Pocket money is yet another of the many tricky moments in parenting. When is the right age to start? How much should they get? And what if they waste it all?
It can be tempting to just put it off and hand over money as and when it’s needed, but giving regular pocket money can be an essential life lesson for children, and handled correctly, it can teach them valuable financial skills.
Not sure where to start? Here are the dos and don’ts you need to know …
Do start young
The government’s MoneyHelper service advises parents to begin their child’s financial education at the age of three or four.
“The sooner kids are familiar with coins and notes, the quicker they begin to appreciate the value of money,” it explains. Adding: “Once they understand what it is, and have seen how you use it, pocket money is a great way to get them to understand what money is used for – whatever their age.”
Don’t give too much
If you want your youngsters to learn how to budget, then you don’t want to give them too much pocket money – especially when times are tough.
Give an amount that’s affordable for you, that will still teach your child the value of saving up for the things they want. If it helps with benchmarking, MoneyHelper states that the average weekly amount of pocket money given to children is £11.70, but this can vary significantly according to their age and the expectations you set for them as to what they have to pay for out of their pocket money.
Some parents find that linking pocket money to chores or the minimum wage is a handy way to give their children a rise each year, while maintaining some real-world structure.
Do think about cash or card
One of the mistakes I made at first was to promise each of my three boys £3 a week, only to realise that I rarely have any actual cash, and definitely never nine pounds in exact change.
If, like me, you don’t tend to carry cash, a child-friendly debit card is a fuss-free solution – and helps get them accustomed to a world in which most payments are card-based or digital. Starling Bank’s Kite card and app, for example, links directly to your current account, and is available for children aged six to 16. Created with ease and safety in mind, it allows you to set a daily spending limit, get notifications when your child spends their money, and gives you control over where they can spend their money.
Do incentivise saving
None of my boys found it easy to save up a large amount. A £40 Lego set seemed like an impossible goal when they were earning £3 a week, so they would usually end up just spending their money each week on sweets or comics.
Incentivising saving can make it more attractive, and help them build good habits. For example, for every £3 your child saves, you could top it up to £4. This makes the process of saving more fun, and goals feel much more achievable.
My biggest mistake was forgetting to pay their money each week, and then handing over a lump sum every couple of months to make up for it.
The point of pocket money is to give children a regular pot of cash to manage, not big handouts every few weeks. If you’re sticking with cash, set a recurring calendar notification a couple of days before to make sure you have it ready to hand over. If you’re going the digital route, simply set their pocket money up as a regular transfer, sit back, and relax.
Do set some rules
What can your kids spend their pocket money on? Can they buy as many sweets as possible (be warned, there is a lot of cheap sugary junk at the supermarket), or do you expect them to save up their money?
For older children, you may even expect them to buy some of their pens or bus fare out of their pocket money. Make sure you talk it all through in advance, or you can only blame yourself when they spend the entire lot on V Bucks to buy new skins in Fortnite.
Don’t be unfair
You might decide that different children should receive different amounts, especially if they are different ages. This is obviously fine, but whatever your system for rewarding pocket money – make sure it’s fair.
Research commissioned by Starling Bank, carried out by Tim Jay, professor of psychology of education at Loughborough University, revealed worrying disparities between parents’ pocket money approach to girls and boys. Not only do boys typically receive 20% more in pocket money each week – £3 v £2.50 – but they’re also more likely to be rewarded for academic achievement, while girls are more likely to be rewarded for completing chores.
So whether you’re basing the amount you give on chores, age, or something else entirely, make sure you’re working to the same set of rules for all your children. The last thing you want to do is set up unfair systems that could make children feel hard done by, and negatively shape their relationship with money in the future.
Don’t take money back
You may be tempted to have a system where your children lose pocket money for poor behaviour – however, taking money they have already received off them as a punishment could seriously backfire.
If your child thinks they might lose their cash, they will want to spend it as soon as they get it rather than learning to save up. A good alternative to taking money back could be “fining” them instead, so they receive less money in their next payment. Whatever you decide to do with your children, it’s important that the rules and penalties are spelled out clearly in advance.
Do talk about it
The point of pocket money is to help children learn good financial habits and that means talking to them about the process, not leaving them on their own to work it out.
Aim to sound open and chatty, not judgemental, and that will help them feel receptive to learning financial lessons. Having candid conversations about money from a young age will teach your children the benefits of talking about financial problems, rather than hiding from them – a brilliant lesson to take into adulthood.
Pocket money is your child’s first real experience of having cash and making real choices. So when it goes well and they save for a big item or show good budgeting skills, celebrate that financial goal – it’s an achievement!
With tools to help your children build their financial confidence, and full oversight for parents, Starling Banks’s award-winning Kite debit card and app is simple, secure and convenient. Sign up for Starling Kite before 31 January 2023 and get your first month free. It then costs just £2 per month. Find out more at starlingbank.com/current-account/kite-debit-card-for-kids