Most households gift Hanukkah coins to their children, offering a perfect opportunity to discuss money and teach essential financial skills.
Pocket money offers parents an important opportunity to guide their children toward responsible financial habits, which are essential for their future. It allows children to practice skills like budget management, delayed gratification, future planning, setting priorities, and learning to make sacrifices, all of which they’ll face throughout life. Moreover, pocket money serves as a foundation for defining boundaries and the parent-child relationship regarding financial assistance, both now and in the future.
So how can you teach children to use pocket money wisely?
Eight guiding candles to illuminate financial skills for children (and one Shamash):
- Discourse: Pocket money provides an opportunity to discuss money openly; understanding what money is, where it comes from and how it is spent.
- Defining the framework of pocket money: Each age comes with unique needs. As the saying goes, “With children come their troubles,” so do amounts and expenses vary. Collaborate to define the amount and frequency of pocket money.
- Rules of use: Every household has its own rules. Clearly define what pocket money can and cannot be used for. This clarity helps address common conflicts, such as, “It’s my money; I’ll spend it how I want.”
- Need and want: Pocket money teaches children to prioritize spending. Learning to distinguish between needs and wants early will help them manage expenses as adults.
- Wise consumerism: Pocket money is an opportunity to develop essential consumer skills: price comparison, informed decision-making, brand value, understanding sales promotions, and the meaning behind advertisements.
- Budget management: Pocket money acts as a small-scale budget. Children can practice tracking income, planning expenses, and evaluating what is left. Tailor this process to their age and understanding.
- Independence: Pocket money gives children the freedom to make decisions while allowing parents to practice “letting go.” All within clear, pre-set boundaries.
- Encouragement for saving and investing: Pocket money is a perfect way to teach the value of saving and investing, showing how good money management leads to greater rewards.
- Shamash: A rule that illuminates them all. Pocket money is a great way for parents to prepare their children for the financial challenges of adulthood. Check regularly whether your approach helps them build the skills and confidence they’ll need to succeed as adults.
If done right, pocket money becomes a great tool for empowerment and moral and financial education, enabling children to carry forward the values of past generations while creating a future filled with wonders, joy, and success.
