Making pocket money work

Posted in: Finance Last updated: 28 Oct 2014

We all know it's important to teach basic money management skills to our children so that when they leave school they can make informed financial decisions and flourish as independent adults. However, with busy schedules and more pressing priorities, the reality is that very few parents have the time, skills or energy to do this.  So, it's with a welcome cheer that the Government took the reins on this seemingly obvious sentiment and from September this year made financial education a statutory part of the curriculum for all state maintained secondary schools.

Preparing them for the future

 With credit cards, debit cards, interest rates and loans covered we can all breathe a sigh of relief knowing that when our teenagers leave school as young adults they won't be running the stock market, but they will be equipped with the basics. But what of primary aged children? Are we missing a trick by not teaching our younger children some money skills?

As we know from research conducted with the Family Investments customer panel*, 83% of parents are giving pocket money to children younger than secondary school age so Family Investments have designed a handy Savings Planner (download here) so you can start building their awareness of the value of money.  By helping your child identify something that they want to save for and by completing the clear simple steps on the planner they can see just how quickly it's possible to reach their goal.

It's no mean feat teaching young children the value of money – sweets, small toys and other trinkets have a magnetic attraction once pocket money is in hand. Be it 50p or £5, pocket money is handed over in exchange for this week's in thing and subsequently the product of their chores or good behaviour is soon forgotten.  So, it's encouraging to see that it's not all about spending as 84% of parents in the survey said their children save at least some of their pocket money each week.

"We can show them how important it is to save at all ages and hopefully help to encourage a habit that could continue throughout life."

Encouraging the savings habit

For younger children, set smaller goals so they can achieve their target quicker, then encourage saving larger amounts as they grow. Before long, they'll want to save for bigger items, and you'll have given them all the tools and skills that they need to reach their target.  Over 53% of parents surveyed also said that their children would save for bigger ticket items such as bikes and other expensive items.

Getting children to put their money away can be a definite challenge, but when you add up the amount that they could actually save if they regularly put small amounts away, it can be a total well worth showing them. Away from small spending bursts, by encouraging our children to save their money, they could buy themselves something of value.

If we can encourage this savings habit through developing an awareness of the benefits of saving pocket money we could send our children into secondary school with one of the great foundations for money management.

Lead by example

As adults we often feel that we could do more to save ourselves but a good way to teach our children the importance of saving is to lead by example.  As we know children can also learn by observation so if they see us saving money, we can show them how important it is to save at all ages and hopefully help to encourage a habit that could continue throughout life.

* Research conducted with 408 customers on the Family Investments customer panel in December 2013.

Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial advisor about your own circumstances.