Learn Financial Literacy: Why Pocket Money Is Important for Kids

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Why is pocket money important for children

With the help of pocket money, children with small amounts of money learn how to use money responsibly. The amount is not critical. What matters instead.

Should I give my child pocket money? And if so, how much? These are questions that every parent has probably asked themselves at some point. Maybe in those moments when kids grumble for ice cream. In such cases, referring to one’s money comforts the parents quickly. But what is the benefit of pocket money?

A representative survey of Forsa showed that in 2022, just over half of parents will pay their children pocket money regularly. Parents rely on pocket money to a large extent on the age of the children (63 percent).

How much pocket money do you want?

Youth Welfare Offices and the Ministry of the Family subsidize an age-related amount that increases with age. According to the survey, the average amount for primary school students is currently €3.80 per week. The German Youth Institute (DJI) recommends a slightly lower amount. For first-year students, the price should be from 1 to 1.50 euros, and for older primary school students, a maximum of 3 euros per week.

Families on very little income should open up with their children about why they don’t get the same amount of pocket money as their friends. “Talk to your kids and explain: We don’t have a lot, but we’ll make sure you still get a small amount,” says Alexandra Langmer, Head of Living Conditions and Living Environments at DJI. It is not the amount of pocket money that matters. And much more important that children receive a small amount at regular intervals without being asked, and they can dispose of it freely.

Because the central aspect of pocket money is that children learn how to handle money as early as possible. But this only works if they are actually allowed to use it. Wishes are given value and kids quickly realize that the weekly amount can only be spent once. So if they have a greater desire, it may mean that they have to save.

What do children spend their pocket money?

According to experts, parents who decide not to pocket money often justify this by saying that small amounts cannot be used to buy anything of value. Instead of the positive experience of being able to fulfill a desire, the child experiences frustration. For example, even a children’s magazine usually costs more than four euros, and therefore is higher than the usual weekly amount or recommendation.

However, Christian Heck from the Child Support and Youth Protection Department at the Youth Welfare Office in Stuttgart finds that even the smallest amounts make sense: “Sometimes it is difficult for us adults to bear what children spend their money on. But these are important experiences that we must have. We allow it.” Heck says, because children are better at making these experiences at a young age with small amounts of money than later, non-practising, with larger experiments.

Therefore, parents should not dictate to their offspring what money they can buy. According to the German Youth Institute, children are especially happy to spend the amount on toys, magazines or sweets and young people on fast food, going out and cell phones. The biggest difference between the sexes is that girls tend to prefer clothes and boys tend to prefer everything related to computers.

good idea? Link payment to terms

After all, a quarter of all parents associate paying pocket money with conditions such as good grades or a certain behavior. Experts disagree on this: Money can certainly be an incentive to put in the effort. In the adult world too, there are subsequent salary bonuses for special achievements. A parallel or didactic effect can certainly be seen here. But what if the kid tried hard and didn’t get a good grade? Then double the penalty.

From a professional point of view, Christian Heck does not consider the circumstances to make sense: “Do not associate ordinary pocket money insurance with performance. Think back to your childhood: Were you free to dispose of pocket money? What? Did you wish?” The task of parents is to advise during The learning process and the imposition of the fewest possible number of conditions and restrictions on the child.

Small steps are especially important in learning how to handle money responsibly. Financially competent people know that money management and the associated financial independence are important to a life of self-determination. The sooner the offspring learns this, the better.

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