extra advice – in the short term – but letting them live with and learn from their mistakes now really can teach them some valuable money management skills.
For more money management tips and discussions, visit The Beanstalk.