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Along with endless summers and little responsibility, pocket money is one of the fondest memories of childhood, but there are a lot of questions around it. How much pocket money should children get? When should you start giving them pocket money? Should they earn it? How can they learn to manage it?
We take a look at all these common concerns around pocket money in this article…
4 Benefits of Pocket Money
While you may think it seems like a token amount, pocket money presents many opportunities to children. On the surface, this could simply be seen as the choice between sweets, toys, Fortnight credits or cinema tickets, but at a deeper level, pocket money provides a lot more than you may realise.
1. Pocket money helps teach children the value of money
If, for example, a child spends all their £5 allowance on sweets and is left with no change, they may regret spending 100% of their pocket money on consumables with nothing to show for it, except perhaps a tummy ache.
Encouraging children to vary their spending, i.e., £1 on sweets and £4 on a magazine and some stickers, helps them to think more about how they use their money and get more out of it. Giving children pocket money when they are young means you can guide them and help them make positive choices with their money, and teach them that when the money has been spent, it is gone.
2. Pocket money also teaches children how they can manage their
Using the same £5 example, a child could spend £1 on chocolate, £2 at the arcades and save £2 for a bigger purchase in a few weeks. Knowing how to put money away for larger purchases can be helpful in later life when it comes to saving towards their first home, holidays, or a new car.
3. Pocket money helps children discover their independence
A child with their own money will learn to make decisions about how to spend that money and will be the person responsible for the choices they make. If, as above, they regret spending their money on something, they can learn to not buy that again, or not so much of it.
Money also allows children to go and do things – this is particularly helpful when it comes to socialising with friends. Being able to use their own money to join their friends at the cinema or the arcade, for instance, helps with their social development.
4. Pocket money helps prepare young people for receiving a salary
Someone who has never had their own money to manage and who then receives several hundred pounds on their first payday is likely to struggle when it comes to budgeting. This may result in them blowing through all their wages as soon as they get them and having nothing left for the rest of the month.
At what age should pocket money start?
There isn’t a set age when you should start giving your child pocket money – it will be different for every family. Some families start pocket money for their children from the age of 4 or 5, while others wait until 9 or 10.
If you are thinking about starting pocket money for your child, it is good to consider if they understand the concept of exchanging money for goods?”
It’s a good idea to speak to your child about the basics of money and how it works when you start giving them pocket money. Broadly speaking, there are three important things to remember about money:
- Money is needed to pay for things.
- You can save money for future goals.
- Once it’s spent, it’s gone and that’s it until the next “payday.”
Average pocket money rates
Statista found the average pocket money rate1, in 2022, to be just under £5, having dropped from over £7 in 2017-2020, most likely affected by the tightening of belts since the pandemic. There was a similar drop, from £8.01 to £6.13, at the time of the 2008 financial crisis.
Unsurprisingly, children in London received more pocket money2 than those in the rest of the country with an average of £8.18 a week, while those in the South East and East England, at the lower end of the spectrum, receive £6.19 a week.
Of course, it’s not just location that plays a difference; the child’s age has an important bearing on how much pocket money they might receive. According to a 2020 study by Statista3, the average weekly allowance was £11.62 for a 14-year-old, £6.82 for a 10 -year-old and £4.79 for a 6-year-old.
Pocket money as a reward for doing chores and helping out
It’s a good idea to use pocket money to reward children for chores. There are a number of benefits to this approach. Firstly, it gives them a sense of “earning” their money, preparing them for the world of work.
Beyond that, it can help instil a sense of accomplishment that a job has been completed to a good standard because they have received money for it, and this can give them confidence and pride.
Also, when a child has earned themselves a new toy by saving their own money from washing dishes or making beds, they appreciate that new toy more than if it was simply given to them and are likely to take better care of it.
Naturally, there is also the benefit to you that chores get done more quickly!
One question to consider is: do you pay per chore, or only give your children their pocket money once all their chores for the week have been completed? There is a danger with the first option that, if the child feels they have enough money, they may refuse individual jobs they don’t want to do.
Some take a contrary position and think that children should do their chores for the simple reason that they live in the house and need to “muck in” to help keep it clean and tidy, and that pocket money is completely separate from their chores. The choice is entirely yours to make.
Extra pocket money to reward success
You may also choose to dangle the carrot of extra money to either encourage your child to work hard at school, or to reward them for something they’ve done well. Having clear rewards can help children focus on reaching a particular goal, for instance, £5 for every ‘A’ they achieve in exam season.
The future of pocket money
Pocket money cards
Pocket money cards work similarly to debit cards and are prepaid by adults as an alternative to giving children cash. This means children can’t lose their money and they’ll be able to buy things online, such as in-game credits.
For adults, it means you can set up a regular payment through your own bank and you don’t need to worry about taking cash out to give to your children.
Pocket money apps
Many of these pocket money cards come with apps, which allow kids to see how much they spend on repeat purchases or at particular shops, helping them identify patterns in their spending, and see how much money they have left.
Some pocket money apps include educational tools around how to budget and save, and they also provide the grown-ups with real-time updates and customisable controls.
At what age should pocket money stop?
As with a starting age, there is no set age at which to stop giving children pocket money – it’ll vary on a few different factors including their earning potential and your financial situation.
Teenagers who have their own source of income, such as those who babysit or have a paper round, may no longer need pocket money. Stopping or reducing pocket money when a child reaches their teenage years can encourage them to look for light work.
This may not apply to every child of course, as some children won’t be able to undertake these responsibilities or may have after-school clubs that clash with working hours.
You may find that the amount goes up as the frequency drops. Instead of a weekly allowance of £5-£10, you may give your older child £20 here and there, for example, to buy food while at a theme park with their friends.
When the time is right to stop giving your children pocket money, you should talk to them about it and encourage them to find alternative sources of income, perhaps helping them apply for jobs. Telling them how much they could earn in a week through work, compared to the amount they receive for pocket money, is a good incentive to get them on board.
How pocket money can encourage kids to save
During the time a child receives pocket money, you will have likely spoken to them about the power of budgeting and saving. Having access to their own money and control over how to manage it gives them good chance to practice saving money for bigger purchases and future goals; this helps them understand how useful it can be to save money for later.
The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.
Sources
1 Statista – average pocket money rate
2 Statista – children in London received more pocket money
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