UAE: How pocket money can teach your children financial literacy

Several parents in the UAE are instructing their children to set aside up to 50 per cent of their allowance, aiming to impart financial management skills.

Despite the allure of spending all the money, particularly in a country with numerous attractions like the UAE, parents are actively fostering a savings habit in their children.

They are trying to achieve this by promoting transparent, enjoyable, and interactive educational approaches.

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Goals and rewards system

Parents explained they are focused on the importance of youth financial literacy by incentivising responsible spending and saving habits, often through a goals and rewards system - nurturing the next generation's ability to be financially responsible.

American expat in the UAE, Naeema Zaki, who is a mother of three children, said, “About two years ago, we began giving our children a weekly allowance of about Dh20.” She explained this allowance was meant more for “spending cash” or “pocket money” rather than savings.

“Our aim was to teach them the value of money, encouraging them to make decisions about their spending instead of constantly asking us for everything they wanted. They earn their allowance by completing basic chores around the house, such as making their bed and cleaning up their toys. They receive their allowance each Friday after school,” she added.

Making better decisions

Zaki explained one significant takeaway from the exercise is that it has helped her children make better decisions about money and their spending habits. “They've become more ‘conservative’ with their spending when it comes out of their own pocket money. That’s a win for us. They've also become aware of price differences, understanding that larger supermarkets tend to charge more and that venues near special events like Global Village and airports often have higher prices. Additionally, they've learned the benefits of buying in bulk versus individual items, directly gaining insight into unit rates.”

She stressed that the reason she continues this practice is the genuine gratitude her children express when she is buying them something. “As opposed to when they used to constantly ask for things. I actually get a big ‘thank you’, when I don’t make them spend from their own money. I am growing more interested in apps or even getting them a children’s bank account a little later.”

Money management

Similarly, Filipino expat Ben Lebig, whose daughter is in Grade 10, said, “As a registered financial planner who teaches personal financial planning as part of my advocacy, I strongly support teaching our children the fundamentals of money management at a young age. Giving them pocket money allows them to learn how to properly handle money, how to save, and how to prioritise in how they spend their allowance.”

Lebig highlighted his daughter, Isabella, who is already an Amazon-published author, has a unique setup since she earns through the sale of her books on the platform.

“So, we teach her how to manage her money. For example, 50 per cent of her income goes straight to savings, between 10-20 per cent she can use to buy stuff she likes, and a big portion she donates to her charity. If we have to give her money it’s not on a regular basis but we do monitor her spending regularly.”

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