Can Pocket Money Teach Children Vital Skills?


Jan 13, 2015 by Amy

According to a 2014 survey conducted for the financial group, ING, which studied 12,000 parents across Europe, the average British parent is comparatively mean when it comes to pocket money. The Italians, French, Germans and Spanish all give their children a higher rate of pocket money than the average £6.35 a week (£8.26 in London) that UK parents provide. In all, around 79% of European parents give their children pocket money - but does it do the children any good in the long term?



The results of the ING survey seem to suggest that yes, giving children pocket money does make them more likely to develop solid financial planning skills, and less likely to get into debt, in adulthood. Giving children financial independence, the argument goes, teaches them the value of money and the importance of being able to save, early on. Initially children will make bad financial decisions, but over time they learn through experience and by the time they are grown up, they are savvy with their cash. 

This all seems very sensible and straightforward. However, the giving of pocket money is fraught with difficulties for parents.

For a start, there seem to be two key schools of thought. Some parents believe in paying children for particular jobs (for example, for doing chores around the house), claiming that this shows them the link between hard work and reward. Others, however, say that doing chores is part of being a household and the responsibility of everybody living in the home, thus children should be helping in the house anyway, without reward.


To pay or not to pay?

Whichever school of thought you belong to, there are still other issues to bear in mind. For example, should older children get so much pocket money that they don't feel the need to get a weekend job, or is a weekend job likely to interfere with their studying in any case? If they do not get paid for doing chores, could they perhaps 'top up' their regular allowance with 'one off' jobs for which they do earn money? This might be useful when the child is saving for a particularly expensive item.

There is also the matter of saving. Levels of personal debt in the UK have reached staggering proportions, and parents are seeing the value of teaching their children to delay gratification and save up to buy things, perhaps more than some recent generations did. Some parents achieve this by requiring their children to save a minimum proportion of their pocket money - often around 20% - and to work out the most efficient way to do this. Some have even persuaded their offspring to check the interest rates on children's savings accounts on a regular basis!


Skills for life

Whatever approach you decide to take, the statistics on pocket money and financial responsibility in later life do seem persuasive. In a country still reeling from recession, chastened by the difficulties that many have with personal debt and its effects, parents are increasingly aware that children simply must be taught how to manage money effectively - and pocket money seems as good a place as any to start teaching them.