Family finance: pocket money

Receiving regular pocket money can help children learn the benefits of saving,while earning it by doing chores can teach them the value of money.

But as a parent or guardian, it’s up to you how much – if any – pocket money your children get.

What age should I start giving pocket money?

When you start giving your child pocket money is a personal choice.

Many parents start giving their children a small allowance at around four or five years of age. Others wait until the child is nine or 10.

Whenever you start, it’s important the child understands how much he or she is getting and how often that will be.

As a rule of thumb, your child is ready to start managing pocket money if he or she understands these three basic truths:

• You need money to buy things

• Saving money will allow you to buy more expensive items

• If you spend all your money in one go, there will be no more until the next “payday”

How much pocket money should I give to my child?

In the UK, kids typically receive around £5 a week in pocket money, according to a recent survey of family-finance app RoosterMoney users.

Most families pay older children more.

But how much you hand out in pocket money will depend on both your parenting style and your financial circumstances.

Never be pressured – by your children or other parents – into paying more than you can afford.

Top tip

If you can’t afford to give your child pocket money, try using homemade tokens to allow them to save up for an activity, such as a family picnic in the park.

When should I give pocket money?

Paying your child pocket money on a set day each week or month will prepare them for earning a wage later in life.

Try not to supplement it or pay in advance because they have run out of funds; the aim is to teach your child not to overspend.

You can withhold pocket money as a punishment.

However, child psychologists advise against taking back any money you have already given, as this can discourage saving.

What is pocket money for?

Pocket money is often used to cover small purchases, such as sweets and toys.

It can also be saved towards the cost of a more expensive item, such as a new bike or video game.

Again, however, what pocket money is for is up to you as a parent.

Some people teach older children about budgeting by giving them a larger amount that also has to cover outgoings such as school lunches, magazine subscriptions and club membership fees.

Either way, letting a child make the odd mistake when it comes to spending their pocket money is an important part of the learning process.

Should pocket money be linked to chores?

In some families, everyone has a list of age-appropriate chores to do.

In others, children don’t have to start helping around the house until they are well into their teens.

So once again, whether your child has to do chores to earn pocket money will depend on how your family functions.

If you do decide to link pocket money to chores, it’s a good idea for the chores to be regular – for example, putting out the bins each week.

It’s also important to explain the chores clearly so there’s no confusion or arguing about what needs to be done and when.

Another approach is to pay extra pocket money for completed chores at a rate of say £1 per chore.

Five common ways to earn pocket money:

• Washing the family car

• Putting the bins out

• Gardening

• Mopping the floor

• Making the dinner