essay pocket money advantages disadvantages

The Great Debate – Pros and Cons of Pocket Money

by Lacey | Sep 9, 2014 | Parenting , Pocket money , Relationships , Teaching kids about money | 1 comment

In this extreme social experiment we call parenting, choices abound. From contentious issues like vaccination, to comparatively trivial ones like when to cut your child’s hair for the first time, we are bombarded opinions on what and what not to do, often in no uncertain terms. Ah, the glorious interweb, font of information (but not necessarily wisdom). So, if you’ve been getting lost trying to navigate the debate around the pros and cons of pocket money, let me assure this one’s completely subjective. Without further ado.

POCKET MONEY!

In this post, I try spare you the overload of the ‘pocket money should be earned’ debate. I will cover the pros and cons of pocket money, four ways you can go about setting it up, and some simple tools to help you work out which method is right for you and your child.

The four ways parents manage pocket money

I’ve spoken with a lot of parents about how they manage their child’s pocket money and I have observed four basic methods. They are:

• By allowance
• Per task and
• By negotiation.

1. On Demand

This is where the child asks the parent whenever they need money for a specific item or event. The most common sentiment I hear from this group of parents is:

“I provide everything my child needs, so they don’t need pocket money.”

While technically correct, the reality is that they probably still get the same material outcomes as other kids who do receive pocket money, i.e. they get to go to the movies, or to buy a treat, or whatever else their little heart desires. It’s just that  they have to ask permission  for how that money is spent every time they want it. Really, it’s pocket money on demand and subject to the discretion of the parent. This is the only method that allows the parent to control how, when and on what money is spent.

2. By Allowance

This is the fixed amount approach: Mum and Dad give child X dollars a week/month/year, and it’s up to the child how that money is spent. The money is not a reward or payment for any particular behaviour or task, it’s a given. The exception to this is deprivation as a form of punishment – much like grounding, or banning from watching TV, you can hold back the allowance when your child behaves badly.

3. Per Task

This method most closely mirrors a wage or salary: do this task, and you will be paid accordingly. Different levels of pay can be associated with different tasks, and often the value varies with the amount of time or effort required for a given task. For example, you might offer $5 for stacking and unstacking the dishwasher for a week, or $10 for doing the washing up for the same period. It reiterates the concept of earning money through effort: a child who doesn’t want to earn much doesn’t have to do much, but if they want more pocket money they need to put in more effort.

4. By Negotiation

Perhaps the most entrepreneurial approach, this method not only varies the pay with the task, it requires the child to negotiate what that pay will be and what the deliverables are. Parents using this method set the expectation with their child that s/he will come to the parent with a proposal to complete a task and negotiate with the parent as to what it’s worth to them. This method can help children learn to spot demand: if a child knows both parents detest washing the car, they can charge a premium for that task. Be warned – kids are smart. They will work out how far they can push you with this. Of course, that’s exactly what we want them to do, but be prepared not to curse when it happens.

Which method is right for you and your child, right now?

Good news: there is no right or wrong answer! (Despite what Facebook parenting experts tell you!)

It’s a matter of personal choice, and you may find you use all four types at various points over the years. That was certainly the case for me – see below for the phases I went through with my Mum. It’s a cautionary tale in one way: I stopped doing the ironing at 14 ½ years, leaving Mum to iron everything except my school uniforms. I’ve ironed about twice a year on average ever since. (I REALLY detest ironing!)

A cautionary tale: my experience receiving pocket money

Ask yourself two questions

You can use the flow chart below to decide how you think pocket money will best work for you and your child, right now.

Start at the top and work your way down to one of the four pocket money methods

Still not sure? Let’s explore these questions in a bit more depth:

Question 1: Do you believe children should be paid for chores?

I was raised being paid for chores, so it never occurred to me to ask this question until a friend of mine recently offered an alternative point of view.

Her take on it was that chores are part of life – a responsibility we all share. No one pays Dad to cook dinner, or Mum to do the washing – it’s just what Dad and Mum do for the family. My friend believed that paying her child for chores would mean he missed a big lesson about contributing to family life and shared responsibility.

On the flip side, there are parents out there who think getting your child to do chores is robbing them of their all-too-fleeting childhood. Why shouldn’t they be rewarded financially for something that takes them away from the fun of being a kid?

Ah, moral questions. Enjoy wading through the quagmire on that one, or simply go with the majority of parents I’ve surveyed and pick ‘Yes’.

Question 2a: If you do believe children should be paid for chores, do you prefer to reward them for effort or results?

