Kids and Cash

When should you start giving pocketmoney? And how can you develop healthy money habits in your children? Dr Kathleen Gurney from the Financial Psychology Corporation gives the following advice.


1. Children have distinct money personalities and they are developed early in life which determines how they manage and relate to money.

2. From toddlerhood on, children give clear signals of how they think and feel about, and are likely to behave with, money.

3. We routinely try to change behaviour patterns that we're afraid will sabotage our kid's changes in life, so why not try to work on their money habits too?

4. Accentuate the positive: Encourage the positive aspects of your child’s financial personality as you discourage the negative ones. Applaud your spender when he or she spots a true bargain or shows some restraint - ability to delay gratification. The reward should be non-financial in nature - take to a favourite destination such as a restaurant.

5. Start early - children start receiving money as gifts, going to the stores with parents, receiving an allowance. Allowances send important conscious and subconscious messages. Given to kids to recognise active participation in their household, an allowance is an effective means of teaching a relationship between money and effort: helping with dishes, washing the car. It creates a connection between effort and earning. Much more positive than children simply getting what they want on demand.

Parents should avoid bestowing and withholding without explaining why or giving a child the opportunity to handle it. That may create manipulative behaviour that angers both parent and child.

Few parents make it a significant part of parenting from an early age. They don't make enough of an effort to create, guide and monitor. Parents can be more conscious of helping to make and create good financial habits.

Kids aren't taught essential money skills in schools so they have to be taught at home. Without basic education and skills, kids mismanage their money. They don't know how to budget, use credit wisely, prioritise their expenditures.

Money is a taboo and many parents feel awkward about exposing their own attitudes, behaviour and financial information. That sense of privacy is apparent to children who model the same behaviour.

Whether the family has a lot of money or just enough to pay the bills, communicating with your children about it should be a priority. By discussing money matters with your children, you'll be sharing values, as well as information. Providing them with a financial education will enable them to become responsible adults.

Family money scripts
Communicate some of the universal virtues that can be attached to money and receiving, spending or saving it: Thrift, charity, self discipline, generosity, sharing.

Children need practical experience, not just an explanation or lecture. Give them money to spend. Incorporate lessons about money into lessons about their everyday life - make it relevant.

Teach children to have an identity, and encourage self-awareness, self-confidence and self-reliance.

Try the following at each age:
3 to 5:
Begin discussing money. Take your children on shopping trips to buy groceries or gifts. Talk about how you weigh choices and decide. Give them small amounts of money occasionally, and ask them to pick among three or four choices.

6 to 7:
Introduce a small allowance. Don't link the money to household chores; simply assign chores as part of your child's family responsibility. Discuss what can be done with the money. Give the money every week at a set time, without fail. Don't take it away for punishment.

8 to 10:
Give annual raises. Increase the child's allowance and responsibilities each year on an easy-to-remember date like New Year, and provide opportunities to earn extra money by doing additional chores. Help your child to open a savings account and talk about what to save for.

11 to 14:
Start to set goals. Invite your child to join you in family budget conferences. Talk about long-term goals, such as tertiary education. As a savings incentive, match any amount that he or she contributes to a savings account.

15 to 18:
Help your children attain independence by opening a cheque account with an ATM card. Consider giving them a family credit card, provided they pay their own bills. Encourage them to get outside jobs. And include them in decisions about paying for tertiary education.

Successful money management begins with knowing yourself. Help your children develop a positive, functional connection and relationship to money rather than a dysfunctional one.