In the money

When are our fiscal habits formed? Is financial savvy pre-programmed in some kind of genetic way? Might it be that some babies could pop out of the womb ready to flog off their stem cells to medical science while others would itch to get into a Ralph Lauren sleepsuit? Or does it take decades to turn us into savers or spenders as we pick up bad and good money habits from those around us?

I have no idea. So when Ben Edwards – a self-confessed pocket money expert who set up Roosterbank,  an online ‘pocket money bank’ – contacted me about helping to encourage children to save, I jumped at the chance to volunteer our youngest child, Katy, 8, as a guinea pig.

So far she has demonstrated a pretty good affinity with money – she knows that Moshi Monsters don’t grow on trees and she understands the theory of saving, if not the practice. She has even labelled one of the drawers in her mini desk ‘savings for collidge’, but so far her student fund consists of one hair bobble and 3p.

Could Ben turn her into a pocket money millionaire? The Roosterbank concept is cunningly simple but effective. Children and parents register with the website and set up a virtual savings bank, which enables parents and children to keep a record of how much pocket money is paid in and what it gets spent on. No money actually changes hands, but it allows children to keep a record of where money goes and where it comes from. The website is packed full of child-friendly games that encourage saving and reward children who get on the savings bandwagon with extra games and ‘Roosties’, which they can use to earn extra games. The account is ‘virtual’ in every sense of the word – no money ever changes hands online. It’s a sort of fun bookkeeping exercise if you like.

Ben joined Katy online to give her a tour of the site and after a ten-minute tutorial she was flying solo. She started off moaning that it was “boring”, but she was still engrossed in it half an hour later when it was time to take her out to walk Doughnut. As we walked, she began to ask me about money – where it came from, how come I get money for “writing emails” (a good question) and what happens to people who don’t have any.

The next day I caught her logging on again – and she’d somehow managed to increase her savings pot from £8 to £100 (not quite sure how she managed that!) and increase her weekly pocket money from £1 a week to £2 (we might have words about this). As my friend Ivana commented when she spotted her posting photos of Doughnut on Twitter to gain followers, “That girl will go far.”

Ben believes that a setting up a regular, structured pocket money routine is key to helping young people develop healthy financial habits later in life. “A report by the Royal Economic Society* recently suggested that parents who link pocket money to household chores help their children to become savvy savers in their adult years. In contrast, parents who give big sums of pocket money without making their children earn it may find that their young ones won’t grow up to become avid savers,” he said.

He believes Roosterbank makes it easy for parents to develop a regular pocket money routine and for children to learn about day-to-day saving and spending. Brimming with great ideas to foster the savings habit, he has shared his top tips on how to do it…

1 Keep track and make it a routine

Establishing a pocket money routine from an early age shows children that you can exercise control over money – this gives them the confidence to do the same later in life. Recording money coming in and going out as well as what can be saved helps grow an understanding of the flow of money. Plus, the act of recording what happens to their money actually seems to encourage them to keep on saving.

2 Set conditions

Creating a set of conditions that your child must meet to get their pocket money will reinforce that it needs to be earned. That could be tasks they have to complete every week in order to receive it, or extra jobs around the house and garden. Make it clear if you do give pocket money for jobs and chores what is worthy of payment versus something they should be doing anyway. It will encourage your children to think about what they do with their pocket money far more carefully!

3 Be fair and get them to budget

Giving pocket money can really help your children learn the value of money. Work out with your children what they are expected to cover with their pocket money. It will help you determine how much to give and help them understand that once it’s gone, it’s gone.

4 Reward your children the more they save

A great way to get your children to think about saving positively is to reward them for it. Getting them to allocate their money into a ‘short-term’ pot (to use for things they want now) and ‘long-term’ savings pot (for the future) will encourage them to get into the habit of regularly putting something aside. When they save more reward them with interest, whether that’s paid in real terms or with a special treat!

5 Be creative

A regular pocket money routine is often linked with household chores, but don’t be afraid to be creative. The supermarket is a great place to get your kids thinking about the value of money. Hunting for reduced price items can be a great way to save cash and making it a challenge will be fun for your children (and a distraction from simply picking up sweets). You can incentivise them with a pocket money reward from the savings you’ve made. Alternatively, consider paying your children for coming up with energy saving ideas that drive down your monthly bills.

So how will my little Rockefeller cope with keeping her pocket money accounts? So far she loves checking how much she’s got and working out what to spend it on but I have a feeling I will have to keep a close eye on the books. I’m not sure whether she has realised she has to record withdrawals as well as deposits. But I’ll keep you posted.

*Taken from the report Saving Behavior From Childhood to Early Adulthood: Analysis of British Panel Data, published 3 April 2013