The question of whether to give your child pocket money is a subject that inevitably comes up as an issue for parents, especially as a child gets older and becomes increasingly aware about money. Many questions come up such as is it the right thing to do for your family, will it help them to learn about budgeting properly? Is it something they really need, and if so, how old should they be when they start getting pocket money?
Well, according to a report by Aviva in 2016 that looked at how much money parents give to their child for pocket money, parents in the UK are more generous when it comes to the idea of paying kids pocket money at an early age.
On average, under-fives in the UK receive £2 a week, compared to 80p in Spain, £1.60 in France and less than 40p in the Netherlands. However, from the age of 15 onwards the rest of Europe tends to pay their children more. Kids in Austria receive on average £28 a week, whilst those in Belgium, France, Germany and Italy receive £24. Comparatively, UK parents give £9.50 to their teenagers.
What are the advantages of giving pocket money?
There are definite benefits to providing your children with a little bit of pocket money, such as:
- It can help them to make money decisions, as they will have to choose whether to spend the money, or save it. This can help them get into good savings habits in the future too.
- It gives them the chance to learn about the concept of money by having their own. Learning the value of money and how to spend it is an important life skill to learn.
- Having pocket money can give kids a sense of achievement, if they start saving money towards a desired item such as a new football, doll or bike.
- If given as a result of taking part in jobs around the home such as the washing up or hoovering, it helps kids to learn the importance of hard work, and gives them a sense of purpose, and allows them to prioritise their needs.
- It can also reduce the likelihood of adult debt. According to an ING survey in 2016 of 12,000 European parents, those that used pocket money effectively reduced the risk of debt in later life.
What are the disadvantages of giving pocket money?
- Children may start comparing the pocket money they have with friends, which means that they may get so caught up in thinking about what their friends have, they forget to consider the value of the money itself. You may also find yourself on the receiving end of continual moans and groans about the apparent lack of money they have.
- Rather than learning to spend or save money wisely, they could end up frittering away any money they have, and then repeatedly ask for more money. In this scenario, it is important to allow them to do this, but to not give them any extra money. Soon enough, they will learn the hard way that they will run out of money very quickly if they continue to act in this fashion. There is also the option of teaching them about cash advances and associated costs and how they can get an advance on their pocket money, but this will mean not receiving it on the day expected.
How much pocket money should you give to your child?
If you do decide to pay your children pocket money, you should be the one to decide first how often you would like to give your children pocket money and how much. This should be dependent upon your family’s financial situation. You may decide to make small weekly payments for younger children, whilst moving to fortnightly or monthly payments for older children and teenagers. This may be an effective way of getting them to learn a valuable life skill of budgeting, by spreading out payments for longer amounts of time.
How much money you decide to give to your kids may also be dependent on whether or not you would like to give them cash in exchange for completing household chores. According to the aforementioned AVIVA survey, over 70% of parents in the UK decide on this option, getting children to participate in chores such as taking the rubbish out, helping tidy around the house or cleaning the car.
You should also take into account the sort of things you expect your child to pay for. Younger children are probably only going to want small, low cost things such as sweets at the shop, or perhaps a cuddly toy. Whilst older children may be looking to buy things that are generally more expensive such as a mobile phone or days out with pals. So, when giving pocket money it is important to take into consideration these factors.
In terms of the current amounts we tend to give to children in the UK, here is the list, divided into age categories of what we pay as weekly pocket money in the UK. It would be wise to use this to gauge how much you want to pay.
Under 5’s: £2
5-10 years: £5
10-15 years: £5
15 and over: £9.50
Should I create a savings account instead of pocket money?
According to the Money Advice Service, if you put £5 a month for 18 years into a savings account, your child could end up with enough to pay a deposit for renting their very first property, or even driving lessons!
You may be more comfortable with this option if you are slightly skeptical about giving pocket money, or are concerned money will be spent frivolously. You can open a savings account for a child with just £1, and there are a couple of types of children’s savings accounts that you can choose from:
- The easy and instant access account: whilst it typically has a lower interest rate than other accounts, it does give you and your child the option of depositing or withdrawing money whenever you choose.
- The regular savings account: with this option it is harder to take out money as easily as with the other account type, however they usually pay a higher amount of interest than the instant access account. This may be the best option for you if you intend on saving regularly on behalf of your child.
- It should be noted that you could open more than one account if you so wish.