Children develop their competence in dealing with money in different ways: through discussions, by watching others and – a particularly effective method –   through practice. Most parents use pocket money as training ground for their first experiences in handling money. Pocket money enables children and young people take responsibility for their own finances for the very first time. They learn how to save, budget and spend money responsibly.

When managing pocket money, parents are often faced with the question of how much responsibility they feel their child is ready to take: at what age should children have access to their own money? To what extent should parents have a say in how the money is used? When are children old enough to take on money management tasks independently?

Tips for parents

As parents, you can create opportunities for your children to practise handling their own money at different ages:

• Even at preschool age, you can allow kids to save small sums of money, perhaps given to them by the grandparents or godparents, in their own piggy bank. Once the piggy bank is sufficiently full, the child can buy something special with the savings – under your supervision.
• After starting school, children are usually ready to manage regular pocket money themselves. First, talk to your child and clarify together what the pocket money is intended for. But after that, you should give your child as much freedom as possible. They will learn best from their own experience – which also includes bad purchases. For example, your son or daughter will soon realize that if they spend all their pocket money on the first day, they can no longer buy anything.
• From around the age of 12 onwards, children can take on more financial responsibility. Determine with your youngsters which living costs (e.g. clothes, lunch) they will have to start paying for themselves with extended pocket money or a “youth salary”.
• Another possibility is to pay the sum directly into the young person’s account. This also gives them the opportunity to practise using e-banking, debit cards and maybe even prepaid credit cards. In this way, adolescents also learn how to handle spending and all its multiple possibilities in a responsible way.