Do you remember the first time you handled money on your own? The sense of freedom when you paid for a soda, a comic book, or a toy all by yourself? Child allowance isn’t just a rite of passage; it is a new phase in the parent-child relationship. Giving children pocket money brings both freedom and responsibility to the parents and the child.
Here are five simple tips to remember while setting up an allowance system for your child:
1. Set an amount
The actual figure of the allowance is based on personal discretion and depends on several factors such as the child’s age, needs and wants, family’s financial situation, and so on. Regardless of what number is finalized, setting a fixed figure for weekly or monthly allowance can have a significant impact on the money management skills of both the parents and the child. Having a fixed allowance will help parents keep a track of their expenses and stick to their budget. On the other hand, when children know how much money they will receive next week, they can better plan their savings and spendings.
2. Teach and Trust
Giving an allowance isn’t simply giving children pocket money weekly. Setting up an allowance is a way to introduce children to the world of finance and develop money management skills. Encourage good habits such as savings and mindful spending, but also give them the opportunity to make mistakes and the space to learn on their own.
3. Use real money
Giving children toy money because they might lose real cash isn’t really a good idea. For starters, when children want to buy something with their money but have to ask you to pay in exchange for their toy money, it takes away the financial freedom and sense of autonomy an allowance is supposed to give. Without the responsibility of managing money by themselves, children do not gain the confidence handling finances is supposed to boost.
4. Consider Bonuses
Allowance isn’t just a way to teach children about basic budgeting. It is the first lesson of their financial literacy journey. In addition to their allowance, certain bonuses and rewards can be used to teach children complex financial concepts like interests, risks, and debt.
5. Ditch Ceramic piggy banks
The days of depositing loose change and saving a portion of pocket money in a piggy bank are long gone. Along with teaching children the basics of money management, it is also crucial to help them stay abreast of the latest financial tools and systems. In a world of online transactions and cashless payments, learning about online banking, digital payments accounts, and neo banks are a crucial part of financial education.
muvin- Smart Banking For The Young
Neo banks like muvin help children get real-world experience of money management but with a safety net. A parent can open a muvin account as the primary account holder and add children as add-on cardholders. Parents can regularly and instantly load children’s pocket money into their debit cards. Protected with two-factor authentication such as a PIN or OTP, transactions made through muvinCard are safe and also recorded through alerts in real-time. The card is easy to block and unlock with a daily transaction limit feature. In addition to gaining practical knowledge through using muvin, children can also educate themselves about personal finance and other financial concepts through video content and blogs on muvin.