Assuming you went with the majority and said ‘Yes’ to paying your child for chores, the next question is whether you’re going to pay them for effort – their time or the type of task they undertake – or for the result they produce?

Not a question I’d considered much, until my mum reduced my pocket money for doing a crappy job of the ironing one week. Her explanation was simple: ‘I’m not paying you do something I’ll need to do again myself because you didn’t do it properly.’ Obviously, I was disgusted and went on strike to protest… until I wanted to go to the movies three days later.

In case you hadn’t guessed, my Mum is of the ‘results’ persuasion, which I theoretically agree with.

However, most jobs I’ve had do not reward results in the short term. They reward effort. If I stuffed up something while I was working, I had to do it again, but I got paid for the failed attempt anyway. I might not get another shift for a while, or I might eventually get fired for my poor productivity, but that week I got my paycheck. So, you could really argue either way for this one – your call!

Question 2b: If you don’t believe children should be paid for chores, do you believe children need some cash of their own?

At some point in their lives, our children are able to make their own decisions. When you think your child is ready to make such decisions relating to money, you are probably ready to let them have cash of their own by paying an allowance. If you think your child is not ready to make these kinds of decisions, you may prefer the ‘on demand’ method: simply providing the cash they need, when they want it, when you have discussed it.

Personally, I’d prefer NOT to have my hypothetical teenage son ask me for $10 so he can buy condoms. I’d rather he had the $10 to be responsible for himself.

Pros and Cons of each method

If you’re still debating which way to go, you can consider the advantages and disadvantages in this table:

What’s next?

Perhaps your choice is obvious, perhaps it’s not. Maybe you want to set aside some time to speak to your child about it, depending on their age. Remember that all four methods can work – it’s up to you when and how you apply your choice, and you can always change your mind. Hooray for a parenting choice that’s not fraught with danger!

Do you have a story to share regarding pocket money? We’d love to hear it – please leave a comment below.

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Lacey Filipich is the co-founder and director of Money School. She helps parents raise financially savvy kids and helps adults get on top of their finances. Connect with her on LinkedIn and follow Money School Facebook to learn more.

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The pros and cons of pocket money

22nd September 2020

by: Team Starling

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This week, Money Explained tackles the topic of pocket money, exploring the benefits and possible pitfalls. Our series looks at the money basics for everyone in the household, breaking it down into bitesize chunks.

Giving your children pocket money can be a great way to get them thinking about finances from an early age.

There are two general ways people give pocket money - either a regular allowance that is agreed upon and given each week no matter what, or money that’s conditional on the child doing certain jobs around the house like helping with the washing-up, hoovering, dusting the living room or a spot of gardening.

Pros and cons of pocket money

Many adults say that as kids get older and more independent, the act of giving pocket money can be a real conversation starter that can lead to lots of enlightening conversations. Other benefits of giving your kids pocket money include:

• Learning the value of money - by having their own cash, they can begin to see how much things are worth, and can decide whether to spend or save it.
• Allowing them to develop a healthy relationship with money – this is an important life skill.
• Helping to build their independence – by giving them some responsibility for their money.
• Discovering that money is something you work for - assuming they earn it by doing chores.
• Teaching that money you have can only be spent once - for example, if your child buys a new video game today, they won’t then be able to buy lego next week with the same money. Once you spend the money, it’s gone. This can help to start learning on how to budget and how to choose between buying different things.

Research has shown that money habits form early, as young as seven, and giving pocket money can really help to boost your child’s understanding of how money works .

It’s worth being aware of some possible negatives to giving pocket money as well:

• Your child could start to expect money for nothing - if you don’t peg their pocket money to work or tasks accomplished.
• It can create envy - if your child earns more or less than their friends.

Ways of giving pocket money

One option is to give your children cash for their pocket money, which you can then encourage them to look after and keep safe.

However, you might not always want to give them cash at all, especially with the current concerns around physical contact.

An alternative to cash is to make use of Starling Kite , a debit card for young people aged 6 - 15. It’s like a bank account, but as the adult, you get better control and visibility. Starling Kite is managed through our app, and you can load on pocket money in an instant. As the adult, you can also check and control specific activities such as cash withdrawals or online payments, and set daily spend limits. A Kite card comes ready blocked for merchants that aren’t age appropriate, including pubs and betting agents. Real-time notifications let you know exactly how they are spending.

Another useful thing about the Starling Kite option is the security. With Kite, if there’s ever a scare about the card being lost or stolen, you can lock / unlock the card with just a tap, in the app.

