Can Pocket Money Lead to a Life of Ruin?

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As recent research published by the Royal Economic Society indicates that children’s pocket money actually influences their financial behaviour as adults. compareandsave.com asks, “What should parents do to prepare their children for a better financial future?”

compareandsave.com piggy bank

Is Pockey Money the Path to Ruin?

The findings from this research are really interesting and will make a lot parents sit up a take note. It seems early financial responsibility really is the key to better future financial management.

According to professors from Sheffield University, published by the Royal Economic Society in April 2013, UK children who receive pocket money are less likely to save than children who have part time work or earn their pocket money; and saving as a child has a strong positive influence on the likelihood of saving money as an adult. Effectively children getting pocket money are less likely to be prudent savers into adulthood.    

Furthermore, the study demonstrated that other factors we might traditionally have assumed had a bearing on behaviour, like parents acting as role models through their own saving habits, actually had little or no bearing on their children. In fact parental point of view of their financial situation inversely impacts the child saving behaviour - If a parent is financially optimistic their child is less likely to save (and vice versa).

It’s obvious that the attitudes of people towards finances are shaped at a very young age and hence parents should consciously try to educate their children on the subject, and teach them the necessary skills required for a healthy and prudent financial future.

Parents have various avenues through which they can educate their children. They could encourage them to take on a part-time job such giving out the local newspapers, mowing the lawns of neighbours or just by earning their pocket money by doing chores around the house.

Moreover, the current personal financial market offers many different products to parents and their kids that will help them become financially savvy. Parents can use prepaid credit cards to load their children pocket money in and in the meanwhile help them develop money management skills. Prepaid products like pktmny enable parents can create an online account for themselves and their children, though which they learn how to manage their pocket money. Parents can set up automatic transfers, create tasks for their children to complete in order to earn money and even set up where they can spend the money.

A spokesperson for compareandsave.com commented :

“The findings from this research are really interesting and will make a lot parents sit up a take note. It seems early financial responsibility really is the key to better future financial management.”

*The study used data collected from 10,000 annual interviews conducted as part of the annual British Household Panel Survey (BHPS) and 6,000 short interviews conducted, for the BHS Youth Questionnaire, to children aged 11-15 since 1994.
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compareandsave.com is one of the UK’s leading personal finance comparison websites. Based in Colchester, Essex, compareandsave.com has been helping UK consumers get a better deal on credit cards, saving, loans and more for over five years.

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Mark Scott
Freedom Marketing Limited
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