When it comes to pocket money, our sons Josef (16) and Benjamin (14) have been riding the rollercoaster boom-and-bust cycles that are our family finances for years. When we’re flush, they get their monthly allowance. When we’re not, they often don’t.
I’ve tried to justify this situation by suggesting that it teaches them the economic facts of life. You can’t just expect to always have enough cash to buy the latest online computer game. On occasion you need to tighten your belt and wait for more prosperous times.
Of late, however, the boys have been calling my bluff and are demanding more security when it comes to their personal finances (I suspect that Ben’s the ring leader here. He’s recently shocked the rest of us by voluntarily picking both Accounting and Business Studies as elective school subjects).
My wife Sam suggested that the boys do a little research by asking their friends about their pocket money arrangements. The results varied widely: some kids seem to get handed preposterous amounts of money whenever they ask for it while others get nothing, ever.
Overall, most families seem to adopt one of two models: Scenario 1, which I’ve dubbed “Money for Jam”, in which the child receives a set amount every month, and Scenario 2, “Benevolent Child Labour”, in which the youngster gets paid money for doing odd jobs around the house.
As you might suspect from my somewhat flippant labels, I have issues with both approaches. Surely it’s only reasonable for parents to expect their kids to contribute materially to maintaining the household before they can lay claim to a regular share of its disposable income. Yet, didn’t we as parents bring our children into the world and thus bear a fiduciary responsibility for providing them with a certain degree of financial comfort?
I did a little digging myself and discovered that opinions on the pocket money debate are divided around the world. In 2013, for instance, the annual conference of the British Royal Economic Society heard evidence that kids on the “Money for Jam” gig (they didn’t call it that) are less likely to turn out to be financially prudent in adulthood compared to others who have to do chores or part-time jobs. Getting free pocket money, the researchers suggested, lowers a child’s propensity for saving, while having a part-time job encourages it. Apparently having been a saver in childhood increases their chances of being one as a grownup by about 18%.
By contrast, a study conducted across 13 European countries in 2014 suggests that individuals who received a regular allowance as a kid were more likely to add to their savings on a regular basis, were slightly less prone to overdraw their bank accounts, as well as saving more for retirement and being generally more financially competent as adults.
Not only does it seem that the attitudes of grownups diverge widely on the matter, they’re not particularly fair either. An Australian online survey revealed that, on average, Aussie boys receive more pocket money than girls, even though they tend to spend less time doing their assigned chores.
This got me thinking about my own childhood. I grew up in Germany and while I did get a modest amount of pocket money sans chores every month, the idea of saving it wasn’t so much drilled into us as it was positively encouraged from an early age.
I think I had accounts with two different banks by the time I was ten. Both banks held special ‘Saving Days’ for kids once a year. On that day you took your bulging piggy bank to a dedicated, balloon-festooned counter where its contents were emptied into a cool money-sorting contraption. Once your treasure was counted in front of your eyes, the amount was officially entered into your savings book.
What really made you want to come back every year were the trinkets, toys and comic books that were handed out to junior savers on the occasion. “Rather manipulative”, you might say. Sure, but it really worked. It made me appreciate my pocket money and stopped me spending it all as soon as I got it.
Keeping all of this in mind we had a family confab and decided to try out a hybrid pocket money model. We finally opened bank accounts for Joe and Ben, they get an allowance at the beginning of each month, and while they don’t have daily chores that are set in stone, they understand that they are expected to contribute to the running of the household by helping to set the dinner table, feeding the pets and so on.
Hopefully, this way we’ll avoid the extremes of teenage wage slavery on the one hand and doling out free cash every month on the other, all while setting the boys on a long-term path to greater financial responsibility.
Photo by Steven Depolo, Child Entrepreneur Lemonade Stand via Flickr. CC by 2.0