Pocket money is on the rise and some children are receiving almost £10 a week.
The issue of how much pocket money to give your children is a key topic of debate around dinner tables and among behavioural psychologists.
On the one hand, you want to teach your kids about money management and budgeting but you may not want to give them financial rewards with no responsibility.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Research by Virgin Money among 2,000 parents with children aged 8 to 16 found three quarters of parents give their child pocket money, with the average weekly amount reaching £9.33.
That equates to £37 a month.
Reflecting inflationary pressures, 54% who give pocket money admit they have increased the amount due to the rising cost of goods and services.
How much pocket money should you give your children?
From Robux to Starbucks, there is plenty for kids to spend money on nowadays but there are differences over how much pocket money to give.
Virgin Money’s research suggests some generous parents are handing over almost £10 per week.
That is a lot higher than figures from kids’ prepaid debit card provider Rooster Money, which suggests parents are giving £3.78 per week on average.
It is of course up to parents to decide how much pocket money to give their children, if any.
There will be variables such as how much the parents earn and how many children they have.
"How much pocket money to give your children depends on your budget and comfort level," says Alex King, founder of the financial education platform Generation Money.
"Consider your disposable income and what your children might want to spend their money on. The amount shouldn't be too high, as it could create a sense of privilege by allowing them to easily buy whatever they want. However, it shouldn't be too low, as this might make them lose interest in saving and budgeting."
Paul Denley, chief executive at Oakham Wealth Management, suggests starting low when a child is young and working up to higher amounts.
“Children should learn about money, what having ‘enough money’ means, and the extra choice money can provide,” he says.
“It’s worth applying a metric for pocket money based on maturity - perhaps £1-2 per week per year of age.
“Clarity prevents negotiation here.
"It’s worth pitching the fixed element low to allow room for incentive-based rewards. Otherwise, young Beatrix might start thinking money grows on trees.”
How to give pocket money to your children
Rather than how much to give, the more important focus is often how it is given.
Many parents and financial experts suggest that instead of just giving a set amount each week, the amount should be linked to incentives such as household chores.
Rachel Beech, founder of school-run support app Fetching, says that rather than paying pocket money, there is always the opportunity for her children to earn money by doing jobs around the house - above what might ordinarily be expected.
“In that respect, there is no limit to the amount that they can earn, which can be motivating,” she says.
King recommends giving your kids a set weekly or monthly amount of pocket money to teach them the concept of a steady income and budgeting and spending.
"Set clear boundaries," adds King.
"For example, if your child spends their weekly pocket money on the first day, be clear that they won't receive next week's money early. This prevents the development of poor spending habits."
Some may prefer to hand over cash but there are also banking apps and debit cards for children such as Rooster Money and GoHenry where children can be set tasks to earn pocket money and their parents can track their spending.
Virgin Money has also launched a new bank account for 11 to 17 year olds, available exclusively to children of its current account customers called M Power.
There is no monthly fee, fee-free spending in the UK and abroad, a dedicated app and a red debit card, letting parents transfer money and monitor spending.
“Pocket money is a good opportunity to build some good money habits though,” says Ben Perks, managing director at Orchard Financial Advisers.
“If you're giving pocket money; the children's debit cards that are linked to an App are great. They allow them to view balances, monitor spending and create savings accounts under the watchful eye of parents or carers.
"It teaches good money management which will be useful in the years to come."
-
Is it time for a global wealth tax?Labour is planning to implement wealth taxes if it wins the election. Will it pave the way for a global crackdown on the rich?
-
Inflation is tamed at last – when will interest rates fall?UK inflation may have hit the Bank of England target but it's unlikely to stay that way for long. What does that mean for interest rates?
