Guide to pocket money


Sonia Rees

A real opinion splitter here when taking a quick poll in the office. It doesn't always follow that if you received pocket money as a child that you will go on to give it to your children. However, we all agree that pocket money is an age-old phenomenon that transcends socioeconomic grouping, country borders and generations. Who actually hands over the cash also varies considerably. In some families it's the parents, in others the grandparents, and in some the uncles and aunts.

What defines pocket money? Is it cash given or cash earned? Is it the frequency with which funds are received that defines it? Whatever way you want to slice and dice the concept, the amount of money handed over in pocket money is growing. Keeping in budget and avoiding short-term loans is key. This guide aims to explore the concept of pocket money, how it has evolved, and the various strategies deployed by parents when providing their children an allowance.

When to start?

Good question - and you will be pleased to hear that there is no right answer! Perhaps a good starting point is when your child begins to start asking (demanding) material things and experiences. Picture the scene, you're in a supermarket walking round the various aisles with your trolley. After completing your tasks, you approach the checkout only to discover a mountain of items that you definitely didn't choose. The culprit? Standing next to you tugging at your trouser leg. Just saying no and putting them back is probably going to lead to a frank conversation (tantrum), as your little one is not likely to truly appreciate the nature of exchange. In their defence it did take humans thousands of years to work out the concept of a market with both buyers and sellers interacting with supply and demand.

Different colour sweets

In addition, the concept of money is a much later convention to facilitate the exchange in a market rather than barter i.e. trading one good for another. So, if your child can begin to appreciate that money is finite and that wants are infinite then they are well on their way to beginning to appreciate the value of money. This is a big tick in the life skills box and will serve them well in the future.

Should you set rules?

There can be no right or wrong answers when it comes to setting rules around pocket money, but there are some key points you should decide for yourself before doing so. It's worth saying that there are perfectly contented children who don't receive any pocket money at all, so there is no reason to feel bad if you can't or don't! If you decide to do so, we have come up with three things you could start to think about:

  • What does your child want to spend their money on?
  • How much should you give them?
  • Is this a set action, or given as a reward or incentive for giving you a helping hand around the house?

As we have mentioned previously, pocket money is a great way to teach children the value of money from an early age. To do this, the amount you choose to give should be accompanied with the information they require to help them start to understand how the decisions they will make affect the money they have. Discussing what your child intends to use their money for is a great way to start this.

Do they want to use it straight away to buy themselves treats, such as little toys, sweets, or games? Or do they want to save for something specific, like a trip out with friends, or a new pair of trainers? As a side note, this may be easier with children over eight years old, as statistically speaking this is around the age where children begin to understand the concept of delayed gratification - the idea that they could buy that small something today, or they could save their pocket money and buy an even better something in a month's time.

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How much to give?

Obviously, this is also a crucial point to establish. Perhaps most importantly, this needs to be within your household budget. There may be some months where you have very little disposable income once the priority bills have been paid, and some months where you can include pocket money in your budget. Explaining why there may be times you can't afford to give out pocket money will also provide your children with the understanding that money is not an infinite resource, and we can't always buy things which we don't need.

Why should you give?

Why you give pocket money is also entirely up to you, but giving children household chores in order to earn their pocket money is a great way to establish a work ethic. This also helps to reinforce the idea that money is not infinite - as we get older, we will have to work to earn money. It is perhaps worth establishing a balance between what should be a habit, and a chore. As a child, making my bed in the morning, and tidying my room were expected - you make the mess, you clean it! Helping my parents wash their car, or cleaning the fridge, however, were things I could earn money for. The added bonus of some help around the house is a given, but whether you choose to give pocket money as an incentive for helping, or as a reward for helping, or even as a reward for exceptional behaviour is entirely up to you.

Girl in toy shop

Shopping habits

Smart shopping habits for the home is another important life skill children can be taught from a very young age. It can help support fundamental maths skills, as well as the importance of a budget, money management, and also helps instil the idea of the value of the products they are buying. For children under seven, setting up a " home shop " is a great place to start. Money is a difficult concept for young children to grasp if they never see it, so you can set up a home shop to begin to teach your child how far their cash pocket money can go.