How much pocket money should I give?

This is a big question that we’ll look at in a future Money Explained article - ultimately it will come down to how much you can afford and how much you think your child should get, but we’ll explore factors you can use to help you decide.

You could also ask friends how much they give their kids, and encourage your children to chat to their friends about how much they’ve been able to save. Talking openly about money isn’t something that comes naturally to some people, but it’s really helpful for your children to learn that money isn’t a taboo topic.

Read the other articles in our Money Explained series :

Sharing and giving

Saving up for something special

Money: Needs vs wants

Teaching kids how to stay safe with money

How children learn about money

Different ways to pay

Find out more about Starling Kite

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Should Pocket Money be Given to Children?

Do you give your child pocket money or like other parents are you also confused? Pocket money has always been a major concern for most parents. Most families have a heated argument between parents and children for the same. Kids are keen to get money and wish to spend them on their own accord but on the contrary, parents are anxious and have their own set of doubts.

Most Indian parents think their kids are too small to deal with money. They are not only doubtful that their kids might get into the wrong company but think they may also misuse money and lead to self-harm. As each coin has 2 sides, similar is the case with this situation. Therefore, we cannot jump to a conclusion about whether pocket money should be given or not.

Advantages of giving pocket money :

Offering pocket money to children can be an excellent method to instill financial responsibility in them. It enables them to practise spending and saving as well as learn more about money management in general. According to our findings, the majority of German households regularly give their children pocket money. According to respondents , 71% of children aged 4 to 6 receive pocket money, rising to 95% for those aged 10 to 12. Only 13% of children aged 4 to 18 receive no personal money at all.

Be independent:

The most important benefit of giving pocket money is teaching kids to be independent and that’s the key to success in today’s time. When parents allow them to play with money, kids feel connected and they think their parents trust them. When they have money, they develop the ability to manage and learn its importance. Most parents feel that they might misuse the money given to them but unless you trust them and let them contribute to their expenses, they will never learn the difference between ‘use’ and ‘misuse’ of money.

Though there are some notorious kids and the best way to deal with them is to ask for the record of every single penny at the end of a week or a month. It works two in one. They will not only learn to use money wisely but this will also make them vigilant and smart to spend efficiently because, in the end, they know they have to submit the r eport to their parents .

Teaching kids the lesson and the importance of saving money:

What generally happens with most Indian kids is that by the time they reach adolescence they neither have much knowledge nor experience in dealing with money. This makes it difficult and they sometimes become a target of fraud. The reason being that they lack confidence and experience. The prime role which lies in parents’ part is not only to teach them the right use of money but also instil in them the value of savings. Complete your sentences by the use of suitable examples.

For instance, give them a real-life example of a person who resolved his problem because he had some savings with him. When you give them their fixed pocket money, ask them to keep some part of it in ‘Piggybank’. Start with a small penny and gradually increase the amount. Sit with them and help them draft their monthly expenditure chart. This way they will learn the efficient use of money. Let them plan the expenditure chart and try to mend it as well as teach them to save. For example, ask them to prefer Rs. 10 candy instead of Rs. 15, and see how happy they become to get Rs. 5 extra.

Teaching kids about the Value of Money:

Sometimes in the initial stage kids tend to spend more money on useless things. Let them do, be it partying, food, movies, stationery, or other things. In some time, they will realise they have no money to spend towards the end of the month on essential goods. Then let them figure out the flaws in their expenditure and mend them the next time. In this way, they will learn to value money. Let them take part in discussions for the monthly budget. Give them a game to save let’s say Rs. 200 in a particular month and appreciate their inputs as well. Tell them the things that are useful to purchase and what all to avoid. Sometimes take them for shopping as well. Give them a list of items and ask to manage the entire purchase within the money constraint. The best way to inculcate in them the value of money is to take their active participation and welcome their suggestions. The other way can be to ask them to save their pocket money to help the needy. Give them a time span of some months and use all their savings to buy gifts and clothes for the poor. This will encourage them to keep a portion of their pocket money as savings. In total, 89% of those polled say they have a strict pocket money schedule, with 36% providing their children money weekly and 53% giving them money monthly. In contrast, we discovered that some parents opt to choose when their children receive money:

11% of parents report that their children receive money when they need it, but not on a daily basis.

18% of parents give their children pocket money depending on their behaviour.

However, some families who adhere to a set timetable or amount say they are open to changes. 27% said they would reconsider the amount of pocket money they give their children based on the circumstances, such as special events, trips, and so on.

