Giving pocket money to children might not be right for every family. But it can be a useful way to help kids learn about managing money for those who choose to include it as part of their child’s financial education. When they get pocket money regularly, children can learn how to budget money and begin to develop crucial money management skills. But what age is the right age to start giving pocket money to your kids?
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How much pocket money should we give our kids?
What age should I start giving my children pocket money?
There is no right or wrong age to start giving your children pocket money. It very much depends on your family, your child, your means and your motivation. Giving pocket money can stem from wanting to help your child become financially literate to wanting to show children that money doesn't ‘grow on trees’. It's also a way of teaching your children about the benefits of saving, budgeting and investing,.
The Pocket Money and Financial Capability study published by the Money Advice Service shows that children by the age of seven most children have grasped how to recognise the value of money and to count it out; and by this age, they will also have come to understand that money can be exchanged for goods, as well as what it means to earn money. If that’s your child then they are probably ready for pocket money.
The study, conducted by researchers at the University of Cambridge also found that children who received pocket money were more likely to have a good understanding of money and how to manage it. They were also more likely to save money and make sound financial decisions.
The study's authors conclude that pocket money can be a positive influence on children's financial literacy. It can help them to learn about the value of money, how to manage it, and how to make sound financial decisions.
Parenting specialist Kirsty Ketley agrees, “Introducing pocket money from as young as six years, can hand over some of the responsibility of buying things to the kids. And it’s a great way for them to learn if they are making good or bad decisions with their money.”
So whatever age you go for pocket money, try not to leave it too late. It’s important for kids to learn about how to manage their money before they are teens out and about without you. Giving kids pocket money when they are young helps them to slowly build financial skills so that they are savvy about spending and saving when they naturally become more independent.
Signs your child may be ready for pocket money
Signs your child may be ready for pocket money are when they:
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They ask for pocket money. Kids usually learn the concept of pocket money from friends. If they ask for it, use it as an opportunity to discuss what pocket money is, what it could be used for and how they can manage their money.
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They’re becoming more independent. This starts to happen around Years 6 and 7 as children start to travel to school alone and meet friends outside the home. At this point, they will need their own money and need to know how to spend and budget their cash.
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They understand delayed gratification and saving for a short-term goal, such as buying a toy or saving up for clothes.
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They want to earn some money but are too young to get a part time job. If this is the case you could link pocket money to doing chores and tasks around the home.
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They have shown an interest in money in general and you want to start teaching them more about money, saving and finances.
For some parents who decide to give pocket money to their kids, a common question is how much pocket money to give. Louise Hill, Co-founder and CEO of GoHenry says,
"It really doesn't matter how much pocket money you give, but if you can give children some money in any way shape or form, whatever you can afford, that they can control, and they can make decisions over, then that's the biggest empowerment you can give your kids. It lets them make decisions, it lets them make mistakes, and they will learn. And not only will it help them better understand how to manage money now, but in the future too.”
Data from GoHenry's latest Youth Economy Report reveals what GoHenry parents are paying:
|
Age |
Average Amount of Weekly Pocket Money |
|
7 |
£3.52 |
|
8 |
£3.75 |
|
9 |
£4.12 |
|
10 |
£4.58 |
|
11 |
£5.34 |
|
12 |
£6.49 |
|
13 |
£8.09 |
|
14 |
£9.70 |
|
15 |
£11.34 |
|
16 |
£13.32 |
|
17 |
£14.52 |
|
18 |
£14.79 |
Why introduce pocket money?
There are plenty of benefits of giving pocket money to kids. It's a great way to kick start your children's financial education. It starts them off on the journey of learning about money management and making decisions about budgeting, spending and saving. It also teaches them crucial financial planning skills and can even help them avoid getting into debt in adulthood.
Beth Zemble, VP for Education at GoHenry, says: “Giving your kids pocket money isn’t just giving them money, it’s giving them the opportunity to grow their financial skill set to become more capable and independent adults. With pocket money, you give them the opportunity to have real life practice with skills like planning ahead and understanding the concept of delayed gratification so that they can develop money confidence.”
It’s one of the reasons why a CBI Economics analysis commissioned by GoHenry and Wilson Wright found that financial literacy increases early career earnings by as much as 28%. It can also boost the economy, creating 76,400 businesses each year and adding an annual £6,98 billion to the UK economy. This further demonstrates the importance of financial education.
