A fun comic, new toys or choice sweets – that’s what children like to spend their pocket money on. But how much do they actually need? And why can they learn so much from it? Swiss Life enlightens the parents and provides helpful tips.
Pocket money is much more than a means of enabling children and adolescents to buy what they want. Its main purpose is to allow parents to teach their children a life lesson by giving them the opportunity to handle money. Pocket money prepares children and adolescents for the challenges of today’s world.
Private provisions only become relevant once you draw your first AHV salary. That makes it all the more important to acquaint children with money as early as possible. How much do they have to save to realise their dreams? How long will it take until they can afford a new computer game? How long must they save to go on a small trip at a later date or kit out their first apartment?
We would like to share the nine key pocket money tips that will help your children develop their awareness of money.
The nine key pocket money tips
Tip 1: Give them a suitable amount
As a rule, the amount of pocket money should depend on the family budget and age of the child. The following overview from “Budgetberatung Schweiz” serves as a guide.
|From the age of six||CHF 1 per week|
|From the age of seven||CHF 2 per week|
|From the age of eight
||CHF 3 per week
|From the age of nine
||CHF 4 per week
|10-11 years old||CHF 25-30 per month|
|12-14 years old
||CHF 30-50 per month
|From the age of 15||CHF 50-80 per month|
Tip 2: Start as early as possible
Annamaria Lusardi, Academic Director of the Global Financial Literacy Excellence Center at The George Washington University, says: Start your financial education as soon as possible. Don’t wait any longer than it takes for your child to put their first milk tooth under the pillow to gain some change for their piggy bank. Otherwise your child risks spending money before understanding its real significance.
Tip 3: Talk about pocket money
Children and teenagers need to understand that pocket money is about more than buying what they want. Keep talking to them about why they should look after their money. Why is it sometimes better to save than just spending everything immediately? Give them examples, for example saving for a driving licence or their education. Tell them you also have to save for the things you want.
Tip 4: Demonstrate the importance of saving
Emphasise the importance of saving. Motivate your offspring by giving them more money as a reward for reaching their savings target. That will help them understand compound interest.
Tip 5: Pay for housework
No work, no money. Money does not come from the hole in the wall but from having a regular salary. Young people need to understand that. So you can pay them pocket money in return for doing chores, for example washing up, bringing out the trash or walking the dog. That helps children understand that work calls for discipline and is worth doing for the “salary”.
Tip 6: Allocate costs clearly
Tell your child exactly what they must pay for with their pocket money and what you will pay for. That will help them to allocate funds and target their saving to a specific end. It’s also important to give them their pocket money punctually and regularly so they can rely on it.
Tip 7: Avoid using pocket money as a punitive measure
Children need to receive pocket money regularly to learn how to live on a set budget and distribute it properly. If they cannot rely on this budget, the exercise becomes counterproductive. That’s why you shouldn't withhold pocket money as a punishment.
Tip 8: Do not pay an Advance
Children need to learn from their mistakes – in finance as much as anything else. So don't give them an advance on their pocket money, instead talk to your child and find out why their budget planning failed.
Tip 9: Bring in a youth wage
Bring in a “youth wage” once your child reaches a certain age. Young people can use this fixed monthly sum to pay for their railcard, going to the hairdresser, clothes and other living costs, and thereby learn how to distribute their money properly. The youth wage is recommended from the age of about 15.
Maintain optimal family budget planning
Children can be a financial challenge, especially for families on a low income. Clothing, food, personal hygiene, free time and pocket money all need to be paid for. Then there are extra expenses, for example braces, hobbies or mobile phones. That’s where the Swiss Life budget calculator can help.