But yes, we cannot neglect the drawbacks of giving pocket money to kids. Have a look at them too.

Teaching kids about money management and how to invest pocket Money:  

With money in their pocket, kids sometimes become callous with money. They start showing off this to their friends. Sometimes they might even get influenced by others and start comparing the amount of pocket money they and their friends receive. This sometimes hurt their ego and they start demanding for more pocket money from parents. They start speaking lies to get an increment in their pocket money. If this wish is left unfulfilled, in some worst cases, kids even go-ahead to steal money.

They don’t even realize what is wrong or right for them. Influence is a strong weapon, the only way to help your kids stay away from this is “awareness”. Before handing over money teach them values, once they become wise and sensible, there is no scope of such incidents to take place in the future. Tell them to stay cautious from all frauds or negative influence, by sharing real-life experiences.

Teaching kids about the spending of money :  

With money by their side kids instil a sense of superiority and start targeting their subordinates or kids with lesser money to spend. They make fun of others and use bad languages against them. When children get too much freedom to spend money, they stop using their brains and spend money lavishly. Sometimes they even get fantasized about wrong habits. The presence of money tempts them to indulge in certain time-wasting habits be it, chilling in canteens, going out for movies, or addiction to junk food, smoking, drinking, or even gambling. All these are signs of kids developing bad habits. When not checked upon, these practices can turn worse, eventually, landing kids in a position where realizing the truth becomes difficult. This affects both physically and mentally. Excess addiction to junk food deteriorates health on a large scale leading to certain diseases. Kids start prioritizing money over other things and demand more money for expenditure. This has an adverse effect on studies as well.

Keep all these points in mind when you hand over money to your kids. There is as such no harm in giving pocket money but parents need to be extra cautious about when, how, and why to give money. A parent’s job is not limited to providing pocket money. They have to have a check on a timely basis and should stipulate the record of each penny given to them. This will make kids less liable to get inclined towards faux pas.  

Giving children and adolescents pocket money is common throughout the world. Do the advantages of this practice outweigh the disadvantages?

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Pocket Money, Complete English Essay, Paragraph, Speech for Class 9, 10, 12 and Graduate Students Exam.

Pocket Money

Pocket money is what parents give to their children to spend. A child can spend his pocket money as he or she likes. Sometimes parents guide a child as to how to spend it wisely. Poor parents may not give pocket money to their children regularly. But they do give as often as they can afford. They give it, especially at festivals and fairs. My parents allow me a good amount of pocket money. It is not fixed. It varies from month to month. My father is a businessman. Whenever he is in a jolly mood because of good business, he gives me a fat purse as my pocket money. I do not spend all my pocket money. I save a part of it and deposit it in my bank account. I have opened a Savings Bank account in a nearby bank. I buy books on chess as it is my hobby. I have a good collection of books on the subject. Once in a while, I go to see a dance recital or a stage play with my friends. I also spend some of my pocket money on sweets and ice-creams. Once I helped Ravi to pay his school fee out of my pocket money. His father was away on a tour and he did not have sufficient money. He felt so obliged. After his father’s return, he soon gave me my money back. Last year I gave my mummy a pleasant surprise by presenting her with a beautiful watch on her marriage anniversary. I had bought it from the savings of my pocket money. I often buy things for my little sister out of it. She feels so delighted whenever I surprise her with sweets, a pencil box, and a fancy dress. My pocket money has helped me to learn how to spend wisely and save simultaneously. It is easy to spend, but to spend wisely is a bit difficult. But to save money is more difficult.

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What Are the Benefits of Pocket Money? And How Much Should You Give?

Pocket money has a wealth of benefits for both the child and the family. In fact, kids who get pocket money are more likely to develop strong financial planning skills, and are less likely to get in debt as adults.

Read on to find out more about the benefits of pocket money and how much you should give.

Pocket Money – The Benefits

There are a wide range of benefits to giving pocket money:-

• Financial Planning: Since 2014, financial literacy features on the UK National Curriculum. Pocket money reinforces this – teaching children the benefits of saving, careful spending, and money management.

• Lower Risk of Adult Debt: According to the ING survey of 12,000 parents across Europe, giving children pocket money reduces the risk of them getting in to debt as adults. Pocket money is the building block for adult self-sufficiency.

• Make a Future Saver: Learning young, through pocket money, encourages a lifetime of saving where delayed gratification is appreciated.

