Providing pocket money to youngsters as early as four or five years old allows them to understand the value of money and how to handle their money. When teenagers receive pocket money, they must decide whether to spend it or save it. And, if they are saving, they will learn to be patient when it comes to getting what they want. They also know the difference between fixed pocket money vs on-demand pocket money.
When it comes to providing youngsters pocket money, there seem to be no definitive laws. Children may be willing to try handling pocket money if they realise that they will need money to pay for things and that it is useful for saving rather than wasting it all. If they spend all of their money today, they will not have any more until the following payday.
Fixed pocket money refers to when children are given a fixed amount every month as their Allowance. Your parents decide an amount they allocate to the children to spend or use it as they like. Children are given a fixed amount to learn to manage all their expenses within the limit. This is a good way of teaching children to budget and uses their money wisely.
On-demand Pocket Money
On-demand pocket money refers to when children are given money whenever they require it and not every month. Your parents expect their children to ask them for money whenever they need it instead of providing the money every month. This is because parents feel that their children can ask for cash only at the time of need, and they should not be given a fixed amount every month to spend on activities that might not be needed.
Fixed pocket money vs on-demand pocket money
4 Reasons Why Fixed Allowance Is Better For Teenagers
Fixed Allowance and on-demand pocket money have their advantages and disadvantages. Teenagers are growing up individuals, and they should be given the responsibility to understand the value of money from a young age. Fixed Allowance is always a better option for your kid because they know to carry out all their expenses within a fixed limit. This gives them an important lesson on budgeting and money managing. They take their own decisions on how they want to spend their money. In this process, they make mistakes and learn from them each time.
To get into the depth of why fixed allowances are better, here are five reasons that will help you understand how fixed budgets are helpful for your kids in the long run.
- Learning financial responsibility: Financial responsibility may be taught to children through allowances, which can educate them about money, accountability, and the consequences of bad choices. Many parents give their children an allowance ask them to pay for non-essentials like trips with buddies or gadgets. When children pay for these extravagances on their own, they learn basic financial planning. They must save their money to make a purchase, and thereby, they must learn how to make compromises. A youngster, for example, may forego soda with their pals to save money for a costly gadget. They may miss out on that experience, but there is a payoff for their perseverance and foresight.
- Teach them about work benefits: Many parents withhold money until their children have completed all their duties. This arrangement pushes youngsters to accept responsibility for performing things on time. They are aware that they are paid when they accomplish their tasks, and if they do not finish their responsibilities, they are not paid. As a result, kids rapidly realise that getting those tasks done benefits them.
- Provides an Opportunity to Show the Save, Purchase, Give Concept: Every transaction may be an opportunity to teach your children about money. To that aim, an allowance provides a chance to teach the principles of saving, spending, and sharing. They discover three methods for allocating their money:
- One for monetary savings. They will put that money aside for the future.
- Then comes the spending. They are free to spend the money any way they see fit.
- Finally, they can give this money to a charity of their choice for sharing.
- There is something for everyone with this allocation technique, and your youngster learns to manage their money conveniently.
- They Learn Money Management with Fyp: With Fyp, your kids learn how to budget and manage their money in a fun way. Fyp provides teens with the liberty of operating their money as per their desires. Parents can plan a monthly allowance and send it to their kids directly on their Fyp accounts. They can use this money to meet their demands. With many cashback opportunities, teens find ways to save money by availing of deals on the Fyp app. Not only that, but they also get to record their spending and income and check them whenever needed to see if they have made any mistakes and avoid those in the future.
At the end of the day, how you arrange an allowance is up to you and your family’s particular circumstances. However, experts advise that you should not let your fear of a sophisticated system keep you from using this essential financial literacy tool. Whatever you decide, express your guidelines to your children clearly. Also, follow through on any recommendations or directions you devised. Finally, take advantage of this chance to educate your children on sound financial principles.