How to think about and spend children's pocket money
1)
Pocket money is essential for developing children's financial literacy. Internationally, Japanese children receive relatively small pocket money.
In Western countries, many families earn their own income through chores and other means, and financial education is introduced at an earlier age than in Japan.
To help children develop financial literacy, it's essential to give them pocket money early on and help them build their financial skills and judgment. This article will discuss pocket money trends in Japan and around the world, as well as children's financial education.
2)
What's the average amount of pocket money? Japanese children's pocket money is low compared to other countries:
According to a 2020 survey conducted by AXA Investment Managers targeting children aged 8 to 15 and their parents in nine countries, the average weekly income for Japanese children, including pocket money and chore fees, is 808 yen. This survey covered the top 80% of those with an annual income of ¥8 million or more.
Let's take a look at the estimated monthly allowances for nine Asian and European countries, including Japan, based on this survey.
3)
Internationally, Japan's monthly allowance for children is approximately ¥3,200, making it the second-lowest after Taiwan.
This survey targeted children aged 8 to 15 and their parents, but at what age do Japanese children start receiving allowances?
4)
Kidsstar Inc. surveyed "children's allowances" with 644 households with preschool children (ages 0-6). 84% of households with preschool children responded that they "do not give their children an allowance."
According to the survey, "Those who answered 'I do not give my child an allowance' often cited reasons such as 'preschool children don't need one yet' and 'I want to give them one after they start elementary school.'"
Among families that give pocket money, the most common answer was "when the child helps out," and the most common monthly amount was "less than ¥200."
5)
Meanwhile, according to the Central Council for Financial Information's "Survey on Children's Lives and Money," 72.9% of children in the lower grades of elementary school responded that they "receive pocket money."
Furthermore, among lower grades, 57.3% reported receiving pocket money "occasionally," rather than regularly, such as once a month. The reason for "occasionally" is presumably because many elementary school children receive pocket money not only from their parents but also from their grandparents.
6)
The most common answer (mode) for the amount of pocket money was ¥500 for "once a month" and ¥100 for "occasionally" for lower and middle grades.
7)
In Japan, children often receive an allowance unconditionally from their parents or grandparents. However, in Europe and the United States, where financial education is more advanced, many children "earn" their own allowance by doing chores or other activities.
8)
"No Job, No Money" in the West: Earn Your Own Allowance!
In Europe and the United States, where financial education is more advanced than in Japan, a "no job, no money" culture is deeply rooted, rather than unconditionally giving allowances, to help children develop a sense of money from an early age.
9)
Many American families give their children an allowance of $1-2 per week, depending on their age, and elementary school students are said to receive around ¥2,000-¥6,000.
Many people may think, "Isn't that a lot for an elementary school student?"
In the United States, many families allow their children to buy their own clothes and school supplies, which is why allowances are so generous. After purchasing the necessities, they use any money left over to buy things they want.
10)
It's also common for children to receive an "allowance" (pocket money) as a reward for doing "chores."
Children's chores include tasks such as walking the dog and preparing and cleaning up meals, which are common in Japan. Other chores include selling old clothes, toys, or handicrafts they've made themselves.
Children create (or select from unwanted items) something they think someone will want, advertise it, and then sell it.
11)
In Scotland, many families don't give their children pocket money for safety reasons, such as "it's dangerous for children to carry money" or "small children don't go out alone."
In Sweden, where electronic money is the norm, fewer parents are giving cash pocket money. Financial institutions have developed pocket money management apps for children. By registering with the app, a designated amount is automatically deposited into the child's account regularly. Children manage their money flow through the app.
It's interesting to see how pocket money circumstances differ depending on the education and culture of each country.
12)
Japanese children spend money on "play":
So far, I've been explaining this from the perspective of those who give pocket money, but are there any international differences in how children who receive pocket money spend their money?
13)
According to a study on the spending habits of elementary, middle, and high school students in Japan, Korea, China, and Vietnam, Japanese children tend to spend their money on leisure activities, such as accessories, game centres, and karaoke. In Korea, children also spend a relatively large amount on play, starting from elementary school.
Among the four countries, Japan had the highest number of children who answered that spending money on play is "good" or "acceptable."
14)
In China and Vietnam, many children recognise that spending money on play is "bad" and place more emphasis on "living and educational expenses." In developed countries with advanced financial education, such as Europe and the United States, many parents seem to use pocket money to "buy school supplies and necessities first, and then spend any money they want."
15)
As mentioned above, the majority of Japanese preschool children do not receive pocket money.
However, a survey on New Year's money found that 85% of children receive it from the age of 0-1. Approximately 80% of parents (ages 0-5) answered that they "save" the New Year's money in a bank account under their child's name.
Among lower elementary school children who receive pocket money, the most common answer was "snacks and juice," followed by "toys" and "playing games." The most common answer for New Year's money is "saving it (in a deposit or savings account) at a bank or post office," followed closely by "giving it to someone at home."
16)
Use pocket money as a starting point for financial education!
While many preschool children do not receive pocket money, it is recommended that you start giving them pocket money early, around the age of 2-3, to help them develop a sense of money.
There are three ways to give pocket money: a "flat rate" system, where a set amount is given each month; a "reward" system, like in the West, where money is provided based on chores or other activities; and a "mixed system" that incorporates both. Discuss your child's pocket money method, considering their personality and behavioural patterns to inform your decision.
Start by giving them a small amount of pocket money and asking them to report how much they spent it on and for what purpose. If your child can write, consider having them keep a pocket money notebook to record their expenses.
17)
For example, have them tell their parents the amount and purpose of the money, such as "I used it to buy snacks for myself," "I'll save the remaining ¥X," or "A birthday present for XX."
Parents should write down the purpose and amount on paper (or check their pocket money notebook), and once a month, give advice like, "You spent it all on yourself this month, so it would be nice if you could save some next month." Making this a habit will gradually help your child develop appropriate money management and judgment, and using pocket money as a starting point for financial education for children.
18)
It's also essential to help children develop an awareness of "what situations money is used for and how it is used" through everyday play activities like pretend shopping, toys, and picture books.
19)
Summary:
To help children acquire proper financial knowledge and judgment, it's recommended that parents start giving them pocket money from around age 2 or 3 and provide advice on how to spend it and how to use it. Why not begin financial education by increasing opportunities for parent-child conversations?
How to think about and spend children's pocket money
https://www.popy.jp/popyful/money/mny_2508/