If your child wants to spend their money on sweets, price up some sweet treats and allow them to choose what they want. Discuss that every sweet has a price, and compare this to how much your child has or wants to spend. You can then help to count out the correct money, and explain how to check you are paying the right amount, and help to count out any change. Once these basic principals have been established, and as your child gets a little older, you could take your child shopping for real.

Using the shopping trip as education tool

There are many options to consider when teaching your child smart shopping choices. Taking grocery shopping as an example, you could:

When out shopping, explain the difference between the products - you can discuss the difference between branded items and shop's own brand items, explain times where it is more appropriate to buy a shop's own brand over a more expensive named brand - explain that just because one item costs more, it doesn't always mean it is better. If you prefer to buy organic, explain that this is usually a little more expensive, but explain why you do so.

Explain how pricing, and choosing the wrong items could affect your budget for example spending £2.50 on a big bag of pre- packed vegetables may seem more cost effective, however explain that buying loose vegetables may be cheaper, and also means you are only buying the quantity you need, reducing waste. Help your child to weigh loose items, and work out together which is cheaper.

Teach your children the value of discounted items and expiry dates, especially when you are on a strict budget. If you are cooking something that evening, it is perfectly good to use something which has been reduced, and may mean you have extra money in your budget for a treat, or means you have extra money to spend next week.

Let your child help you to pay at the end. Using cash for a small shop is a good way to explain how to work out and check whether you have received the correct change. It is important to ensure what you are teaching your child fits their level of understanding, however helping your child understand these shopping principles over time will serve them incredibly well when they become adults.

Saving money is a difficult thing to explain to a young child, they may not understand that money is not infinite and sometimes it is sensible to save your money for something you may need rather than spending straight away on something you want. An easy way to introduce your child to saving in those early years doesn't have to involve money at all. Using a voucher system for treats such as watching TV is a great place to start. If one voucher is equivalent to 30 minutes, and a child wants to watch a 90-minute film, they will quickly learn that they will need to wait until they have received three vouchers to do so - and indeed, this may be a better reward than using their vouchers as soon as they receive them.

Introducing money after establishing this idea of delayed gratification may make saving a little easier to understand - they have already learned that sometimes waiting means a bigger reward, so this can be transferred to money. At this point, their sights are probably set on something a little more material than a few hours of television anyway, so you can start to discuss how much things actually cost. You can discuss the idea of long term saving " for a rainy day " over saving for a specific item, and talk about ways to save for both at the same time. Younger children may benefit from a visual aid, such as a chart to track their savings progress, or a physical jar they can watch fill up. You could make a small savings jar for " now " purchases, and a bigger savings jar for " later " purchases together - discuss what your child wants to buy, how much it costs, and how long it will take to get there. An older child may benefit from a savings account with a bank, giving them the feeling of being more grown up. The possibilities are endless, and you will need to establish what motivates your child to start saving their money.

Becoming a lifetime saver

Introducing the concept of interest to an older child is also a great way to encourage extra pennies in their savings jar. This could start early with rewards or treats if they don't spend their money for a certain period of time, or topping up their savings with extra cash, for every £5.00 they save, you will add 50p, for example. It is important to allow your child to make mistakes when it comes to saving - we all have the potential to make poor decisions with money at some point in our life, so it is important to establish what can happen in these instances, and how they can affect you in the future. At this age, mistakes are likely to be little more than missing out on a brand-new game or gadget their friends have, or missing out on a trip. Although these may seem catastrophic disasters to your child at the time, thankfully it is unlikely to be a substantial financial loss. It does, however, have the potential to teach them to really think about what might have happened if they had waited that little bit longer.


Hopefully this article has helped shed some light on what the face of it seems like a pretty trivial matter, but actually is incredibly important in a child's development.

Whether you actually choose to give your child money or not, it doesn't stop you from helping them understand the concept of value, delayed gratification and saving. For more information and some great tips check out this website.

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