What’s your stance on pocket money? Some parents choose to dole out a weekly chunk of change for their kids to spend as they wish, while others prefer to simply buy items and gifts as and when needed.
There’s no right or wrong answer here – and how you handle the issue is likely to come down to cash flow as much as parenting ethos. However, there is some evidence to show that giving your kids a regular allowance is an important step towards helping them understand money.
That’s according to the most recent Youth Economy Report from children’s finance company GoHenry. They found that: “paying weekly pocket money helps children get used to managing their income.” The report also found that pocket money works best when it’s tied to household chores: “this is a vital part of kids’ financial education. For many, particularly young children who aren’t yet old enough to get a traditional part-time job, paid tasks are an introduction to the world of work, helping them to understand the relationship between work and money.”
So how much money should you be giving? Although your kids might not agree, it turns out that this is less important. Even a small amount can be used to help children to learn to budget – and learning how to save rather than squander small amounts can be an important lesson in its own right. The key is to not simply hand over the cash, but to also encourage your youngsters to think about how they want to spend (or save) it.
Tools like GoHenry can be really helpful here, mimicking adult banking by giving kids their own account. It offers a prepaid debit card and app so that young people can take control of their money, spend in shops and even create saving goals. It also has some handy features for parents, such as the ability to set chores and then pay out money once they’re complete. It also notifies you every time the card is used, so you can keep track of what’s being spent.
For teenagers, a GoHenry account can also be used much like a more traditional bank account, with part-time jobs able to deposit wages directly into the account through BACS payments. There are also options to ‘split the bill’ with friends and transfer money, making the app not unlike a lightweight, child-friendly version of Monzo or Revolut.
Of course, this isn’t the only option for dishing out pocket money. Good old traditional cash still has its place, and can help kids think about money as more than just an abstract concept. And many high-street banks also have the option of opening a children’s bank account, although they are less likely to have a mobile-first design and lack some of the family-friendly features of the GoHenry account.
Right now, everybody is feeling the squeeze. However, if you can find room in the budget to give your children some independence with their money, it could be the most fruitful way of teaching them to manage their finances later in life.