Pocket Money Pedagogy: Why the Best Financial Lessons for Kids Come from Spending

We’ve all heard the age-old adages about the importance of saving money. “A penny saved is a penny earned,” they say. While instilling the value of saving in our children is crucial, there’s an equally important lesson that’s often overlooked: the value of spending. Yes, you read that correctly. To truly educate our children about the complexities of financial management, we should encourage them to spend their money. Here’s why.

The School of Real Life

Textbooks and theoretical lessons have their place, but nothing beats real-life experience when it comes to learning. This is particularly true for financial education. By giving kids the autonomy to spend their money, we are offering them a practical course in budgeting, decision-making, and understanding value—all crucial life skills.

Lessons in Budgeting

When children are given the freedom to spend, they quickly realise that money is a finite resource. They learn to budget, weighing their immediate desires against their long-term needs. The act of spending teaches them to allocate resources wisely, a lesson that is infinitely more impactful when learned through experience rather than in theory.

The Value of Value

Spending money provides kids with the opportunity to understand the concept of value. Is that toy really worth the asking price, or can they find something equally enjoyable for less? These are the kinds of questions that we, as adults, ask ourselves regularly, and it’s time we let our children start pondering them too.

Decision-making and Consequences

With the autonomy to spend comes the responsibility to make wise choices. Children will undoubtedly make mistakes, perhaps blowing all their pocket money on a whim. However, these mistakes are valuable learning opportunities, teaching them about the consequences of poor financial decisions.

Negotiation Skills

Whether it’s haggling at a garage sale or deciding how to split the cost of a gift with siblings, spending money can also teach kids the art of negotiation. These skills are not just useful for financial matters but are applicable in various other aspects of life.

Understanding the Market

Children who spend their money will naturally start to understand market dynamics. They’ll learn why prices fluctuate, what drives demand, and even get a basic grasp of taxation when they wonder why the
price at the counter is higher than the tag.

The Emotional Aspect

Money is not just a financial instrument; it’s also an emotional one. By managing their own money, kids
learn to control the emotional impulses that can lead to poor financial decisions later in life.

While saving is a virtue that should undoubtedly be instilled in our children, it’s not the be-all and end-all of financial education. Spending money wisely is equally important and often more educational. So the next time your child asks if they can buy something, consider saying yes. After all, the best lessons in life often come from the freedom to make choices, and the same applies to learning about money.