Parenting specialist Kirsty Ketley also agrees, “It’s vital parents teach their kids how to be financially healthy - it's an important life skill. Pocket money helps kids understand the value of things and when something is too expensive. It is a useful way to let your child make decisions so that they learn if they are making good or bad decisions with their money.”
Related: Pros and cons of pocket money
Saving and budgeting
As many adults will agree, saving and budgeting are not always easy. But if you learn good saving and budgeting habits in childhood, it can become something that you do naturally and without much effort. By getting into the habit of budgeting and saving some of their pocket money, your kids should have no problem carrying on these good habits as they get older.
According to the latest research conducted by GoHenry, Development Economics and Censuswide, 20% of people who received financial education in childhood said it would take them between 7-12 months to save up to £20,000 for a big expenditure. However, 31% of those who received no financial education as a child admitted that saving that amount of money would be impossible.
Independence
Getting to grips with money early on can help young people become independent and less reliant on others financially. This is because when you are financially stable, you have more options available to you and better opportunities.
It’s why encouraging kids to be entrepreneurial and setting tasks and chores for pocket money can help children understand both the value of money and their earning potential.
Louise Hill, CEO and co-founder of GoHenry agrees: “Children don’t have to wait until they turn 18 to start earning money. According to our research, children are earning up to £29 per month by carrying out tasks such as vacuuming, mopping and unloading the dishwasher. Earning for chores is a powerful exercise that teaches kids financial independence, and ultimately gives much more satisfaction rather than instant gratification.”
Related: Does pocket money teach independence?
Spending responsibilities
Pocket money helps teach kids to be more financially responsible, prioritise their own spending and saving, and make more prudent financial decisions down the line. The Pocket Money and Financial Capability study published by the Money Advice Service.
found that giving children pocket money helped them be more cautious about debt and have a theoretical understanding of the importance of savings and the concept of value for money.
Appreciation and achievement
Giving children pocket money as a reward for doing chores is a good way to show your appreciation for their efforts and acknowledge their achievements. Beth Zemble, VP for Education at GoHenry, says: “National standards and frameworks (US, UK, EU) for financial literacy all include understanding finances as integral to financial literacy. Providing kids with payment for chores can help them understand both the value of earning and the value of money by helping them to appreciate the connection between their hard work and the financial gain.”
With the GoHenry app, you can set up paid tasks for your child, and when they complete them, the agreed payment is sent to their GoHenry kids' debit card to reward them for their hard work.
When to stop giving pocket money?
Just like when to start giving pocket money, deciding when to stop is up to you. Some parents give their kids pocket money until they’re 18, but others stop at a younger age, maybe when kids get part-time jobs or start earning money from their own ventures. Of course, if your child can’t get a job, has too much school work, or needs additional money, you may want to keep giving your child pocket money for longer; the choice is yours.
How to talk to your child about ending pocket money
If you decide to stop giving pocket money, openly discuss it like you would discuss all other aspects of money with your kids.
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Be open and clear about what you are doing and why.
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Be prepared for questions. Your child may want to know why you are ending pocket money and what they will do without it. Be prepared to answer hard questions in a way that they can understand.
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Be understanding. Your child may be upset or angry when you tell them you are ending pocket money. This is a natural and normal reaction, which they will understand if you are clear about why you are doing it.
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Be patient. It may take some time for your child to adjust to the change and stop coming to the bank of mum and dad.
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Make ending pocket money a valuable learning experience by encouraging them to be entrepreneurial so that they can learn the value of earning. There are several things they can do if they don't get pocket money. Get a part-time job. Do extra chores for money around the house and even sell stuff they no longer need on online marketplaces. As Beth Zemble, VP for Education and GoHenry, says, "Just remember – if kids aren't given any opportunity to earn money, but are just given money, they lose an opportunity to practise financial decision-making skills and develop habits that will inform their future financial capability."
Use GoHenry to give your kids pocket money
If you decide the time is right to start giving your children pocket money, GoHenry makes it quick and easy. You can open a GoHenry account online, manage regular pocket money payments, set tasks and spending limits, and invite relatives to contribute via Giftlinks.
For your kids, the GoHenry pocket money app is packed with benefits. They can earn money by completing tasks, and learn valuable budgeting skills by monitoring their balance in the GoHenry app, as well as use their GoHenry kids debit card in shops, online, and ATMs. What's more, with in-app Money Missions, they can develop their money skills and learn about everything from budgeting and saving to giving to charity.
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