Most of us remember the excitement of receiving pocket money as a child – the sound it made as it dropped through the slot into your moneybox, and then the thrill of deciding how to spend it. As a parent, however, the idea of giving your own child pocket money can bring a new set of dilemmas and worries. Is there a right age for them to start getting pocket money? Is there a right amount? Will they spend or save it wisely?
There is growing recognition that the earlier our children start to learn good money habits, the more financially capable they will become as adults. Yet research by the Money and Pensions Service (MaPS) found that less than half (46%) of parents talk openly with their children about money. The more confident that parents are about managing their money, the more likely they are to talk to their children than those who are not confident with money (58% vs 33%). Giving your child pocket money provides the perfect opportunity to discuss money and teach your child good financial habits within the home, so here’s some practical advice and useful tips on this often-contentious subject.
An Experian survey* revealed that 75% of parents first gave their child pocket money between the ages of five and seven. Children begin building their money habits at an early age, so as soon as your child can count and understand the concept of having a certain amount of something, then they are probably ready for pocket money, even if it’s only a few pence. You can tie pocket money to chores like tidying-up and washing-up to promote a sense of earning.
Toy cash registers and playing shop at home are good ways to introduce young children to the idea of money. Then, as they get older, asking your child to pay for items for you in real shops will make money and what things cost less of an alien concept. The MaPS research showed that parental actions and characteristics have a far greater impact on a child’s financial capability in the long run than any other kind of financial education, so just by talking to your child about money and involving them in the act of buying essential everyday items you are teaching them valuable lessons.
So, how much pocket money should you give your child? Well, perhaps the most important fact to understand is that, however much you give them, they would always like more, so don’t be swayed by comparisons of how much their friends get or by national statistics. Factors to consider:
The very act of regularly receiving their own money and being allowed to decide how to spend it is vital in your child’s process of becoming financially independent. Among the parents interviewed in the MaPS survey, some took a back seat in their child’s spending decisions, following the age-old adage of, ‘they’ll learn by their own mistakes’, while others advised their children. A useful piece of advice given by one parent was for their child to think about the purchase for a while and see if they really needed to buy the item – thereby introducing wants versus needs and the useful habit of deferred gratification (something that many of us as adults might forget to do!).
For further advice on pocket money and ways to teach your key child key budgeting skills, read our Planning & spending article, read our Planning & spending article.
The survey highlighted that children who are more financially capable tend to have parents who role-model financially capable behaviours at home, such as:
Another parental quandary is often whether a child should do household chores to ‘earn’ pocket money. As a family member, everyone should be expected to do certain things, e.g. laying the table for dinner, tidying their room, etc. While it is not healthy for a child to think that they should be paid for everything they do, it is useful for them to make the connection between work and money. The decision on this subject is yours and yours alone – getting into a bartering match with your child is certainly never wise. You could, perhaps, pay them extra for non-standard jobs, such as washing a car, cleaning windows or bathing the dog.
Another practice to encourage early is saving money. Again, the best way to teach your child this is by replicating your behaviour. You might talk to your child about how you put money aside for an emergency or you might have labelled money boxes at home for key events in the family calendar, such as a holiday or Christmas.
One of the key lessons to be learned from receiving pocket money is how to survive on a budget, so you won’t do your child any favours by ‘topping up’ their pocket money if they spend it all and then plead with you for more as they want to buy something else. As time goes by, they will soon realise that if they want to do or buy things throughout the week or month, then they will need to spread their spending.
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Want your child to find out more for themselves? Here are some activities to share with them.