• The Value of Money: It’s a tricky concept for kids to grasp, but one they need to understand. To them they literally see cash come out of a hole-in-the-wall. Pocket money, especially if earned through chores, enables them to learn what money is actually worth, and its value. They learn to prioritise wants and needs.

• A Sense of Purpose and Achievement: By gradually saving some of their pocket money towards a goal, children develop a sense of purpose and pride in their achievement. They also learn to value possessions more, when they have had a hand in paying for them.

• It Limits the Pester-Power: Marketers know all about it, and any parent standing at the checkout of a supermarket does too - kids have pester-power! However, when it’s their money they are spending, they suddenly become more savvy spenders. You’re not stuck buying the fiftieth packet of trading cards because they just have to have ultra-rare Number 24.

• It Teaches the Value of Hard Work: When children can earn pocket money in exchange for jobs they realise the intrinsic value of hard-work.

Are There Disadvantages of Pocket Money?

In the main, pocket money is beneficial. There are a few disadvantages, but with careful management, these can in fact become learning opportunities in themselves.

• The Frivolous Spender: By handing over control of some pocket money to your child you may discover they repeatedly ‘blow’ the money on frivolous spends. Try to stand back a little and allow this to happen. It’s learning through mistakes. By spending frivolously, they will learn the hard lesson that they never achieve their saving goal, and run out of money fast. If you’ve still got a frivolous spender on your hands, it might be time to start laying down some pocket money rules such as save half, spend half.

• They Compare Themselves to Friends: There’s always going to be peer pressure, and it can be hard if you are unable to give your young one the same as their friends. However, don’t panic. Firstly, chances are there is some playground exaggeration going on. Secondly, remember that having a restricted budget is a good thing for learning financial planning.

• Money Becomes a Sign of Love: Some children, and parents, can get in a situation whereby the giving of cash becomes equated with love. For this reason, it’s sensible to set a weekly or monthly amount which doesn’t vary greatly. This doesn’t mean that they shouldn’t be expected to contribute if they have wilfully damaged something, but it separates money from affection.

How Much Pocket Money?

How much pocket money you give, and what you expect it to be spent on, will vary according to age (as well as from family to family). As a nation, we tend to give generously to our younger children, and less generously to older kids and teens, proportionally compared to other European countries.

The amount you choose to give should take in to consideration what you expect your child to pay for. A young child who will only be expected to pay for sweets, playground fads, and small toys, won’t need as much as a teen who is expected to cover their phone bill and trips with friends.

The folks at RoosterMoney surveyed their users and found that on average a 4 year old will get £3.21 per week, compared to a 14 year old who can expect around £11.64 per week.

To find out the pocket money average by age in the UK, click here .

How to Give?

Once parents have decided how much pocket money to give, they then need to consider how they will pay it. Will you give it regardless on a regular basis, or do chores need to be performed first? Many families find it good to strike a balance, with a set amount given regularly, and the opportunity to earn more through chores.

Then you need to decide whether you’re handing over hard cash, or providing pocket money in a different way. The benefits of cash are that the child learns the actual value of notes and coins, and has a tangible way of spending money. However, if the child is saving, this isn’t necessarily the most appropriate vessel. Similarly, piggy banks are vulnerable to parents running an IOU for car park coins, ice cream van arrivals, and other cheeky thefts!

It is also difficult to set up appropriate bank accounts for children for pocket money which they need access to. Savings accounts are, of course, an option, and can teach reading bank statements, but they don’t provide the pot in the way that many need for pocket money.

Bridging this gap are various technological tools to help parents. For example, you may choose to use a pocket money tracker app such as Rooster , which also allows children to track their spending and savings goals. Or you may choose to set up accounts such as GoHenry  which provide your child with an actual debit card for spending.

No matter how you pay it, or the amount, don’t forget to use the act of giving to teach children how to make lists of priorities and savings goals.

Big Spenders, Little Spenders

Pocket money is a vital part of childhood, and can be a valuable tool for teaching money management and independence. By starting young, your child has the chance to make the mistakes when you’re looking at pennies, rather than pounds.

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Pocket Money to Kids: 4 Pros & Cons To Know

Lets us understand the advantages and disadvantages of giving too much pocket money to kids

Are you planning to give pocket-money to your kids? Before actually going for it, read the article and think twice. Learn about the drawbacks and benefits of giving pocket money to the little ones.

With an economy of capitalization, people are acquiring more and more wealth. Parents Children  spend money lavishly w ithout giving a second thought.

