x Abu Dhabi, UAEThursday 18 January 2018

Miniature economy

Can children be trusted with pocket money? They might surprise you.

While Fraser March spends pocket money on sweets, he also shows responsibility by saving money for more expensive items.
While Fraser March spends pocket money on sweets, he also shows responsibility by saving money for more expensive items.

Pocket money is one of those issues that every parent has an opinion on, and is often a thorny issue in many households - how much is enough, or too much? What it must cover? Do you withhold it if the child misbehaves? It's the economics of family life in miniature form. In our household, Fraser, our 11-year-old eldest son, receives Dh25 a week, payable monthly in advance, which, when written in black and white, sounds like a pretty puny amount; I could easily spend that and more on a lunchtime sandwich, while I expect my son to survive for a week on his allowance. His pocket money is, however, what some might call "splash cash".

It's purely disposable income, except for the one stipulation that he must buy his own mobile phone credit. Neither I nor my wife place any further restrictions on the use of this money, although we do reserve the right to tut disapprovingly when he makes an inappropriate purchase with his available funds. We have withheld his weekly cash once following a series of minor misdemeanours around the house, such as not doing his homework.

Fraser first received pocket money when he was seven, and in those early days, he would routinely spend all his allowance a few minutes after he received it. The cash barely had time to get warm enough to burn a hole in his pocket before he was handing it over to some shopkeeper in return for another piece of shiny plastic imported from China. And, while we rarely approved, we felt it was important to let him make those bad investments to help him form a better understanding of the value of money.

Familiarity sometimes breeds content, however, and very quickly Fraser learnt a strategic and analytical approach to pocket money. He's now, four years later, a fascinating mix of saver and spender which, unsurprisingly given who he lives with, is exactly how his parents are. We tend to have cheap months when the finances can replenish and other extravagant periods when it seems impossible to stem the tide of money washing out of family funds.

His latest purchase, a board on two wheels called The Wave, which is said to combine the best of skate and snowboarding, costs the not inconsequential sum of Dh475 (US$130) when he bought it last month. To ride on the crest of this funky looking wave he saved, hectored and pleaded to purchase the board. And, just like his parents, after a period of prudence there came the feast of frenetic spending.

After he'd tallied up how much pocket money he had sloshing around in his wallet (Dh150), he calculated what sort of bridging finance he needed to put in place to fund The Wave and then relentlessly chased the deal to a conclusion with his would-be financiers (his parents). In this case it amounted to him cashing in some book vouchers he'd been given a few months earlier and then seeking an agreement to have his following month's pocket money paid up front. Throughout, he conducted his negotiations graciously and tenaciously and I was putty in his creative hands.

I am sure these skills will serve him well in later years. This is a common form of deal brokering in many households where pocket money is paid. One of Fraser's classmates at school, Harry, receives Dh100 a month as pocket money, while Ben, his 13-year-old older brother, has an allowance of Dh200 a month. Megan Seward, the boys' mother, believes handling money is an important part of growing up: "I do think the boys are breeding their spending habits for adult life. Pocket money helps our children find their feet with cash and to understand money."

Just like Fraser, the Seward boys went through a period of impulse spending before settling down into a more regular pattern of purchases, according to their mother. "They went through the wrestling stage, buying little plastic dolls of World Wrestling Entertainment stars," Mrs Seward says. They used to spend a fortune on them." Now though, Ben and Harry have become more considered in their spending. Harry, for instance, has just bought a new pair of trainers for Dh250.

"They were something he really wanted," Mrs Seward explains. "He can be a rash buyer at times. He'll see something he really wants and he'll want it immediately, so much so that if you make him think about what he's purchasing he'll go off it. With these trainers, I made him wait. "So he went away, thought about it, researched similar types of shoes on the internet and then made the decision to buy the ones he'd seen."

Meanwhile, Cameron, another of Fraser's classmates, was so keen to book his place on a recent school trip he paid the Dh200 deposit himself from his own pocket money, according to his mother, Sally Taylor. What binds these tales is one common thread. No matter how much cash your child receives, it is the one time in life when all of the money in your pocket is truly yours. Be it trainers, an adventure or a skateboard, allowances help children explore the many possibilities money can open up.