Awareness campaign in cooperation with the leading financial portal Peníze.cz . Read the full article with comments and links at this link.
In the previous parts of the series on financial literacy, we have been learning how to manage the family budget. Now it is still important to pass on the knowledge.
Do you have kids? Are they asking you for money? Unnecessary question. Let’s look at it scientifically.
We will use a long-term and very comprehensive study conducted by ING Bank on 12,000 consumers in 13 European countries, including the Czech Republic, the results of which are, in my opinion, quite practical.
In general, the study looked at whether there is any link between childhood experiences and adult behaviour. Specifically, how did the child’s receipt of pocket money affect how he or she managed it as an adult.
Pocket money as a teacher
Around 80% of parents in Europe give their children pocket money, so it is a rarity to find a child without pocket money. The most generous of the twelve nations studied are the Turks. Almost every parent in Turkey (95 per cent) gives pocket money to their children.
When we give a child pocket money, there are various reasons. Some children have to use their pocket money to pay for things like snacks, the bus, etc. Others, on the other hand, do not have to pay anything and the entire allowance is available to them. That is why the amount of pocket money varies and is often adapted to what the children have to pay. And of course – different families have different options.
A slight majority of parents who give their children pocket money, just over 50 percent, but the overwhelming reason given is the need to teach children to be frugal. These numbers are unlikely to have moved substantially since 2014. But another figure may be different: according to a study for ING, about eight percent of parents do not give their children money in hand, but send it to their children’s account.
For more recent data, but now only for the Czech Republic, we looked at a study carried out by Ipsos for the Czech Banking Association in 2021. The data show that 13 % of all parents in the Czech Republic sent the entire allowance directly to the account, while another 11 % sent some portion of the allowance. Forty-five percent of parents stayed with cash, and in 27% of Czech families children do not receive pocket money (in an international study the results were slightly more unfavourable, according to which 32% of Czech children did not receive pocket money).
“There are advantages to both methods of payment, i.e. cash and bank account, and above all, each is suitable for differently aged children. With cash, we should start with younger children so they can touch the money, know what it looks like and we can better explain how it works and what its value is. On the other hand, pocket money sent to an account is more suitable for older children who are digitally savvy, already know something about money and know how to manage it at least a little,” Lucie Nápravová from the Czech Banking Association commented on the Czech survey. According to her, electronic pocket money has one clear advantage, namely regularity.
What will it teach them?
Let’s go back to the international survey. He did not just ask whether and what kind of pocket money today’s children receive, but also asked their parents if they received pocket money. And he was looking for an answer to the question of what pocket money taught them.
Does pocket money have a positive effect on my economy as an adult? According to the study, today’s parents – those who pay their children an allowance – are overwhelmingly (70 per cent) confident in their children’s financial future and 83 per cent believe that an allowance can help children identify and learn the value of money.
And it’s true. When comparing the behaviour of adults who received pocket money as children with those who did not, it is noticeable. 45% of people who did not receive pocket money as children are able to increase their savings. But among those who received it, it’s 55 percent. There is a similar difference in whether they save money for old age: 31 per cent of those who grew up without an allowance and 40 per cent of those who had one do so.
But there are skeptics who question the study. Their argument is that children are influenced by many factors, not just pocket money. According to them, there is a positive relationship between pocket money in childhood and better management in adulthood, but it is impossible to say exactly how strong. So, pocket money, yes or no? You can ask your children.
Tips for adults on how to make pocket money
The reality is that pocket money alone is probably not enough. In addition, the positive influence and example of parents is needed. Pocket money can be a great tool for what we might call financial education, but it also has to be worked with. We have some tips for you:
- Example: if you think that now you will follow the example of how much a particular kid should get and how the rules should be set, it is not so. Example means – that you have to set an example. Ideally, by showing and explaining to the children, in an age-appropriate way, how much things cost. How much does your family put aside per month for food, how much for mandatory expenses, how much must be put aside if you want to save for this or that. And don’t forget how much your work costs. For comparison’s sake.
- How often: you can choose a weekly or monthly basis, it doesn’t matter that much, consistency and regularity are more important. If your kids are going to keep their money in order, you need to keep yours in order. Predictability is important. Have you ever had an employer who sometimes didn’t have enough money to pay you and you didn’t know if it would come on the 10th, 15th, or even if it would come at all?
- How much: Again, the amount of the pocket money doesn’t really matter. If the child has to pay for something himself, it would be good that it not only works out, but that he has something left for himself. Anyway, there’s no need to coddle. For inspiration, a two-year-old survey by the banking association says: “Younger pupils take an average of CZK 130 per month, while older pupils take CZK 280. After primary school, children receive an average of CZK 480 until they have their own income.”
- Rules: Do not set too many rules for managing children’s pocket money. Of course, try to explain to them what good it is not to spend everything at once, that there is a difference between spending money on a one-time pleasure and on a thing that will please him for a long time. But don’t overdo it. Rather, read the first point again.
- When to start: You can talk about money with children from pre-school age. They can start receiving their first pocket money when they master addition and subtraction. But they should also be able to exchange their money for something. Without that, it’s just metal discs and paper. For the sake of illustration, here is a picture from the research of the Czech Banking Association. I want you to know how other people have it. Whether you want to fit in or be different.
