Why Giving Your Children Pocket Money Is A Terrible Idea
I notice there is great emphasis in our society today on teaching financial literacy to children at an early age. The earlier-the-better approach led to science, computer literacy, and reading percolating down to kindergartens in the late 20th century. Financial literacy is the next frontier.
The assumption is that the earlier they start investing, the longer that money has to grow through compounding, resulting in wealth creation and greater freedom of choice from a young age.
Money Techniques Versus Money Psychology
I have learned that the techniques of managing money are secondary in creating wealth. The foundation is the psychology of money.
How our children relate to money in their minds and hearts will determine how abundant their lives will be.
For instance, I don’t intend to give pocket money to my daughters. They have been told that money grows on trees. It is an impending family project to create one in our entryway, from which we will simply pluck coins each time we have to step out of the house. Knowing that money is always there builds a relationship based on security.
Asking For More Is A Muscle To Be Trained
Moreover, they have been informed that all they need is an ask away. Being able to ask for what they want is an important skill, and when they ask they get it (within reasonable bounds). If only to confirm their belief that asking is worth it.
Sometimes, they receive an allowance for a specific purpose or trip. And my effort is to encourage them to aspire for something beyond it, or to run out of it. Because it is at that point when our individual resources run out that we become creative, persuasive, and universal. At this point, all is possible. At this point when they are then stumped with “false” scarcity, I use the opportunity to reinforce that scarcity is only in the mind and that the resources of the entire universe (their universe = their parents) are at their disposal if only they show the courage and ingenuity to ask. So I grill them — Did you ask me? What stopped you from asking me? Why are you only asking for this much?
We decide what, Life decides when and how
I grew up in a simple, education-oriented home in a small town in India, too, where earning your money and place in the world was emphasised more than anything else. I still hold my family’s values of honesty, sincerity, and kindness dear and practice them.
But they also believed — who else can be trusted to take care of you, if your money runs out?
All I have done differently is to relax my expectations of what forms and avenues abundance will take in making its way to me. I will teach my children that they can set intentions for the things and experiences they desire, including wealth. However, it is up to the much wiser, much more complex mechanism of Life to determine how and when they could have these desires fulfilled.
Final Thoughts
I understand this may sound preposterous and ultra-privileged to people who grew up in humble and principled families. Like me. I admire your families and their timeless value systems, they will stand you in good stead, always.
Except for one thing — an unfortunate side effect of this system of values is a limiting belief that money is scarce and must be optimised. This belief is true only if you insist on relying upon your limited individual resources. However, life is not individual, it is communal and universal. Each of us is a small but interconnected part of the whole, and so the resources of the whole are always available to us if our ask is important, intentional, and universal.
