A new survey has shone a light on children’s pocket money and thrown up some surprising results.
The research, conducted by Family Investments, looked into the pocket money habits of both parents and their children, and found:
- 80% of parents believe children who learn how to save will manage their finances better in later life
- However, only a third of children get pocket money on a regular basis
- Those children who do receive pocket money get an average of £2.50 to £4.00 per week aged between six and 12, rising to £7.50 per week from 13 to 16
- 84% of children save some or all of their pocket money, although older children are less likely to save
Children who put money aside unsurprisingly tend to save for short term items, such as holidays, bikes or toys. Although 12% are thinking much longer term and putting money aside for university.
Working for pocket money?
The survey also looked at whether parents make their children work for pocket money:
- Only 27% of parents make their children do chores, or odd jobs around the home, in return for their pocket money
- 40% of parents make their children work for their pocket money, although many said this wasn’t rigorously enforced
- 33% of parents set no conditions whatsoever for their children to receive their weekly allowance
Commenting on the survey Kate Moore, Head of Savings & Investments at Family Investments, said: “Every parent has different ideas about pocket money – how much to give, whether it should be spent or saved, and whether the child has to earn it.”
“Teaching kids about money management from an early age can be really valuable, whether it’s a piggy bank or a savings account. While it’s surprising to see that only a third of children get pocket money at all, we hope those that do learn a thing or two about how to spend and save wisely!”
Children’s savings options
The 84% of children who save some or all of their pocket money have a range of options to earn some interest and make their savings work even harder:
Regular Saver Accounts These type of accounts, which as they name would suggest require a regular monthly payment, can pay surprisingly competitive rates if interest. For example, the Barclays Children’s Regular Saver Account currently pays 3.50% and has a low minimum monthly payment of just £5
Junior Cash ISAs Most children are non-taxpayers so the benefit of tax-free saving via an ISA isn’t so important as it is for adults. However, at 18 Junior Cash ISAs convert into ‘adult’ ISAs and retain their tax-free status, so can be very important for long term planning. The interest rates aren’t bad either; for example, existing Halifax customers can get 6.00% on the Halifax Junior Cash ISA
Fixed Rate Bonds For younger savers who are happy to tie up their money children’s fixed rate bonds are worth a look. Again, the Halifax pay an attractive rate of 6.00%, whilst the West Bromwich Fixed Rate Regular Saver (Child) Issue 2 pays 3.60% although savings have to be tied up for a year.
With most schools not teaching pupils even the most basic financial management skills, it’s down to parents to do so. It’s clear children who save part of their pocket money are learning valuable lessons, which will help them in later life when careful financial management will be even more important.