Pocket money can be a great way to introduce children to the importance of finances from a young age. But as we move to an increasingly cashless society, handing out coins in exchange for chores is becoming less common. With no physical piggy banks to quantify the value of money, how can parents and guardians ensure their children have a healthy understanding of earning, spending and saving?
Cashless pocket money
Pocket money can be a controversial subject. Some parents set a regular allowance for their child no matter what, while others only hand out money in return for chores. Every family has their own budget and views around how much pocket money is appropriate.
And now that physical cash payments are less frequent, another concern is rising to the forefront. If kids can’t see their money, will they still be able to appreciate its value? The days of earning a couple of pound coins in return for completing weekly chores have long gone. Even Santa and the Tooth Fairy appear to be transitioning to digital payments. What will this mean for the next generation’s understanding of earning money and saving for important life purchases?
With the rise of contactless and online payments, children aren’t seeing tangible real-world transactions, either. From the age of 11 (or sometimes 16), there’s the option to open a starter bank account, which can help teens gain an understanding of saving, spending, and interest. But what about younger children? How can we bridge the gap?
Some people are opting for pre-paid cards to help teach their kids how much a certain amount is really worth. Parents can top up their child’s card with a set amount of pocket money, similar to a gift voucher. Because they are pre-paid, it means the child can’t spend beyond a £0 balance.
Another benefit of pre-paid cards is the sense of independence it provides. Children can make purchases without relying on their parents to carry out the transaction.
In many cases, parents can also set up restrictions, such as daily spend limits to introduce an awareness that finances are finite. However, some pre-paid cards come with monthly fees, ATM charges and other hidden costs.
Some companies have combined child-friendly debit cards with apps that allow parents to oversee their children’s spending. They enable parents to deposit money directly into their kids’ accounts and provide a junior card for spending. Some apps have the option to set tasks that children must complete to earn their money transfer.
Another feature of pocket money apps is the ability to show children their balance and categorise it into spending and saving funds. Young people can see how much things are worth and make their own decisions on whether to spend or save.
HyperJar, for example, offers a Kids Card directly linked to the parent or guardian’s adult account. The app allows parents to help their children create different money ‘Jars’. Alongside managing their jars and learning how to spend sensibly, HyperJar has the option to set goals so children can understand how to budget and save for a specific target. It also offers very attractive saving rates with major household brands and, rumour has it, family activities too soon.