Indian parents tend to give pocket money to their children after they become teens or reach college. They feel that children are grown up enough to understand and use money wisely. While it is completely at the discretion of the parents to decide when to give pocket money to kids and how much, here are some tips to help you navigate.
The Right Age to Start Pocket Money
There is no benchmark as such. But you can start as early as 8 or 9 years. At this age, it is easier to explain to them the value of money and help them develop financial literacy. They can learn to spend and save money.
The Right Amount of Pocket Money
It could be any amount, depending on your financial circumstances and your trust in the child’s ability to handle it. Little kids would be happy with even Rs10 as they can buy a chocolate or pencil from it, or simply enjoy the experience of putting it in their piggy bank. But the older ones might want Rs100, Rs500 or more, depending on their age and nature of expenses they want to incur independently from you. They might want to buy lunch from the school canteen or a special gift for a friend once in a while.
You can give the pocket money to them on a weekly, fortnightly or monthly basis or tie up the amount to certain activities like helping in household chores or special occasions like birthdays and festivals. However, just make sure that the child doesn’t get into the habit of doing household chores simply to get more money.
Cash, Card or E-Wallet
These days, many banks offer ATM cards for children under junior savings account scheme. If your child owns a smartphone, you can even set up an e-wallet facility and fix an allowance. And, of course, the good ol’ cash is always an option.
Ideally, you should give cash as pocket money if kids are under 13-14 years. Thereafter, you can let them use their debit card or e-wallet to develop familiarity with digital money but this depends entirely on your comfort level.
Teach Children to Use Pocket Money the Right Way
Once the children get pocket money, it is up to them to decide what they want to do with it. However, they can use some advice from you.
- There should be no arguments about the pocket money amount. If at all the child needs an extra amount, it should be a fair and logical reason or should earn it from parents by doing some extra work.
- They should learn to use the pocket money – they can spend some part, save some part and donate some part towards a good cause.
- It is not necessary to spend the money – they can save it to buy an expensive toy or dress or some other reason.
- They should maintain a financial diary where they can note down all their expenses and savings from pocket money. This will teach them how to manage the inflow and outflow of money.
- They should know that you are keeping an eye on their spending to avoid misuse for any inappropriate purpose by them.
Pocket money is a great way to inculcate financial habits in children. Start now if you can.