Pocket money can be an exciting thing for any child to receive as it gives them the freedom to buy the things they want – whether that’s a new toy or a packet of sweets. It also lets them experience the satisfaction of earning money, saving it, and seeing it grow until they’re able to use it to purchase something they’ve yearned for.
And because it gives children the opportunity to make their own decisions, giving them pocket money could be a great way to teach them about the value of money and the importance of saving from a young age. Both of these are essential life lessons that can be carried with them into adulthood, giving them a strong base for when they start working and paying bills.
So, it’s hardly surprising that according to new research from Aviva, 7 in 10 British parents give their children pocket money in exchange for them doing chores.1
This reinforces a survey from Yorkshire Building Society in 2019 that found up to 83.5% of children in the UK get pocket money, and that the top reason from parents with children aged between 6 and 17 for giving them this is to teach their little ones how to save and spend. In fact, 61.3% of parents said that this was their main reason for doing so.2
So, with pocket money being used to help children build good money habits, and with many parents offering cash in exchange for chores, what are children doing to earn it and what are they spending their hard-earned money on?
Aviva wanted to find out, so they've done some research. Here are their results.
How do children earn pocket money from their parents?
As part of their new campaign that looks at children’s pocket money habits, Aviva, the leading UK insurer and owner of Wealthify, surveyed 1,000 UK parents to learn more about their (and their little ones’) relationships with pocket money.
Their research found that most children (70%) worked hard for their allowances, doing chores in exchange for pocket money for their parents. The most common chores were found to be:
- General household cleaning, such as vacuuming and dusting (65%)
- Washing up (48%)
- Walking the dog (26%)
- Laundry (25%)
- Cleaning the car (24%)
What do children do with their pocket money?
Giving your little ones pocket money from a young age could help them to feel more independent and confident as it teaches them how to budget for the things they want. This is something that could greatly benefit them when they reach adulthood.
And if you think it’s too soon to teach your kids about finances, behavioural experts at the University of Cambridge have concluded that people typically form money habits up to age of 7, and it could be difficult to reverse these habits later in life.3
But what exactly are kids saving for? Aviva looked into what the most common things children spend their pocket money on and discovered that these were the top 10:
- Sweets and soft drink (37%)
- Toys and games (32%)
- Digital games and add-ons (such as in-app purchases) (26%)
- Clothing and accessories (24%)
- Eating out and takeaways (17%)
- General tech such as PC parts, console accessories, headphones etc. (11%)
- Toiletries and cosmetics (11%)
- Sports and activities (8%)
- School dinner (7%)
- Cinema and streaming such as Netflix (6%)
It was also found that, on average, parents think that their child will reach financial independence at age 21. However, almost 30% of the children that earn pocket money don’t have a savings account that they or their parents pay into to help them achieve this goal.
Could you save for your child’s future with a Junior ISA?
A Junior ISA is a savings or investment account that parents or guardians can pay into for their child. It can be opened from the moment they are born, and can be paid into until the little one turns 18. Your child can then access the money in the Junior ISA (or ‘JISA)’ and decide what they want to do with it – such as keeping it saved or invested in an adult ISA, or even using it to help them pay for something like their very first car, their university studies, or even the deposit for a house.
Parents can currently contribute up to £9,000 a year in a Junior ISA, and their child won’t have to pay tax on any interest or dividends they gain. However, the allowance amount is subject to change in future.
There are two types of JISAs a parent can pay into – a Junior Cash ISA and a Junior Stocks and Shares ISA. Although they can both be used by parents to save for their little one’s future, a Junior Cash ISA is similar to a savings account in that your child’s savings will be able to gain interest over the years. With a Junior Stocks and Shares ISA, such as the one offered by Wealthify, their money will be invested in the stock market instead where it could grow further.
However, it’s important to remember that with investing, your capital is at risk – meaning your child could get back less than what you have invested for them.
Want to give your child a financial head start? Find out more about Wealthify’s Junior Stocks and Shares ISA or get your own finances in order by visiting the Aviva website to discover more about the insurance products they offer.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and your child could get back less than what was invested for them.
You should seek financial advice if you are unsure about investing.
- Survey of 1,000 British parents conducted by Aviva