Helping your child to save money!
If you’re reading this you most probably grew up with the idea of pocket money, and were given pocket money by parents or grandparents once you were old enough.
But if you’re now a parent with children of your own, you may be wondering whether pocket money is still expected, and if so, how old should your child be and how much should you give them.
So in this article we take a look at the world of pocket money in 2020.
The reality is that most children do still get pocket money. Many parents start giving small amounts of pocket money to children as young as 4 or 5.
But to give any more significant amount of pocket money is probably best left until the child is around 9 or 10. They need to be old enough to understand the value of money, to look after their money carefully, and to use it wisely.
A recent study of over 24,000 children has revealed what they spent their pocket money on during the pandemic. The four most popular items were:
Your children will definitely have their own ideas of what they want to buy with their money. So you need to decide whether you are going to let them spend it exactly how they like, or whether you are going to try and help to guide them into good spending habits.
You may also decide that you will give them a bit more pocket money if they are trying to save money for something special, or perhaps want to give some of it to a charitable cause that they are interested in. Or you may want to help them look at ways to start saving money for the future. We’ll look at this later in this article.
So, how much pocket money should you give? The first thing to bear in mind is that this is completely up to you. You should never feel pressured – either by your kids or other family members or even other parents – into giving more than you want to.
Recent research by RoosterMoney – an app that helps families manage childrens’ money – found that on average pocket money starts at around £3 per week for a 4 year old, rising gradually to £7.50 per week for a 14 year old. But the amount you pay should be based on your own ideas, as well as what you are able to afford.
If you are struggling financially at the moment, the last thing you want to do is try to find yet more money so that you can give your children pocket money. If this is the case, then one alternative is to give them a very small amount of cash to spend now, plus a homemade token that they can save up towards something special to have later.
If you have grown up receiving pocket money then this will probably have been in cash, and perhaps you then kept it in some kind of piggy bank. This was exciting because the piggy bank would gradually get heavier as you saved more money.
But these days, many children now receive at least some of their pocket money without using cash. Over the last couple of years, the number of children owning piggy banks has dropped, and at the same time, more children are having their pocket money put into either a bank account or pocket money apps.
This is particularly the case with older children. 29% of boys and 32% of girls aged between 12 and 15 have at least some of their pocket money put straight into their bank accounts. They then use the Internet to manage their accounts; boys slightly more than girls (29% vs 21%).
The growing trend of paying pocket money directly into a bank account is also a really valuable way of helping children to learn about how to manage money. It helps if you can pay the money on the same day each week or month, then they can begin to understand the importance of “payday”. They can also start to learn how to manage their money and that it has to last until the next payday.
Some parents give their children more financial responsibility by giving them enough money to cover all their weekly or monthly expenses – including school lunches, clubs, subscriptions etc. By doing this, the children learn how to handle an increasing range of financial transactions.
Having money in a bank account also gives children an easy opportunity to save money. The research mentioned above showed that children are saving an average of 43.5% of their pocket money. It is really positive for them to develop good saving habits early on. Research indicates that we form many of our basic money habits by the age of 7: habits that will make a huge difference to our lives later on.
So if your child has not yet started saving money, you can help them to do this by thinking of something that they really want, and working out how much they would have to save each week in order to buy it at a certain time. You can also discuss with them the importance of having some savings for emergencies or other unexpected situations, using examples that will be meaningful to them.
We’ve already looked at teaching children about the concept of payday. Another way to build on this is to give them the opportunity to earn more pocket money by doing extra chores. You can then decide whether to add this money onto the amount they are getting next payday, or to give it to them immediately in cash as a bonus.
You need to decide on chores that you are happy for them to do, and also whether these are to be done on a regular or ad hoc basis. You make the rules here!
So make sure that the system works for you, and that any chores done are genuinely helpful and not just unnecessary things that you are finding for them to do. Some ideas for useful chores are:
We hope that this article has helped you decide how much pocket money to give your child, how to pay them, and how to help them spend wisely and save money.
Remember to check back here soon for more financial and lifestyle advice from Loans 2 Go.
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