Teaching financial literacy: Why pocket money is important for children

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Why pocket money is important for children

Using pocket money, children with small sums of money learn to spend money responsibly. The amount is not decisive. What matters instead.

Should I give my child pocket money? And if so how much? These are questions that all parents probably ask themselves at some point. Maybe in those moments when the kids are whining for an ice cream. In such cases, the reference to own money quickly relieves the parents. But what is pocket money good for?

A representative Forsa survey shows that in 2022, well over half of all parents will pay their children pocket money on an ongoing basis. Parents make the amount of pocket money largely dependent on the age of the children (63 percent).

How much pocket money do you want?

Youth offices and the Family Ministry support an age-related amount that increases with age. According to the survey, the average amount for primary school students is currently 3.80 euros per week. The German Youth Institute (DJI) recommends a slightly lower amount. For first graders it should be around 1 to 1.50 euros, for the oldest elementary school students no more than 3 euros per week.

Families living on very low incomes should be open with their children about why they don’t get as much pocket money as their friends. “Have a talk with your children and explain: We don’t have that much, but we make sure that you still get a small amount,” says Alexandra Langmeyer, who heads DJI’s Living Situations and Living Environment Group. It is not the amount of pocket money that matters. It is much more important that children receive a small sum at regular intervals, without being asked, which they can freely dispose of.

Because the key thing about pocket money is that children learn to handle money as early as possible. But it only works if they are actually allowed to use it. Wishes are given a value and the children quickly realize that the weekly amount can only be used once. So if they have a bigger desire, it may mean they have to save.

What children spend their pocket money on

According to experts, parents who decide against pocket money often justify it by saying that the small amounts cannot be used to buy anything of value. Instead of the positive experience of being able to fulfill a wish, the child experiences frustration. For example, even a children’s magazine usually costs more than four euros and is therefore above the typical weekly amount or recommendation.

However, Christian Heck from the child support and youth protection department of Stuttgart’s youth office sees that even the smallest amounts make sense: “Sometimes it is difficult for us as adults to bear what children spend money on. But these are the important experiences. we have to allow that .” Because children are better at doing these experiences at a young age with small amounts of money than later, untrained, with larger ones, says Heck.

Parents should therefore not dictate to their offspring what they can buy with their pocket money. According to the German Youth Institute, children are particularly happy to spend the amount on toys, magazines or sweets and young people on fast food, going out and their mobile phones. The biggest gender difference is that girls tend to prefer clothes and boys prefer anything related to computers.

A good idea? Link payment to conditions

After all, a quarter of all parents link the payment of pocket money to conditions such as good grades or certain behaviour. Experts disagree on this: Money can certainly be an incentive to make an effort. Also in the adult world, there are later salary supplements for special achievements. A parallel or a learning effect could certainly be seen here. But what if the child tries hard and still doesn’t get a good grade? Then it is doubly punished.

From a professional point of view, Christian Heck therefore does not consider the conditions reasonable: “Do not connect the security of ordinary pocket money with achievements. Think back to your own childhood: Were you free to dispose of your pocket money? What would you have wanted?” The parents’ task is to advise during the learning process and to impose as few conditions and restrictions as possible on the child.

The small steps are especially important in learning how to handle money responsibly. Financially competent people know that managing money and the associated financial independence is important to a self-determined life. The earlier the offspring learns this, the better.

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