Giving young children too much pocket money has become a tradition. It is a harmful practice as it teaches extravagance to children.

Lets us understand the advantages and disadvantages of giving too much pocket money to kids:

Related: 7 Ways To Save Money Efficiently

Advantages of Giving Pocket Money:

• Kids realize the value of money as they learn responsi bility about paying for their expenses . They becom e a ccountable in matters of money.
• They learn to manage their budget in later part of their life.
• It helps children in making important decisions about money and expenditure. It provides them with a good sense of purpose and achievement.
• P arents can save time by allowing kids to buy small things on their own. Thus parents can spen d q uality tim e w ith their children.

Disadvantages of Pocket Money:

• The most critical drawback associated with pocket money is that it makes them careless with cash. They need to be more careful and avoid spending money on frivolous things.
• They are likely to make hasty and wrong decisions regarding finances. They need to realize the worth and value of money.
• Without supervision, a child might get into trouble in money matters.
• The child might be bullied by others if they carry too much money as pocket money. So abstain from endangering your child’s life into any mishap.

Keep these important points in mind before handing over money to your kids on a monthly basis . Remember, money cannot express your love or affection towards your kids. Before giving them money, teach them to spend it smartly and wisely!

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The importance of giving pocket money to children

This article considers the benefits of giving pocket money to children, and some methods for teaching them to make wise money choices later in life.

9 October 2022 · Fiona Zerbst

The use of pocket money

Children may view pocket money as a gift rather than something earned, and many parents attach no conditions to receiving an allowance. However, pocket money is an essential first step in teaching children to manage money, and correctly value their finances.

We consider the benefits of giving pocket money to children, and some methods for teaching them to make wise money choices later in life.

Tip: Teach your children about delayed gratification by means of an investment product such as unit trusts. Learn more now.

Why teach children about money? 

Although children may think about much less weighty matters, learning about money management has significant advantages, says John Manyike, head of financial education at Old Mutual.

Because many parents have not been educated themselves about money, Manyike asserts, few children are fortunate enough to have been taught these skills.

“Financial education was not traditionally in the school curriculum, and money was frequently a taboo subject at home,” he says.

“There has been some improvement over the past couple of decades. However, we remain a credit-hungry, over-indebted society because managing money has largely been about trial and error.”

Gareth Collier, a certified financial planner and director of Crue Invest, says childhood lessons are critical for forming responsible adult financial behaviour.

“We are constantly bombarded with advertisements,” Collier says. “If kids don’t understand the consequences of spending all their money on the first thing they see, and thus being denied something else they may want, they will have trouble making wise decisions later on in life,” he cautions.

“It’s good to stand back and let your children struggle a bit. It’s hard to watch, but it’s important.”

Pocket money provides valuable lessons

Collier says giving children pocket money is a tried and tested technique that works well - provided it is done with intention.

“Teaching children about money is often about teaching delayed gratification. When too much comes too easily and quickly, children will expect the same of the wider world when they grow up.”

Manyike agrees. “If you’re just handing out R100 on a Friday, and it’s all gone on Saturday, you’re not doing your child any favours,” he says.

“Rather guide your child in a discussion about spending decisions. You may want this, but what else could you get? What will it take to get that item, which costs more than R100? How long would you need to save for it?”

Finally, Manyike says giving a child money to buy small things, such as sweets or ice cream, teaches them nothing unless they learn that money can be scarce.

“One of my favourite examples is comparing money to a small blanket. You must decide whether to cover your head or your legs - you can’t cover both. The lesson is that you must sacrifice something to get something,” he says.

Assigning chores in exchange for pocket money can illustrate this point. “Not everything a child does in the house has to be paid for, but you can identify chores that will reap rewards.”

Teach broader financial concepts

Money can be used to teach broader concepts, but in a practical rather than an abstract way, notes Manyike.

“You don’t have to spend money just because it is there. Calculate how much you spend on your child’s takeaway lunch and show them how much the family can save by packing a lunchbox every day.

“If you spend R25 daily, that’s R500 a month and R6,000 a year. Over 20 years, that amounts to R120,000.”

Manyike says parents should not underestimate the relationship between money management and mathematical literacy. “When children learn to divide and multiply, you can show them how this works with money.”

Collier says giving children pocket money provides an opportunity to share financial knowledge – but parents should be clear on concepts and principles.

Set clear ground rules in the home 

As all families are different, you will need to decide what works for your family, and how much money you can afford to give a child. Having set out an amount, it’s important to follow through with your promises.

