I got asked about children and pocket money following research which found that parents are encouraging children to work for their allowance.
There were some good questions asked – they’re all actually answered in the book Taming the Pound but if you’re still waiting for your copy to be delivered (or you haven’t bought it on Kindle!), here’s what I said.
How can parents teach their children the value of money?
It depends on the age – small children think in quantity, so five pennies is more than one fifty pence piece, older children understand different value, but they don’t understand consequences (nor do many adults). So give them experience of judging value and let them know consequences – if they can’t pay their mobile bill, they don’t have use of the phone except for emergencies, if they spend all their dinner money on sweets they stay hungry until meal times. They might still spend all their student loan in two weeks, but it’s less likely if they found out years before that spend first, think later is a bad move.
Why is it important that parents get their children into the saving habit early?
We live up to our image – if you “save at the end of the month, if I have some money”, you’ll never save because
a) you can always spend money left over from saving first, but if you spend first you never have any to save and
b) you define yourself as a non-saver.
So your habit is “if you’ve got it spend it” – you never save. If you save first, you think of yourself as a saver and it becomes a habit. Children learning that the thing you do each month is save, will end up doing it automatically – then the habit they have will be one that will help them.
What advice would you give to families who are suffering from the economic downturn?
Everybody ought to think about what they really want, if you’re feeling the pinch it’s even more important. Materialistic attitudes, always wanting more “stuff”, actually make you unhappier. You might become the richest person in the graveyard, but you’ll have a miserable life. It also makes you the servant of the Great God Money – it’s the boss, you’re the slave. Things like relationships, doing work you enjoy, helping others etc., actually make you feel good – and usually don’t cost anything. So prioritise your spending for things that are really necessary and that make you happy long term (like building good relationships, having a purpose to your life) – that way you’re the boss and the money is a tool.
What impact can debt-related stress have on an individual?
It impacts on just about everything, mental and physical. People are designed to deal with perceived threat by fighting or running and hiding. You can’t run and hide from a foreclosure order, and hitting the bailiff is not a good plan. We’re not designed to deal with ongoing, low level stress, we’re supposed to see the threat, run or fight, then an hour later we’re back to normal. Nowadays our body and brain chemistry stays unbalanced for months on end – so we have depression, susceptibility to minor illnesses, are more prone to accidents, get headaches, can’t sleep, can’t digest food properly etc. We can end up with a whole range of niggling things, and become more susceptible to serious illness because our immune system isn’t working properly.