In modern consumer-oriented society parents usually try to provide their children with as many toys, gadgets and money as possible. But it turns out the more pocket money they children get, the poorer savers they are going to become. New research advices to cut your kids’ pocket money and teach them how to earn it.
A report on spending and saving habits was presented recently at the annual conference of the Royal Economic Society at Royal Holloway, University of London. The research included responses from around 6000 British children aged 11 to 15 who were asked how much pocket money they received, whether they worked and whether they saved it all or spent it all. Most of the children said they saved money for toys or mobile phone accessories, but almost a quarter admitted they just spent it all immediately. According to the results, kids who were given the largest amounts of cash without having to work for it were most likely to spend everything without putting anything away.
So, the more cash you give your children, the poorer savers they become. In comparison, making them do house chores will teach them to save. Earnings from part-time work are also connected to their ability to save for the future. It turns out that when the child gets money only after working for it, he or she realizes the true value of money and develops a habit of saving early in life. When saving, children face financial decision-making at very early age, despite the fact they have no actual financial assets. Parents may think that saving for a new phone or bike isn’t serious enough, but it’s really a big deal through children’s perspective.
One of the interesting findings of the study is that parents’ example is irrelevant. Contrary to many believes, money saving behavior of the parents had absolutely no effect on the behavior of children. But the authors admitted that in families where parents openly discussed household finances with their children, children were more inclined to save for the future. So, experts say that we should share more with the kids even when it comes to money. And in order to teach them positive financial behavior, we have to cut their pocket money and make them get a paper round.
Kids definitely need opportunities to practice handling money. Even something like going to an ATM is a chance to teach them and open a discussion. Tools like http://www.bankaroo.com are out there, too–combined with things like books, piggy banks, etc., these resources make it much easier to get the message about money across. Parents just need to find what works for their child.