“Make your expectations clear and stick to them,” says Collier. “Some people expect their children to buy their personal toiletries out of their allowance, while others are happy to let their children spend the money on whatever they want.

“Discuss ground rules,” Collier continues. “If your children would rather forego brushing their teeth than buying toothpaste, rethink your approach. If they’re talented artists, let them budget for art supplies, as this can also teach them a valuable lesson.

Collier says different families have different money philosophies and approaches.

“Some children learn early on about their parents’ bond repayments, the cost of groceries, and how much tax the family pays. Some parents believe children should be shielded from these realities. However, as a parent, it is your responsibility to prepare your children for life in a sometimes-challenging world.”

Manyike says consistency is key. “Children observe and learn your behaviour, so don’t tell them to save if you’re splashing out,” he warns.

Collier agrees. “You can’t teach your children discipline if you’re not disciplined yourself.”

Tip: Did you know you can take out a retirement annuity for a child , which is the ultimate saving vehicle? Find out more.

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What are the Advantages and Disadvantages of Money? – Answered!

Read this article to learn about Advantages and Disadvantages of Money!

Advantages of Money:

Paper money has got several advantages and disadvantages.

The following advantages can be mentioned:

(i) Economical:

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Paper money practically costs nothing to the Govern­ment. Currency notes, therefore, are the cheapest media of exchange. If a country uses paper money, it need not spend anything on the purchase of gold or minting coins. The loss which a country suffers from the wear and tear of metallic money is also avoided.

(ii) Convenient:

Paper money is the most convenient form of money. A large amount can be carried conveniently in the pocket without anybody knowing it. It is very risky to carry on one’s person Rs. 5,000 in cash, but not in notes. It possesses, in a very large measure, the quality of portability which a money material should have. In a very small bulk, it can contain a very large value. Think of a currency note of Rs. 10,000.

(iii) Homogeneous:

One essential quality in money is that it must be exactly of the same type. Even among the coins there are good and bad coins. But currency notes are all exactly similar. It is, therefore, a very suitable medium of exchange.

(iv) Stability:

The value of paper money can be kept stable by properly regulating its issue. That is why there are many advocates of ‘managed’ paper currency.

(v) Elasticity:

Paper money is absolutely elastic. Its quantity can be increased or decreased at the will of the currency authority. Thus paper money can better meet the requirements of trade and industry.

(vi) Cheap Remittance:

Money in the form of currency notes can be cheaply remitted from one place to another in an insured cover.

(vii) Advantageous to Banks:

Paper money is of very great advantage to the banks. They can keep their cash reserves against liabilities in this form, for currency notes are full legal tender.

(viii) Fiscal advantages to the Government of the paper currency are undoubtedly very great, especially in times of national emergencies like a war. A modern war cannot be prosecuted by taxes or loans alone. All governments have to resort to the printing press. In recent years in India there has been great inflation. We must remember that by this means our Government has been able to spend hundreds of crores of rupees on various ambitious programmes of development. Hence within limits the issue of paper money comes very handy to the government at the time of dire need.

Disadvantages of Paper Money:

But we cannot overlook the disadvantages of money:

(i) Paper money is of no value outside the country of issue. Gold and silver coins are accepted even by foreigners, as they have got some intrinsic value.

(ii) There is a possibility of the damage to paper. Fire may burn it; if the place is flooded, it is gone; it may also be eaten up by white ants.

(iii) A serious drawback in paper currency is the ease with which it can be issued. There is always a danger of its over-issue when the Government is in financial difficulties. The temptation is too great to be resisted. Once this course is adopted, however, it gathers momentum and leads to further note-printing, and this goes on till the paper currency loses all value. This happened in various countries in recent times: in Russia (1917), in Germany (1919), in China (1944), and so on.

An over-issue of notes, in other words ‘inflation’, brings many evils in its train.

Some of them are:

(a) Prices rise steeply. As a result, labourers and people with fixed incomes suffer greatly. The whole public feels the pinch.

(b) The indirect result of the excessive rise in prices is a fall in exports and a rise in imports. This leads to the export of gold from the country, which is not a desirable thing. Its balance of payments becomes unfavorable.

(c) The rise in prices also leads to a fall in the external value of the home currency. The rate of exchange falls. More home money will have to be paid to buy units of foreign currencies.

