Giving pocket money as cash is old-school – but going digital can still be a good way to teach them about finance.
For many families, the days of cash being doled out every week as pocket money have gone as parents turn to digital means to pay their children’s allowance, monitor how they’re spending their money, and teach them the basics of money management.
Numerous apps have sprung up in recent years to help you do this (generally in return for a small fee). For example, RoosterMoney is a pocket money-tracking app aimed at children aged four and up. Using the app, you can set up a regular allowance for your children that will be added to their account, and add tasks that need to be completed in order for them to earn extra cash.
Via either their own account on your device, or the app on their own device, children can then see how much money they have, what tasks they need to do in order to earn more, and can separate money into different “pots” on the app, marked “spend”, “save”, “give” and “goals”. The basic app is free, but there is a £1.99 monthly fee if you upgrade to RoosterPlus, which adds the option for children to earn money by doing chores.
Another option is goHenry, an app that is aimed at children aged between six and 18. With this service children get their own pre-paid Visa contactless debit card, but this comes with parental controls via a linked online account. Through instantaneous notifications you can see where the debit card is used, and if you see something you don’t like, or are concerned the card has been lost or stolen, you can block the card instantly via your smartphone. The goHenry service costs £2.99 a month per child, plus 50p for one-off top-ups.
The nimbl app offers much the same services as goHenry, with a “micro-saving” feature that transfers a small amount into savings each time the card is used. All top-ups to a nimbl account, whether from you or from family and friends, are free of charge, and the annual fee is just £15. Finally, the Osper app encourages children to tag each purchase with a category, so they can keep track of how much they’re spending on what. There’s a monthly fee of £2.50.
The best children’s savings accounts
For those putting aside some money for their children’s future, the best choice of savings account depends how you plan to save. If you want to start building up savings, consider a children’s regular-savings account. Halifax’s Kids’ Regular Saver pays 4.5% for 12 months, and allows you to deposit up to £100 a month, but no withdrawals are allowed until the account matures after 12 months. Your child must be 15 or under to open the account.
If you already have some money that you want to tuck away, then consider a children’s savings account. Santander’s 123 Mini Current Account pays 3% on balances between £300 and £2,000, but your child will need to be aged over 11 to open this account. If you have more than £2,000 to save, then Halifax’s Young Saver account pays 2% interest on balances up to £20,000. Note that children get the same £1,000 Personal Savings Allowance as adults for tax-free interest.
Finally, a Junior Isa pays slightly more interest than a traditional account, locking away the money until your child turns 18. But as this means the money could be tucked away for a long time, you might want to consider an investment Jisa instead. The highest rate available is 3.5% from The Coventry Building Society. This account cannot be operated online though, so if you want internet banking then Nationwide’s Jisa pays 3.25%.
Pocket money… steer clear of poor-value over-50s plans
• Good news for anyone wanting to buy a property so they can rent it to a family member, says Sarah Davidson on This Is Money. Mansfield Building Society has launched a new family buy-to-let mortgage that lets the borrower charge their family tenant a rent equal to their mortgage payment (ie, 100%). This is in “stark contrast” to the amount required by most lenders. Tougher industry rules introduced last year led to many mortgage providers raising the required amount of monthly rent from 125% of mortgage payments to 145%.
• Around 380,000 people buy “over-50s plans” every year as a way to give their loved ones peace of mind, says Ruth Emery in The Sunday Times. These insurance policies pay a lump sum after death to help with funeral costs or an inheritance tax bill. However, in reality these plans are “inflexible” and offer “poor value”, often paying out less than has been paid in, and “rarely even covering the cost of funerals”.
Analysis by the Co-op (one of only two plans to receive a five-star rating by Fairer Finance) shows the shortfall will only get bigger, with average funeral costs rising at 3% a year. The worst plans require policy-holders to pay monthly premiums until they die, and with most you lose everything if you stop paying. A good prepaid funeral plan is likely to be an improvement on an over-50 plan, although they tend to be more expensive and aren’t regulated by the Financial Conduct Authority. Generally, unless your life expectancy is short, it makes more sense to opt for a straightforward savings account.
• Committees responsible for looking after the interests of 12 million UK workplace-pension savers are “failing to perform their core responsibilities”, according to charity ShareAction. Since 2015 workplace-pension providers have been required to appoint independent governance committees (IGCs) to ensure savers get “value for money”, says the Financial Times. But most were found to be ineffective at “keeping tabs on costs or holding… providers to account”.
As many as five out of 16 IGC reports failed to state the pension charges, and far from being “independent”, IGCs are “appointed… and remunerated by the provider” they’re keeping a check on. Aviva’s IGC came out top. BlackRock and Old Mutual Wealth ranked last.