When a child has some close friends at school, but some of them come from relatively richer families, so they get maybe twice my child's pocket money, how should I answer when he complains and asks to be on par with such friends?
Depending on their age, you may be able to use this to teach them about finances.
- Not everyone is paid the same.
- Not everyone has the same expenses.
Also, you might give them an opportunity to earn a little more:
- Small payments for special housework (they still have chores that don't count here)
- Other jobs (selling candy/soda/etc. at a garage sale; odd jobs for family/friends/neighbors)
- Interest (set up an in home bank account, and allow them to earn interest on money they keep in savings with you)
In addition to the answers already given, I would also point out those who are not as fortunate as you or the richer families.
Depending on the age of your child, it may be a good time to discuss community service. Take your child to a food bank or get involved in other activities where your child can experience both sides of the coin.
I would like to share how our parents raise us. When it comes to money matters, my mom is very transparent or vocal about our financial condition. Like she tell us that this is what we have, and we will have to spend it on this and that. In this way, I learned the value of money.
Based from experience, my parent's honesty about our financial status, had helped me to accept that we are not that rich compared with others. But it inspires me to study and persevere, because I know that with limited resources my parents are doing their best to support my needs. I believe that when you are honest with your children about your finances, slowly they could understand the situation, and from there, it may help them to persevere in life.
I'm against the whole concept of just giving kids money. But if you are going to give it to him, I would respond to his complaints by having a discussion about fairness and equality and that they are not necessarily the same thing. Other topics for discussion would be: whether his friends do anything to earn their money, what trade-offs are associated with them getting more money (e.g. his Dad is rich and can give him more pocket money, but works so much he never gets to spend time with his Dad), etc.
Don't be secretive about money
Many parents treat money as a secret, and attempt to shield their children, and even their partners from it as though it is something dirty.
Money is an important part of our lives. Be open about it. Be open about what it costs you personally in terms of time away from the family, effort and sweat to get money.
Many young people assume that money just comes easily. She may have a subconscious belief that when other people recognise how wonderful she is, money will just fall from the sky and into her lap.
Show her that choosing into something (e.g. more pocket money for her) also means choosing out of something (e.g. holidays, time spent with parents, happy times, etc.)
Have a transparent (non-secret) budget, and involve her
You can demonstrate this by setting clear, open and transparent budgets for things and sticking to them, and by involving her in the decision-making process. For example, a Saturday entertainment budget might be £60 for the family. This could be spent on a movie, a trip, a meal out, but not all three.
Involve your children in the process of deciding where money should be spent, and they will become more fiscally aware.
Consider commission and interest on savings rather than pocket money
There are 3 ways to get money:
- Working (doing chores)
- Investment (interest on savings)
- Handouts (benefits / pocket money)
In our house, we don't do pocket money. However, the kids do have the chance to earn fairly significant amounts by working hard and doing impressive things. They also earn 5% interest on savings each month.
It seems to me that by giving a child pocket money, you are teaching them to live on magic money from the sky. This benefits no one.
If you allow them the ability to earn (by taking out the recycling, winning competitions, hoovering the house, etc) you are showing them how to succeed in life.
If you allow them to look for ways to earn (by coming to you and saying "can I have a pound for doing this job", you are teaching them to be entrepreneurial.
Rich dad poor dad is by far the best resource that you can use for this. Give your child this very simple parable:
"Every morning an elderly man goes for a run. He looks to be in great shape and always has the energy. During his run, this old mans grandson can be found at home watching television. This grandson is overweight and never has the energy to run with his grandfather.
When you look at the grandfather, he looks to be in great shape and doesn't look like he needs the exercise. However, the grandson does look like he needs the exercise.
The same is true when it comes to money.
When it comes to people that are continuously spending their money, their bank statements are telling them that they need to learn how to start saving. But those that are saving wisely, look like they need to spend more often."