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Does pocket money teach children to save?

Even children need money. They might not be buying their own food or paying their own bills, but pocket money can be a great tool to help children learn how to manage their own money.

By giving children a fixed amount on a regular basis, you can help them learn how to budget and teach them good savings habits.

The benefits of giving kids pocket money

The earlier children start learning about managing their own money, the better.

A 2015 study from Brown University found that most habits learnt before the age of nine are unlikely to change and, according to a study by Cambridge University, children have a basic idea about money and finance by the age of seven.

RedSTART Educate, a charity that focuses on bringing financial education to schools, has made it their mission to start teaching children in primary school about money management and finance. Through their Change the Game programme, RedSTART Educate is looking to prove that helping children form healthy financial habits at an early age will help them become more money-savvy adults.

All of this shows that early childhood is the best time to start teaching your kids about the value of money, good money management and the importance of saving - habits that will help them avoid debt and make their money grow.

It helps children learn about the value of money

It can be hard for young children to understand that money comes from hard work, it’s not just given out. This makes it difficult for them to see the value of money.

Having to pay for the things they want instead of asking you to buy them can help your children start to understand how money works.

Getting a fixed amount of money regularly can help them learn how to budget and manage their money, since they’ll know they can’t go to you for extra cash when they run out.

They’ll have to weigh up if the things they want are worth spending their money on.

Getting a head start on budgeting skills can also help kids learn about comparing prices, taking advantage of discounts and just how much a pound can buy.

“It has made them appreciate how much things cost. It’s amazing how price-conscious they are now they have to fund non-essential stuff themselves.” - Lorraine

It helps them connect money and work

Offering extra cash in return for helping around the house can help your children start to understand that money is earned through hard work, helping them develop a good work ethic on top of money management skills.

“Both my children have the opportunity to earn extra for their money boxes by helping around the house.” - Lucy

Some parents reward their children financially for doing well at school, but it’s worth keeping in mind that there might be subjects your child naturally struggles with.

If you’d like to give your child some extra pocket money based on how they do at school, it could be a good idea to reward their efforts rather than their results - such as doing all their homework on time, studying regularly and knowing to ask for help when they don’t understand something.

It helps children develop good savings habits

Managing their own money helps children learn how much they can afford to spend straightaway and how to save for more expensive things later on.

“Giving my kids pocket money actually saved me a fortune. Instead of endless pester power, they were in control of their own budgets and started to learn the value of money: ‘wow, that’s really expensive – I’m not paying that’. And started saving too, for holidays and treats.” - Carol

If they don’t have a good grasp on maths just yet, you can give them a hand by asking them how much it would cost to buy something they want and showing them how they could reach that amount by saving their pocket money instead of spending it. 

If they manage to stick to their goals and set some of their pocket money aside regularly, the excitement of being able to afford the things that they want could teach them the joy of saving early in life. 

This can lead to them becoming more financially responsible adults later on.

You can help encourage their new savings habit by offering to round up their savings. For example, if what they want costs £50, you can say you’ll give them an extra £1 for every £9 they manage to save, helping them reach their goal faster.

This can help motivate children to not give up on their savings goals while they’re developing their savings habits.

How much pocket money should you give your child?

The right amount of pocket money to give your kids depends on what’s right for you and your family.

In the UK, four-year-old children receive £3.71 a week on average in pocket money, with the amount going up to £11.64 for 14-year-olds. But these are just averages, and the right amount for your child will depend on things like what they need to spend their money on.

It’s worth considering if they’ll need to use it to buy sports equipment or pay for being a member of a club, whether they’ll buy their own clothes and pay their own phone bill out of their pocket money and even things like if they need to use their pocket money to pay for public transport.

The earlier you start teaching children about money, even if it’s by giving them small amounts of money, the longer they will have to develop a strong understanding of money management and build steady habits.

You could start your child off on a smaller amount of pocket money and increase it as they get older, as they’ll have more expenses to cover when they get into their teens. If you’ve opened up a savings or investment account for your child, such as a junior ISA, you could have them choose on their birthday how much of a rise they’ll get on their pocket money compared to how much will go to their junior ISA. They might surprise you and ask you to put more away for their future!

Weaning your child off pocket money

Even though pocket money teaches good financial habits and responsibility, you might find that it’s not teaching them enough about the value of hard work. Once your child is old enough, you might prefer them to get a part-time job or a side hustle to increase their income so they can better cover their costs and save up for the things they want.

Their daily expenses are likely to go up as they get older, so stopping pocket money completely can feel too harsh and might discourage them from focusing on their school work.

Instead, you could think about reducing their pocket money or stop increasing it and letting them know that if they want to be able to afford more, they’ll have to find a way to make money.

Just keep in mind that while it’s important to learn the value of money and earning your own income, they are still teenagers! Even if you encourage them to take up a part-time job, they should have enough time left to study, rest, build relationships and have fun.

Helping your child get a head start on their future

Long-term saving is important as an adult. Even if your child has learned the importance of saving, it might be hard for them to fully understand the idea of saving for the long-term, where they won’t see the rewards of their hard work for a few years.

A great way to help your child learn about long-term saving while setting them up financially for adulthood is to open a children’s savings product, such as a junior ISA or a tax-exempt savings plan like our Junior Bond.

Their money will be locked away until the child turns 18 for a junior ISA and until the payment term ends for a Junior Bond. This means they can’t touch the money until then so there’s no temptation to spend it.

You can start putting money away for your child from the day they’re born. When they’re old enough to learn about saving, you can tell them about the account.

Take the time to go through their options of what to use the money for when they’re older, such as buying a home or their first car. You might have an idea of how you’d like them to use it, but at the end of the day it will be their money to help them achieve their goals - whatever they might be.

They could even use it for a holiday!

If your child knows they have money building up in the background, they might want to start adding to their junior ISA or Junior Bond themselves, either with any pocket money they saved or any cash they’ve earned through odd jobs or part-time work.

It might still be far away, but finally getting access to a lump sum they’ve helped put together will encourage them to develop a good, lasting relationship with saving for the long-term.

Junior ISA

Junior ISA

With our stocks and shares Junior ISA you can start investing from just £10 a month and save up to £9,000 each year on behalf of a child. Anyone can pay in and the child will be able to withdraw the money in the account once they turn 18.

Explore Junior ISA


Junior Bond

Our Junior Bond is a Tax-Exempt Savings Plan designed to help you save on behalf of a child for ten to 25 years. You can open one for any child under the age of 16 and when the policy matures the child will receive a tax-free lump sum.

Explore Junior Bond

Our Junior ISA and Junior Bond invest in stocks and shares. This means they have good long-term growth potential, but the value of your investments could go down as well as up so your child could end up with less money than you've put in.

happy cute girl saving money, kid counting coins

Setting your child up for success

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