Yes we should teach our kids about money, but how exactly escapes me


I’m running a randomised controlled trial on pocket money with my own children: the oldest, eight, has the benefit of modern technology (more on this later), the youngest, six, relies on my remembering to pay her. In practice, this means the oldest gets £10 a month and the youngest gets nothing. After a period of accumulation the youngest vents her outrage and gets a lump sum. She immediately loses it. Our main hope is that she mislays it somewhere in the house where it can reenter the slipstream of the family’s economy.

My findings are as follows: miniature bank accounts are brilliant, but not necessarily educational. I use Osper, which is an account for eight-pluses that comes with a card they can use in a cash machine or on the internet. I don’t know if you can stick it behind the bar because we haven’t tried it. I have a £10 monthly standing order and can add one-off amounts online. I can also invite other people to put money on it, which I never do, because it’s the financial equivalent of asking them to look at pictures of your child and wax lyrical about its cuteness. So far, Osper has taught the big ’un that money, with automating top-ups and nobody ever spending it, accumulates as effortlessly as wet leaves in a drain. It also taught him that getting money out of a cashpoint with his own pin is mind-bendingly exciting.

Neither of these is a particularly useful lesson. Indeed, as a lesson in reality, pocket money only makes sense if it replicates in principle the real world – that is, you make them work and then they buy their own stuff. The way I’m doing it for the eight-year-old – all accumulation, no effort, no spending – is more like preparing him for being a tight landlord or some other rentier. However, the fact that I don’t make either of them perform chores for money is deliberate: I don’t want to monetise household tasks. Once there’s a price tag on one, why do any of them for free?

In other words, I eschew systems in favour of randomness. A quarter of children interviewed in a survey by Ziffit (a kind of selling interface for books and games, like a posh eBay) said they learned about the value of money from their grandparents, presumably because a quarter of British parents are a lot like me and incapable of teaching anybody anything about anything. But many aren’t: while nearly a third of children get no pocket money, a fifth of parents give their children £5 each a week, and two-fifths give their kids £10 or more. There must be some kind of system there, or it would just be like throwing cash into the wind.

Paul Treanor, e-commerce director of Ziffit, has three children aged seven, five and two. The two-year-old, naturally, can whistle for it. The seven-year-old gets £2 a week, the five-year-old £1.50. He doesn’t pay it into an account because, he says, “I don’t think they’re there yet. They need to see the money physically.” Here’s where the life lessons come in: “Anything they’ve saved after three months, I will match it. I think it’s really important that they understand the power of accumulation. Pocket money teaches you about choices and restraining yourself and the rewards you can get from that.” He doesn’t have set chores, preferring to hold the pocket money as leverage for good behaviour. “But you don’t want to box them in too much, you don’t want little soldiers.” No danger of that, I hear a nation’s parents moaning.

While Treanor has his sophisticated aim of teaching deferred gratification, most parents just want children to learn the value of money so that they’re not constantly asking for a pony or a Learjet. I personally think they understand on their own what the relative value is between things, and make unreasonable demands just to punch out space for when they have a demand they think is reasonable.

Assuming, though, that this is a concept you can impart, you have to decide what you think the value of money actually is. Bruce Davis, a financial entrepreneur who part-invented peer-to-peer lending and now runs the crowdfunder Abundance, has five children ranging right across the spectrum of financial irresponsibility, from eight years old to 23. “We tend to start with kids talking about saving,” he says, “because it’s part of a broader moral lesson about how you should be with money: you should conserve it, you shouldn’t spend it too much, you save up to get what you want. Then that gets completely exploded when they get a credit card. It’s a bit like teaching sex education through the world of the Muppets. There’s no real solid information – it’s just a set of nice stories.”

Indeed, to extend this analogy with sex education, we teach complete abstinence until the age of 16, then complete licence, and try to attach a moral component to that when all that has changed in the children’s eyes (indeed, in the world of reality) is that they’ve had a birthday.

Felix Martin’s marvellous book Money: An Unauthorised Biography is scathing on our underpinning understanding of money – that it has an intrinsic value and, therefore, that the debtor is somehow morally bound, and inferior, to the creditor. He says that if we properly understood money for what it is – something that is socially constructed to mark indebtedness, but has no inherent value of its own and might as well be a giant stone or an amethyst (I’m paraphrasing, and you are strongly enjoined to read the book, rather than take it from me) – then we wouldn’t get into this complete contradiction: on the one hand, valorising saving as the sensible thing that ethical people do, while simultaneously heaping the real, tangible rewards of the world upon the people taking the greatest risks, never saving anything and having no ethics. How do you convey that to children with pocket money? It makes me think my randomness is actually a pretty good preparation for the life ahead.

Davis also points out the critical importance of the medium in which money is expressed: “Since we grew up it’s gone from being solid to being digital. Our children won’t use cash. All of the ways we teach saving are kind of irrelevant. We shouldn’t be teaching them how to add up with coins at all. We need to be able to teach them how to use a receipt. We have a nostalgic view of money that we teach our children, and then we throw them into the world of finance and they get lost.”

I cannot, either instantly or after cocktail hour, think of a good way to introduce the notion of money and its intrinsic value (or otherwise), either via pocket money or anything else. I did ask the children themselves what they thought they needed pocket money for, exactly, and the eldest said rather augustly, “things that our house needs”. “Like what?” “Like toys.” “How can this house conceivably need toys?” “We’ve got loads of Lego, but we haven’t got sets.” The youngest, asked how much she wanted, said a tenner a week, and when I asked her what she’d spend it on, replied, “I have no idea.” That’s what we’re dealing with, ladies and gentlemen: people who want money for no purpose that they can imagine, just so that they have it. Might as well give them nails.

Source: Guardian