Conclusion:

Really, paper money, if it is issued and regulated carefully, is without any disadvantage. All countries issue paper currency, and, in normal times, they do not suffer from it in any manner. Only when it is over-issued, it becomes a great danger and a curse. It may cause grave discontent among the masses. When paper money is over-issued, there is inflation and prices rise. It hits hard several important sections of the people like workers and fixed- encomiasts.

The people might lose confidence in the currency and it might become useless. Such a situation arose in many European countries during and after World War I, and later more recently in China. It is remarkable that Indian Government was able to control inflation, whereas even countries like the U.K. were unable to check it.

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Advantages and Disadvantages of Having Money

Looking for advantages and disadvantages of Having Money?

We have collected some solid points that will help you understand the pros and cons of Having Money in detail.

But first, let’s understand the topic:

What is Having Money?

“Having money” means you own or possess some amount of currency, like dollars or euros. This money can be used to buy things you need or want, like food, toys, or clothes. It can also be saved for future use.

What are the advantages and disadvantages of Having Money

The following are the advantages and disadvantages of Having Money:

Advantages of Having Money

• Can afford basic necessities – Having money means you can buy things you need like food, clothes and shelter.
• Provides financial security – Money also gives a sense of safety. You can handle emergencies or unexpected costs without worry.
• Enables investment opportunities – It also opens up chances to grow wealth. You can buy property or start a business.
• Supports philanthropic endeavors – Money can also help others. You can donate to charities or support causes you care about.
• Enhances living standards – Lastly, money can improve your life. You can enjoy better housing, education, and experiences.

Disadvantages of Having Money

• Can attract false friends – When you have a lot of money, you might draw in people who pretend to be your friends but are only interested in your wealth.
• Increases fear of loss – Money can also make you constantly worried about losing it, which can take away your peace of mind.
• Might lead to overspending – Having a lot of money might tempt you to spend more than necessary, which can lead to financial instability in the long run.
• Can cause stress and anxiety – Money can also be a source of stress and anxiety, especially when it comes to managing it properly and making the right financial decisions.
• May foster materialistic mindset – Lastly, having money could make you focus too much on material possessions, forgetting the importance of non-material aspects of life.
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Pocket Money, Should Parents develop this habit at the tender age?

Any economy, any Country, any Company, even an NGO or the smallest company need resources to achieve its objectives; but it is a known fact that the resources are always limited, and need to be used optimally. This is the reason why even the developed and resourceful countries also prepare a budget for the optimal use of resources. Similarly, every person also has his own budget for his personal expenses or for the expenses of his family.

Usually, it has been seen that a person starts budgeting after he starts earning; till that time his parents provide him with everything he needs (depending on the budget of the family). Because of this, he fails to understand the importance or the value of money and cannot prioritise his necessities and luxuries immediately as he starts earning and soon realises the Hindi saying that 'Aish to Baap ke Paise se Hoti Hai, Khud ke Paison se to Sirf Zarooratain Poori Hoti Hai'. But this could be avoided, if they are put into the habit of planned and prioritized expenditure at their tender age; it would not only help them to cut down few of the unnecessary expenses but also make them realise the value of their parents' and in coming times their own hard earned money.

Developing the habit of pocket money at a very young age thus will play an important role in person's development and will develop different management, financial and strategical skills in them. Quite possibly, this might help them and the whole economy of which he is a part to develop good resource management and to flourish even with meagre resources.

But having access to money at such an immature age may, at first, tempt the kid to spend on his cravings; this might lead to constant demand of increment and on refusal, probably to the theft. So, along with giving a free hand, some restrictions or specifically a check should be maintained. A kid should be taught and encouraged to keep an account of his expenditures; and rather than constantly nagging him, the habit of self-analysis should be developed. This habit of self-analysis might let him learn from his own mistakes and take better decisions in future.

Pocket money might help them realise the importance of available resources and its optimal use but not the importance of hard work; so, instead of simply giving away the money, they should be asked to do some simple works such as washing car, cleaning utensils, etc. Also, the care needs to be taken that this 'Money for Work' should only be an encouragement to work and not turn into the employer-employee relationship. For this, the inevitable expenses such as school fees, books, uniform etc. should be borne by parents. Also, to maintain the warmth of the relationship, birthday parties or some trips also need to be arranged by the parents and not charged upon the pocket money of kids.

Thus, developing the habit of pocket money helps making the kid realise the importance of available resources, labour, savings and developing many other skills such as budgeting, management, decision-making etc. But, while inculcating these, it should be taken care of that the warmth of parent-kid relationship is maintained and the kid doesn't get into wrong practices such as theft or bribe.

Hiral D. Myatra

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