Money in their hands

Your child's allowance is an important financial lesson. Research suggests a steady flow is advisable.

Two girls count their spending money in front of a toy store. Giving your child an allowance is a financial foundation.

Aude Lafond, Karen Bull-Wright and Ursula Hutmacher have one thing in common: week after week they forget to pay pocket money. And none of their children seem to mind. Since the kids don't claim it, the mothers don't pay it. As we get deeper into a financial crisis, teaching children how to spend, save and invest money wisely may be one path to redemption. "Our banking system has become like Sugar Daddy," says Devika Singh, a Dubai-based family therapist. "There is easy credit everywhere - just go to your bank, fill out a form and take your money. Think about what this teaches our children."

Paying weekly allowances is the basic starting point for a child's financial education, Mrs Singh says, because it gives them a set amount of "income" to deal with. But in real life, few families seem to stick to that formula. Instead, giving money seems random, often tied to chores or used as an incentive for good behaviour. In addition, many children who grow up in affluent families seem rather indifferent to weekly allowances. Parents, meanwhile, are happy to "forget", as they fear endless discussions about electronic gadgets or their houses becoming swamped with cheap Chinese toys.

Mrs Lafond, for example, hands out money haphazardly. "It is their carrot, their salary," she says. The French mother of three gives her children money to reward good behaviour, chores or, occasionally, simply when they ask. "The other day they were all very nice, so I gave them Dh5 (US$1.36) each," she says. "The rule is we should receive ?2 (Dh10) a week if we are good," says her 13-year-old daughter, Loice. "And we usually get ?4 when the parents throw a party and we help."

Loice recently asked her mother for money to buy a present for her girlfriend's newborn sister. "But my mother does not want me to buy hair clips or bandannas, because she says they are worthless," she says. Linking pocket money to household chores, school grades or behaviour is hotly debated. Pocket money can be used as a reward or a consequence, but it depends on the child," says Mrs Singh. "Some children get upset when television is taken away from them, but they couldn't care less about not receiving pocket money."

Mrs Hutmacher's eight-year-old son, Yannick, is a case in point. To punish his sloppiness, his mother takes away Dh1 whenever he forgets something at school. "Although he hates it, he has not yet managed to earn them back," she says. Giving money to reward good behaviour can send an important signal. But generally, non-monetary rewards such as taking a child to the movies tends to work better, Mrs Singh says. It may be hard to believe, but for many children money seems to easily lose its appeal.

Until recently, Mrs Bell-Wright, who is from the US, paid her 14-year-old son, Michael, Dh100 a month for washing her car twice a week. "But it became sporadic pretty soon," she says. "It was good for a while," echoes Michael. Why did he stop? He just shrugs his shoulders. At the end of the day, Mrs Singh says regular pocket money is the best mirror of real life. "The child must learn how to manage a certain amount of money in a certain time," she says. "Even if you give only Dh5, children will realise they need to put it aside if they want to buy that Coke on Wednesday."

Granted, teaching about money usually becomes more difficult the more affluent one's family is. "The children have a bit of an attitude like 'who needs pocket money if the things I want will come from somewhere anyway'," Mrs Singh says. That may help explain why many children merely shrug their shoulders about unpaid or forgotten pocket money. And others simply don't know what to do with it. "The children often count their money or leaf through toy catalogues, but they do not know what they want to buy," says Mrs Hutmacher, who is from Switzerland and has three children between seven and nine years of age.

Birthday parties sometimes mean a large amount of cash, and children need to know how to handle it. Take Michael. He received Dh3,000 from his friends when he celebrated his 14th birthday last month. He put the money in a bank, and wants a PlayStation 3, but is reluctant to drain his account. "It would not feel right ... and maybe it will come for Christmas anyway," he says. Michael and his 11-year-old sister, Katie, are supposed to receive Dh10 weekly, but their mother usually pays it out at the next holiday. "That way the kids don't bother us and beg for things during the whole holiday," she says. Paying kids in intervals is not a bad idea, says Ms Singh. "It can teach the child a lot about delayed gratification and impulse control," she explains. "Clinical research shows it is easier for these children to stay clean and healthy later in life, as they are less prone to become addicted, say, to alcohol."

On the downside, pocket money can become a bitter pill when parents and children disagree on its use. Parents often wonder whether saying "no" to certain items undermines the lesson pocket money should teach. "It is all about finding the balance between something that goes against my value set as a parent and something that matters a lot to the child," says Mrs Singh. While some parents may reject fake guns and army figurines, others fear being inundated with plastic toys that break immediately after purchase and clutter the house.

"I want them to invest their money a bit cleverly, and not in something that breaks after one week," says Mrs Hutmacher. "We guide," says Emma Sharif, the mother of eight-year-old Kahlil and five-year-old Sunaa. "We consider some things completely unsuitable. Then we can get into fights with the kids." Army figures and guns are forbidden, and so are Bratz, dolls even more disproportionately endowed than Barbie. In line with the textbook, Sunaa and Kahlil receive their weekly Dh10 before the Friday visit to the mosque. Birthday and Christmas money goes into the children's savings accounts, and Khalil has accumulated £5,000 (Dh27,858).

"I could buy a house," he says with conviction. And in today's troubled times, he may be right.