World-famous financial guru Buffett pointed out that if you want to give your children pocket money, it is very important for parents to understand the following 4 points:
1. Pocket money is an important tool for educating children about money management.
2. The child's family values (family environment) determine how a child spends his pocket money.
3. If the purpose of giving your child pocket money is to get him to do housework, establish clear goals.
4. How parents use money, children will have a sample when they use pocket money.
Next, we break down in detail what Buffett said about these 4 points
Buffett and Huang Zheng (Pinduoduo)
One. What the children of elite families think about pocket money
Giving pocket money to 4, 5-year-olds helps them start learning about the value of money and money management.
For example, when a child receives pocket money, the first choice the child faces is whether to spend it or save it. Children of wealthy families often choose to save until they have enough of what they want. And poor children usually spend money right away to buy something that satisfies themselves right now, like snacks or cheap, inferior toys.
Pocket money can also help children understand the consequences of spending money unwisely. Getting your child to make some mistakes is part of the learning process.
Focus: Children learn a lot about money management by observing how parents use money. For example, if your child sees that you buy something and sets a ceiling, or shops around when they buy something, your child will learn to follow the budget.
Two. Pocket money and housework
Some parents believe that everyone should help with housework because everyone is a member of the family, not doing housework for money. Moreover, linking your child's chores to pocket money can lead to children bargaining over doing housework.
On the other hand, some parents believe that pocket money should be "earned" by their children, not just "given to their children". Using pocket money to get children to do housework is a means of motivation.
Here we should make it clear that there is no right or wrong way to pay your children for housework.
If you decide to link pocket money to housework, be sure to stick to it and stay regular — for example, tidying up your room every day or week, or going downstairs every night to take out the garbage. If you keep it for a long time, it will make your child understand the truth of making money through "work".
Important: If you choose to pay pocket money for housework, be sure to explain the housework clearly so that you don't have a situation of arguing or bargaining with your child over "what to do" and "when to do it".
3. Tips for pocket money
Here are some tips for giving your child pocket money:
1. Explain to your child what pocket money is used for, not what it is used for. For example, if pocket money is used to pay for entertainment, determine what type of entertainment is possible. It is helpful to make a list.
2. As a parent, give your child some guidance and discussion on how much to save and how much to spend. For example, talk to your child about saving 70% of your pocket money and spending 30% of your pocket money, and why you should do it.
3. It doesn't matter how much pocket money you give your child, don't punch your face and be fat, and don't care what other parents (or your child) will say.
4. It is best to have a fixed cycle for pocket money. For example, weekly, bi-weekly, or monthly payments.
5. Deposit your child's pocket money directly into their bank account. This can help children understand the concept of money, which is sometimes just a number on the screen.
5. Try not to give your child pocket money in advance, and try not to give pocket money outside of a fixed cycle. If you must do this, teach your child to make a repayment plan and understand the concepts of borrowing and taking out loans. For example, if your child sees a toy worth $100, but he only has $50 in his hand, borrow him $50 and tell him that for the next period of time, the pocket money from his "work" will be used to repay the loan, and a certain amount of "interest" will be charged.
The point: If kids see their pocket money "growing," that increases their motivation to save. You can also use a few jars for your child to distribute their pocket money — for example, one jar for the small things they want now, and another for the bigger ones they want.
Four. Parental influence on children
By observing how parents deal with money, your child will learn the following:
What is money: the relative price of a thing
What is spending money: Once it is spent, the money is gone
What is making money: Let your child understand that earning money is a hard job, but often this is the only way to get it
What is saving: Let your child understand what short-term and long-term goals are
What is borrowing: Let the child know that the borrowed money is to be repaid!
What is opportunity cost: When you buy something with money, you give up the opportunity to use that money to buy something else. Perhaps, better in the back, sometimes waiting and patience determine whether a person can succeed or not
Do you agree with Buffett's advice on pocket money for kids? Say what you think in the comments section!