A Parent's Guide to Pocket Money

When to introduce pocket money

There is no right or wrong time to introduce pocket money. This very much depends on your family, the motivation behind it and how ready and able your children are to learn about and understand the value of money. It gets even more complicated when you start considering the terms. When do you start giving it, how much do you give, should it be earned and how often should it be paid? Are there any conditions attached and what about saving? The list goes on.

To start, keep it simple. The very idea of pocket money comes out of a desire to teach your children about the value of money and that despite popular belief, it really doesn’t grow on trees. Saving is a key part of the pocket money experience. Teaching your child to save a little each week to buy something bigger later on, can be a difficult concept for many children to accept these days, particularly as we live in a culture of ‘everything now’. For this very reason, parents have an extremely valuable tool at their disposal at a very key time in their children’s lives. Responsible pocket money schemes can teach more than simply adding and subtracting, getting and having.

So, how to start?

Once your children can count confidently and understand the idea of having a certain quantity of something and by either adding to it or taking away from it, they are left with the result. You can then safely say that your children are ready to understand the concept of pocket money.

That said, you should consider the long term implications of giving pocket money and whether or not you want to attach any conditions to it so that there are multiple lessons to be learned and associated with the rewards (and sometimes hardships) related to managing money.

Some parents decide on a set amount, to be increased year on year until a child becomes a teenager at which point, the process will be re-evaluated. You may wish to teach your child about saving and impose a compulsory saving scheme on a certain amount of the pocket money, which will be matched by you if they decide to save more than the minimum. You can set up an ‘interest’ jar to show your child how their money grows as they save.

Pocket money isn’t necessarily a given right. Your child may start out each week with a zero balance and will have to earn their keep by the weekend. It may also be taken away under certain circumstances that must be discussed with your child initially so that they understand the implications of their actions and the resulting loss of pocket money in such instances.

Raising the stakes

Some children will become highly motivated by money and the idea of earning it. Within reason, this is a good thing and should be nurtured in the right way. You can start to teach your child about earning a ‘bonus’ which can either be doubled by putting it into their savings or if they chose to spend it then that is their choice. Extra chores, outstanding behaviour or kind acts performed could all be considered and may even be suggested by parents from time to time as a way of reminding their children about going above and beyond what is expected on them. As you can see, pocket money is a fantastic tool, not just for teaching your child about money and arithmetic but also as a way of motivating them to achieve more by building a desire within them to strive for things that they want.

Keeping it close to home

In the beginning, young children may benefit from the ‘home shop’. This is a great way for families to interact, parents can teach their children about shop etiquette and how to look at the prices of things before deciding whether or not they are affordable. Children can then ‘shop’ for their items, place them in their little baskets and proceed to the Mum or Dad checkout. There you can explain in your own time, about how to understand the pricing, how to count out their money and most importantly, how to check that they have paid the correct amount and been given the appropriate change! Once this has been done to a point where you are confident in your children’s ability to go out on their own, you can accompany them to a real shop and allow them to shop.

An interest in saving?

Children are naturally curious and always in need of something. The tendency to spend all their money in one foul swoop is often too tempting. Once your children have had an opportunity to relish in the idea of having their own money for a while, you may wish to consider teaching them about saving and borrowing. Borrowing is usually a big hit the first time round, saving, not so much! The idea of being able to borrow from their next week’s pocket money so that they can have a bigger, better splurge this week is just too good an opportunity to pass up. Unfortunately, the tears and devastation that arrive the following week when they get little or no pocket money as a result. This will soon put a stop to the idea of borrowing, or at least, it will send a message that borrowing is fine, but as long as you are prepared for the payback or to go without until you are in a position to have a full purse of pocket money again, your children will need to be able to live with that decision.

Saving on the other hand seems far less glamorous than borrowing against future earnings. However, on the back of the loan shock, you can use the opportunity to turn things around. Explain to your children that they have a ‘saving jar’. The saving jar is their visual saving account, something that they will remember fondly as they grow older.

You can explain the concept of saving and add that for every penny saved over the basic saving amount set each week, you will match or double it so that they are rewarded well for their saving habits. You could use a visual in the ‘home shop’ and show your children an accumulative bundle of what they could have if they saved for one week, two weeks, and so on. The longer they save, the more interest they earn, the bigger the toy/sweet bundle becomes.

What about other money?

Once your children have grasped the concept of pocket money, saving and borrowing you can explain to them that the same principal applies to the other money that they receive over the year. Perhaps they would be wise to save some of their birthday or Christmas money and discuss what they may like to buy later in the year if they have saved enough? It is important with that in mind then, that you ensure that your children do get the rewards for their hard work at saving (even if it means you have to secretly top it up while they’re younger) to ensure that they understand the full impact of a good reward for saving.

Some parents set up Junior ISA’s for their children so that once they’re old enough, they can start to deposit their own savings from pocket money, birthdays or special occasions as the years go by. They will then be able to watch their money grow knowing that when they turn 18, they will have the money they need to see themselves through University, a Gap Year, the purchasing of their first car or even moving into their own accommodation for the first time.

Pocket money is about teaching children that you can have anything you want as long as you’re prepared to work for it and save towards it. The lessons your child can learn through pocket money are endless. The real value isn’t in the amount of money you give them but rather in the understanding they will gain about how best to manage the money they have and plan well for the future. Hopefully anyway!


However carefully researched the material in this information guide might be, it is not possible to guarantee its accuracy or completeness. The author and distributor therefore accept no liability for any inaccuracies or any loss or damage arising from the use of or reliance on details obtained from this information guide. Please ensure that you check the current government guidelines and requirements relating to the information shared within this guide.

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