Pocket Money – How much is enough?

29th June 2018

The Author: Paul Evans
Paul is both a client adviser and responsible for setting the strategy and vision for United Advisers.

‘Pocket Money’ or ‘Allowance’ is a valuable resource for children to learn about the value of money. It is a useful tool for parents to encourage children to develop confidence in consciously and actively managing money.

But how much is enough?

For many parents, deciding how much pocket money is appropriate is anything but an ‘exact science’. Like most transactions, what is appropriate for the circumstances depends on a whole plethora of moving parts. Their age, where you live and cost of living, transport costs, and your level of income…to name just a few.

In 2014, ING performed an International survey that tackled the question ‘Does pocket money teach savings habits for life’. The survey sampled the amount of pocket money paid to different age groups in various locations around Europe.

The results looked like this:

You can read the full ING report from the survey here.

There are some surprises in this study. For example, a teen in Poland gets nearly as much money as a teenager in the UK. Given the high cost of living and the average income in Luxembourg, it is not surprising that they top the table in terms of pocket money for teens.

Pocket Money is about more than just the money

More interesting than amounts paid, is where pocket money comes from and how children use it. RoosterMoney, who provide an app for managing pocket money came up with ‘The Pocket Money Index’. This snapshot of the pocket money habits of children across the UK that includes many interesting statistics:

Rooster money pocket money indexSource:

So, what’s the bigger picture here?

What we do with money is intertwined and entangled with how we spend our time, and how we spend and express our lives.  It’s about our individual and societal values, about what we give and take as we go through life and about how we interact the world around us.

Teaching children about money is an opportunity to teach them about how to live responsibly and empathically in their world.

In June 2016 a Facebook post about one family’s pocket money ‘strategy’, told from a child’s point of view went viral. To date, the post has been liked by 704,000 people, shared by 103,000, and has amassed some 23,000 comments:

The family’s strategy teaches valuable lessons about wise spending, saving, and investing, and donating to those who are less fortunate.

Read the full post and comments here.

Teaching the true meaning of wealth

We’ve all heard stories about people with lots of money who are absolutely miserable and conversely, there are tales about those who have little but are happy with their lot.

Being ‘wealthy’ is often used to describe a position of having a lot of money or valuable material possessions. But, it literally means having a lot of something good. We can have a wealth of experience, a wealth of wisdom or a wealth of compassion.

Pocket money can be used for far more than teaching children how to save and how to spend wisely.  It can be used to stimulate a feeling of wealth that transcends monetary meaning. These valuable life lessons can be learned from a young age using pocket money as a teaching medium.

Here is a short video about pocket money and savings from Claer Barrett, Personal Finance Editor at the Financial Times:

It’s worth noting the psychology behind the act of donating; it’s rarely an entirely altruistic act, even though we might like to think so.  Donating improves someone else’s life but in reality the act of donating more often than not also makes the donator feel good about themselves. It also helps create the lifestyle they want for themselves by giving meaning to what they do in their lives.

A win-win, if you like.

Taking Pocket Money Digital – Allowance, Apps, and Accounts

For many, the piggy-bank is relegated to ornamental status. It’s an outdated means of saving and accessing pocket money now we have apps and online accounts.

The sensible provision and frugal use of ‘pocket money’ in the right environment can help instil the best values from an early age. There are several innovative apps that both children and parents can use to give, manage and track pocket money. They often designed with the aim to teach children the value of money and how to use it wisely.

Making sure pocket money is ‘done right’ can very often be helped along using modern payment methods and state of the art tools, like ‘Rooster Money’. This app that tracks pocket money through the use of ‘pots’ called ‘spend’, ‘save’, ‘give’ and ‘goals’. A little like the ‘Humans of New York’ strategy saw on Facebook.

GoHenry is a similar app for managing digital pocket money via an online account and attached pre-paid visa debit card.

Similarly, among pre-paid debit cards designed specifically for young people to manage pocket money, there is ‘Osper’ backed by Mastercard.

Also backed by Mastercard, there’s ‘Nimble.’

You can read more about Rooster Money, GoHenry, Osper, and Nimble, in this wonderful article about digital pocket money by Lucy Warwick-Ching, digital and communities editor with the Financial Times.

In conclusion…

In our line of work we come across people from all stages of life and, for whatever reason, they are often able to come up with a veritable encyclopaedia of excuses not to save.

From young people at University or just starting out in their working lives who “have plenty of time to think about all that later”, established couples who “just don’t have enough money right now” to those approaching retirement for whom “it’s just too late to do that now”.

Whatever your life-stage, it’s never too late to save for your future, and it is most definitely never too early. Our recommendation? Make the best use of your money over time, take advantage of compound interest, and start saving towards your future as early as you can.

Read our guides for more about savings and financial best practices.