When I was growing up, pocket money was handed out sporadically to me and my siblings. I remember trying to squeeze my growing fingers into my piggy bank to extract coins (and more challengingly, notes) to add up the latest balance. There was no ‘money talk’ from my parents, nothing to make it clear to us kids what pocket money was for and, as we didn’t have the opportunity to spend it that often, money was more of a collectable than a medium of exchange. Now I’m a financial psychotherapist, I can see the missed opportunities in my parents’ casual approach to handing out pocket money. Today, we know that early experiences can shape significantly how we behave in all areas of life as adults – money being one of them. Some say that our relationship with money is set by the age of seven, but I don’t believe this to be the case. I believe our relationship with money is an ongoing journey, albeit one that starts early, as we watch our parents deal with money on a daily basis and this continues through every stage of life. But I am in no doubt that there is an opportunity to teach children healthy financial habits from an early age and expose them to the much-needed practice of making money choices – before they find themselves as adults and having to manage budgets, credit cards, loans and mortgages. Through my column I’ve explored how our parents’ attitude towards money shapes our own, and what that means for our future relationship with wealth and how, for example, we approach budgeting and risk. Was your father in charge of all financial decisions – except small household expenses? Were your parents extravagant spenders or proudly frugal? How were ‘the wealthy’ talked about? Was there shame about wanting more and modesty celebrated? These are only some of dozens of factors that might have shaped your attitude to money today. When clients come to me with their troubled relationship with money, there’s also a desire not to ‘mess their children up’ in the same way. They ask about how to raise their children to be financially independent, aware that what they say and do now around money will have repercussions for decades to come. Pocket money comes up as an emotional minefield: how much should we give? At what age should we start giving it? Should it be conditional on performance/chores/good behaviour? We start by discussing a road map for using pocket money to teach their children valuable financial-management lessons that will enable a healthy relationship with money, one in which they feel gradually empowered and able to make choices with awareness. Even when the glorious day comes when money management is part of school’s core curriculum, children will never learn the theory without real-life experience. We want our children to experience the joys, trade-offs, limitations, rewards, frustrations and mistakes of money in a small, contained way before they are adults and making choices that will have a substantial impact on their future. What's the point of pocket money? My approach is that pocket money should be seen as a teaching tool to help equip children with both the money-management skills and mindset you want them to have in the long term. There is no ‘right’ age to start giving your child pocket money, but at a minimum they should have an ability to count, an interest in money and an understanding of the cause/effect of it. These are all signs that it could be a good time. Children are introduced to the topic of pocket money in school in Year One. This could be your springboard, so start with £1 a week in Year One – increasing to £2 in Year Two, etc. if that feels like an affordable and appropriate amount for your family. For context, GoHenry’s research suggests that the average pocket money for a six-year-old is at £3 (up to £5 for a ten-year-old). It’s certainly easy for kids to understand, and it addresses issues of fairness among siblings. (GoHenry is a debit card and app for kids and has smart parental controls. It’s £3.99 monthly per child, with a one-month free trial.) In the cashless world we live in, it feels important to keep money physical for children for as long as it is practical to do so. A balance on a GoHenry account might be too abstract for a six-year-old to properly grasp. Physical money helps them connect effort, choice and consequence in a way that’s immediate and real. My son wants pocket money for making his bed! As tempting as it might be to use pocket money in order to reward children or coerce a desired behaviour from them, doing either can have negative consequence on their behaviour and money mindset in the long term. One client told me his story of how he’d used pocket money as a reward and now it had been taken by his son to extremes. ‘For a few years now we’ve rewarded our son with money every time he’s got a top grade at school or made the football team. Now he’s a teenager and he’s asking for money to even make his bed and keep his room tidy – it’s too much. What can I do to show him life isn’t always about money?’ This is a great example of how a good intention can have unintended consequences. As generous as it is to reward a child for good behaviour or performance with a financial gift, over time it can create expectations that when a child gives their best – or even just contributes to family life – it should come with a financial reward. And that seems to be exactly what’s happening here. The son has learnt to link positive actions with payment, applying that logic to even making his bed. I suggested to my client that his son should be keeping his room tidy simply because it’s part of being in a family, where everyone plays a part in helping things run smoothly. After all, it’s part of living together in a home and which you all benefit from keeping clean and tidy – just as we keep our streets clean or our desks at school/work in order. Besides imparting this key message, it was an opportunity for the father to show that celebrating an achievement does not need to involve money. In my consulting room, I’ve seen plenty of adults get stuck in unhealthy spending patterns because they’ve learned to ‘reward themselves’ with designer bags or expensive gadgets every time they hit a goal at work. There’s nothing wrong with occasionally marking a big achievement with a treat, but when the reward becomes the main motivator, it can lead to an over-reliance on external incentives: ‘I’ll work hard so I can buy myself a new car or golf membership’. The focus shifts away from the intrinsic rewards – such as pride, purpose, or genuine satisfaction – and on to the next purchase. Should I use pocket money to punish? Some parents tell me their child responds better to a ‘stick’ rather than a ‘carrot’ approach with pocket money. One mother decided to start giving pocket money in order to ‘dock’ the payment as a way to incentivise her daughter to recognise the value of her possessions. She told me, ‘My daughter is ten – I want to start giving her pocket money as a way to help her stop losing stuff at school. She can’t keep track of her games kit and I’m spending far too much on replacement. She would start off every week with £5 in a jar and a pound would be deducted for every item she doesn’t bring home. But will this method make her resent being given money? I explained that children mature at different paces and being focused and organised with their belongings is a developmental achievement that some find more challenging than others. She might have tried being supportive and might feel she is losing both patience and money as a result of her daughter’s seeming absent-mindedness. But remember what your intention is: to teach your daughter how to manage both money and belongings responsibly. Presenting pocket money as something she can lose may unintentionally create anxiety around money and doesn’t foster intrinsic motivations to being responsible. I have seen many adult clients who carry deep financial anxieties related to money disappearing, ‘from one moment to another’. I pointed out that she would not want to set her child’s relationship with money to start from a place of fear. When children behave well mainly to avoid loss or punishment, it shifts their focus on external consequences rather than developing an internal sense of pride (which helps their confidence grow) and responsibility. Similarly, I’d avoid using pocket money as leverage for unrelated things. For example, you might say: ‘If you don’t save X, you can’t go on holiday.’ This can make money feel like a weapon instead of a resource to manage wisely. They might then learn that it’s OK to be controlling with money, which is certainly not a dynamic you’d want to see in their adult relationships. Pocket money works best as a tool to teach positive financial habits – such as saving for long-term goals (and delay gratification), making thoughtful spending choices – being neither impulsive nor excessive – and understanding the value of money. Rather than deducting money for lost items, you can consider involving her in the natural financial consequences of having to replace an item. You might think ‘that’s even worse if I am asking her to pay a tenner for a T-shirt rather than deduct a pound from her pay’, but psychologically it’s very different. For example, if she loses something and needs a replacement, you could discuss how she might contribute towards it from her savings or brainstorm ways she can earn extra to cover the cost. This approach helps her think about the value of money, the impact of her actions but still preserves pocket money as a learning tool rather than a source of fear or control. Will money talk ruin their childhoods? As with sex education at school, a few parents tell me they are concerned that bringing ‘money’ into their child’s lives too early on could ruin the wonderful, carefree world of childhood. One father who wrote to me said he felt discussing finances was an ‘adult’ concern. He said: ‘My twin girls have started asking if we’re poor – they might have heard me and my wife discussing cutting back this year due to bills rising. How can I remove their worry without wrapping them up in cotton wool?’ I encouraged him not to make assumptions about where their question is coming from. Children often ask parents if they are poor simply because they notice differences – such as a friend’s larger garden or fancier car. Curiosity, and trying to get a ‘map’ of the world and where they stand in it, is a natural part of development and might not reflect the anxious worries that are on parents’ minds. If this happens with your children, ask them, ‘I wonder why you think that?’ and listen to their answer. It may be a good opportunity to talk about the difference between ‘wants’ and ‘needs’ – an essential foundation in developing a healthy relationship with money. You might reassure them by explaining that being ‘poor’ means not having enough to meet basic needs – such as food and shelter – something your family isn’t facing. Depending on their age you might even introduce the idea that when essentials cost more, families need to be more thoughtful about spending on ‘wants’. You can help them understand this with simple examples – like renting a movie at home instead of going to the cinema as a way to spend less on a ‘want’ which also gets them thinking about trade-offs and problem-solving. What should my child spend their pocket money on? Some parents have expressed concern to me about what to tell children is the ‘right’ thing to do with pocket money, fearful that too many rules around it will make them come across as controlling. What if they spend too much on sweets? Or hoard money and never get a chance to experience spending (which is what I did when I was young)? Or even end up buying gifts for all their friends. My sister felt emotionally trapped when her daughter decided she wanted to spend all £40 she had saved over the year to buy a fancy Barbie doll for her new best friend! I hear all these concerns and my main message is this: better if it’s too much chocolate now than a luxury vehicle in their 20s. Better to give away £40 to a Barbie doll and regret it, than a designer handbag bought on credit for a soon-to-be ex-girlfriend age 30. What I mean is that pocket money is an opportunity to make money mistakes in a safe environment. They are mistakes they can learn from which will help them to avoid repeating them when the stakes are much higher later in life. They need to feel the regret of spending too much; the frustration of not having enough for everything they want; the envy that their sibling who does spend gets to have nice things, and the emotional hangover of an excessive spending spree. I am not suggesting handing the money out with no guidance and to let them learn on their own. Inviting them to think about their feelings related to money is how you help them build financial emotional awareness. It is important to have a first conversation about pocket money which could be along the lines of: ‘This is money that you can spend on things you want [because we will buy you the things you need] or you can save it for something bigger in the future.’ Invite them to think of the pros and cons of spending and saving. You might want to set one ground rule: they can’t buy things you wouldn’t allow them to have – for example, a pet. And then, of course, that shouldn’t be the last money conversation you have. Money conversations should be happening often. Involving our children in our thinking can help them see the trade-offs we consider when spending at the supermarket or when choosing holidays, clothes or outings. Children can be included in these decisions in age-appropriate ways. Talking about giving, buying things for others in need and the family’s charitable donations should be part of the conversation too. How can I stop my child hoarding money? If you notice that their tendency is to spend money too quickly and easily, you could invite them to think about the feelings that result from this (guilt? regret?). You can also introduce incentives to save, such as: ‘I will double the amount you manage to put away by Christmas.’ If they hoard money, you could explain that money is both to be saved and enjoyed. They might think they are gaining your approval and being sensible by not spending anything, and might need encouragement to test out small purchases. My child gives all their money away – HELP! If your child gives a lot of their pocket money away and you sense that this is a tactic to be liked by others, then you could gently explore this with them – not to discourage generosity but to help them reflect on what they are hoping to gain and whether that’s really what generosity is about. They might ask you for ways to make even more money – and that’s where you might consider tasks that aren’t part of their usual responsibility (eg: washing the car, mowing the lawn or helping you input numbers into an excel sheet). If you can talk about sex, you can talk about money Many parents avoid money conversations almost with the same dread as conversations about the birds and the bees. But the world has changed since we were children. Access to technology offers both an opportunity to learn about money through the right educational tools and apps, but they will also be bombarded by temptations to shop, gamble, trade stocks and crypto, buy on credit etc. in a way that we were not in adolescence and early adulthood. It is important that we give them the opportunity to understand, learn and make money mistakes when we are there to support them and when their mistakes don’t trap them in a spiral of debt. We need to help them develop not just financial literacy, but financial-emotional awareness.