The Barefoot Investor reveals why every parent should give their children pocket money - and his three tips to teach kids how to be good savers for life
The Barefoot Investor has shared his three easy steps for parents to teach their kids how to save pocket money and become financially savvy as they grow up.
Scott Pape, who is known as the Barefoot Investor for his best-selling financial advice books, said paying pocket money is 'one of the most powerful tools' parents have to teach their kids good money saving habits.
But Mr Pape said paying children a few dollars for household chores is only the first step.
'The main money lesson comes in what they do with their pocket money: the spending … the saving … and the giving,' he wrote in his recent book The Barefoot Investor For Families.
Mr Pape said life-changing lessons happen when adults use pocket money to teach their kids about goal-setting, delayed gratification, kindness and empathy
The best-selling author said that ingraining regular and systematic saving creates 'muscle memory' and gives children a way of looking at the world after their parents have gone
Mr Pape said life-changing lessons happen when adults use pocket money to teach their kids about goal-setting, delayed gratification, kindness and empathy.
He advised parents to get three empty jars and label them the 'Splurge Jar,' the 'Smile Jar' and the 'Give Jar'.
The splurge jar is for children's day-to-day spending, and will stop kids from letting their coins pile up without spending a cent.
'You don't want your kids to grow up with an unhealthy obsession with money. Neither do you want your kids to grow up like one of those snooty teenagers on Instagram who posts a selfie with their $900 handbag,' Mr Pape said.
Mr Pape said the splurge jar will help kids become well-adjusted and savvy spenders later on in life.
He also suggested parents get their children a wallet or purse so they can easily carry around their splurge money.
The second jar, labelled the 'Smile jar,' is for saving up for things that will make children smile.
'Here's the deal: the art of saving is as much a financial technique as it is a character trait. And that is what this jar is all about,' Mr Pape said.
Mr Pape advised parents to get three empty jars and label them the 'Splurge Jar,' the 'Smile Jar' and the 'Give Jar'
The best-selling author said that ingraining regular and systematic saving creates 'muscle memory' and gives children a way of looking at the world after their parents have gone.
He referenced the Dunedin Study, which found that a lack of self-control in childhood was the number one predictor of financial problems.
The third and final step, the 'Give Jar', is what Mr Pape refers to as 'the brat buster'.
Mr Pape said studies show spending money on others changes the mindset of 'self-centred' teenagers.
'Being kind is a big deal in my family — it's much more important than money. That's because if my kids are kind, they'll be happier, have more meaningful relationships and be decent human beings,' he said.