Nearly two years ago, Nisreen Husain started giving her 15-year-old daughter a monthly allowance. The pocket money covers the child's transportation, movie tickets and other forms of outdoor entertainment.
The Indian expat thought the time was ripe for her teenage girl to manage her finances, especially since the 11th-grader has been going out on her own, hanging out with friends and doing other activities without the parents tagging along.
"She gets between Dh200 and Dh300 a month. I think she's mature enough to handle money. There has to be a point in time when parents have to stop thinking that their sons or daughters are still children. In my case, giving my child the freedom to manage her money has taught her to become independent and financially smart," Husain told Gulf News last Tuesday.
Giving an allowance is a common tool parents have been encouraged to use, to teach children the value of money.
Financial professionals advocate that having their own pocket money will help children learn the difference between needs and wants, and understand why unnecessary spending can spell disaster on their wallets.
"Pocket money gives children and teens a sense of responsibility and empowerment," noted Rasool Hujair, CEO of Majid Al Futtaim Finance.
But parents in the UAE have different approaches to giving away allowances, and the amounts can vary, depending on the age of the child and the expenses covered. Parents in general empower their children to do their own small purchases, but they still take care of the essential items.
Seema Jajria allots Dh30 monthly allowance for her nine-year-old daughter. The set amount covers minor expenses and serves as the girl's pocket money when the family goes to the mall. School lunches, clothes, educational supplies and other basic essentials are not part of the deal.
Good idea
The allowance idea started about a year ago when Jajria tagged her daughter along to a garage sale.
"There were toys, shoes, accessories and all sorts of fancy stuff and my daughter wanted me to buy her some. Instead of me buying the things for her, I decided to give her money and told her that she could buy anything she wanted with that money."
"Interestingly, she didn't spend it, saying she didn't need any of those things after all. She just kept the money to herself. That's when I realised giving her a regular pocket money is a good idea. She's been saving her money for a year now," Jajria confided.
Jajria intends to increase the pocket money once her daughter gets older. "For now, Dh30 is a good amount. It will just cover the minor things she might want to get from time to time. She's still small to go out and do things on her own. Maybe when she turns 14 or 15, she will get an allowance that will cover things like eating out or any kind of outdoor entertainment," she added.
Some parents also give away cash as payment for doing household chores, as a reward for a good behaviour or as a gift on special occasions. Some experts say these are also considered allowances, though they're more variable and irregular.
In an earlier interview, Latha Ganes from India, said her twin daughters, 8, are entitled to a cash reward if they get good grades at school or behave well.
"So far, they have accumulated about Dh250 in financial rewards. They said they would donate half of the amount to poor people back in India," Ganes said.
The same reward approach proves to be a financially healthy practice for Canadian expat Yvonne Marion, whose two sons, 9 and 12, regularly receive cash for helping around the house.
"We make it a point that they have to earn things. We don't just give them anything for the sake of giving it to them. They have minor chores to do at home and they get paid once a month provided they do them without fighting each other," Marion said.
Financial experts say the success of the allowance approach greatly depends on how parents play the "game." Parents are advised to set an amount and stick to it, no matter what happens. This means that if the child spends all her money before the end of the month, parents are not supposed to offer any help.
"My daughter lost her money in the past due to unnecessary spending and I'm glad it happened because it taught her a lesson. However, she never came back to me saying she needed more money," said Husain.
The working mother has taught her daughter early on to monitor her expenses and that when she overspends, nobody will come to her rescue.
"I taught her to keep an expense diary where she can write down her expenses, so she knows how much money she has or how far away she is from going over budget. This allowance approach is ended very helpful. Now, my daughter has learned how to spend wisely," she added.
Do your children have a pay day? How responsible are they with money? What do you to teach them to be money smart?
