I’d mentioned to one of my psychologist friends that I’d set up this site. I’m glad to say he not only liked it but, having children, offered to share a bit of practical psychology for dealing with pocket money that might be useful to you. What he does is give the children pocket money, and once given, it is the children’s, so if they want to spend it, they can. However, the children have come to realise that once it is spent, the money is gone and that’s that! Both children tend to save now for the things they really want, and it saves any arguing about money.
Maybe you think that is obvious – if so, that’s great. But maybe you had the same response to that idea that I got once when I proposed a psychologically useful way of teaching children about handling money. I suggested that as they get older, you should involve them in buying clothes, paying mobile phone bills, organising money, setting budgets for school trips etc. and let them handle increasing responsibility, and take the consequences. Some of my audience reacted as if I’d grown a second head! But it works.
It’s a similar principle to allowing children to explore the world a bit. Maybe they get grazed knees or something once in a while, but they learn how to deal with the world as it really is, in a situation where they are only going to get a few scrapes or bruises, not get themselves badly hurt.
With money, if they get things wrong (they spend money on sweets that should have bought them lunch on the school trip) they will learn that they get the consequences (like being hungry most of the day). You know that they learn from something that is less serious and not going to produce a huge problem (like blowing their whole university allowance and student loan in the first two weeks because they’ve never learned to handle a budget).
Think about it. It does work, both in theory and in practice.