Passing the Financial Torch
Exploring Children’s Experiences With Money in Britain Today
Data is based on a Yorkshire Building Society survey of 1,019 British parents of 6-17-year-old children in October 2019. The 2016 data used for a comparison is from YouGov Plc. YouGov total sample size 4,281 adults, undertaken between 28th October - 1st November 2016. Figures were weighted and are representative of all GB adults (18+).
- On average, parents give children £2,670 in pocket money from the age of 6 to 17 and spend £2,702 on their Christmas presents.
- Nine in 10 parents said their child has a dedicated savings account, with an average balance of £1,766.
- The typical parent overestimates the amount their 6-year-old will have in their savings by their 18th birthday by around 50%.
- One-third of parents said they ‘regularly’ talk to their children about money, with mums being more likely than dads to discuss finances.
- Parents in 2019 are more likely to talk to their child about money ‘sometimes’ or ‘regularly’ than in 2016.
- Regular conversations about money between parent and child are now 4.4 times more common than roughly 25 years ago.
- Despite more conversations, parents are less likely than three years ago to say their child has a ‘very good’ understanding of money.
- Half said they think digital money and the decline of cash have a negative effect; 7 in 10 said loot boxes in video games are unhelpful; and 1 in 5 recalled their child making an online purchase using their money without permission.
A generation ago, the concept of a ‘cashless piggy bank’ would have sounded as useful as a chocolate teapot. Today, this app-based approach to kids’ finances is just one of many modern tools parents can use to teach their children about money.
But for every educational app that’s now available to clarify a child’s understanding of money, there’s a development to potentially muddy it, be it the decline of cash, the rise of loot boxes in video games or infinitely scrolling Christmas wish lists inspired by social media.
To explore how children in Britain today receive money and learn how to spend and save it, we surveyed over 1,019 parents of 6–17-year-olds.
Until children are free to enter the world of work at age 13 or 14, their access to money is mostly limited to whatever they can beg, borrow or earn from their parents and grandparents.
Nearly three-quarters of parents surveyed said their child is given pocket money. The prevalence of pocket money is lowest at age 6 (55.6%), highest at age 12 (83.5%) and gradually drops to 66% by age 17.
The majority of parents said they have specific motivations for sharing the wealth – only 1 in 10 hand out pocket money for ‘no particular reason’.
The top five reasons parents of 6-17 year olds give them pocket money:
- To teach them how to save and spend 61.3%
- To give them independence in their spending 56.6%
- For doing chores 54.1%
- For good behaviour 43.4%
- For studying/doing homework 21.1%
Children on average get £2,670 in pocket money throughout their childhood
It seems that the habit of giving pocket money might run in the family, as 81.5% of parents who received it when they were their child’s age give pocket money to their children today, compared to 63.6% of those who didn’t receive pocket money when they were young.
Pocket money may also now be more common than it was a generation ago, as a maximum of 60% of parents said they received an allowance between the ages of 6 and 17, compared to 74.5% of children in the same age range today.
On average, a child who receives pocket money from the age of 6 to 17 gets a total of £2,670. That’s equal to £222.50 per year (enough to buy a new PS4, Xbox One or Nintendo Switch Lite – assuming the child has the dedication to save their allowance for the full 12 months).
To keep up with the Joneses, parents should increase their child’s pocket money by £27 each year, as this was the average annual ‘raise’ between the ages of 6 and 17.
However, some parents choose to splash more cash – 1 in 10 (12.4%) give their child £40 per month or more, equal to roughly £480 annually.
Parents overestimate how much they’ll save up for their child
Pocket money is particularly useful to children in the present, but behind the scenes, most parents also deposit into a dedicated savings account for their child’s future. We compared how much parents said is currently in their child’s savings to what those same parents expect the total will be when their child turns 18.
Nine in 10 parents said their children have a dedicated savings account. The average current balance ranged from £1,211 for a 6-year-old to £2,323 for a 17-year-old, with the average for 6–17-year-olds at £1,766.
By comparing responses for children of various ages, we can see that parents typically overestimate how much they’ll eventually have saved for their child by their 18th birthday. In fact, the typical parent of a 6-year-old overestimates the amount by around 50%.
As their child gets older, and their 18th birthday looms ever closer, the average parent revises their estimate to a more realistic figure, but it’s still a way off what parents of older children report is actually in their children’s savings accounts.
For example, on average, parents of 10-year-olds said they currently have £1,615 saved for their child and expect the balance to rise by over £4,000 to £5,653 by their 18th birthday. But with the big day just two years away, parents of 16-year-olds said their savings contain £2,222 and hope to reach a more modest £3,724 by age 18.
Alongside pocket money and contributions to savings, most parents say they also spend a sizeable chunk of money on their child’s Christmas presents. The average total expected spend per child for Christmas 2019 is £218, with a surprisingly small difference between 6–9-year-olds (£196) and 14–17-year olds (£236).
When combined, parent’s average total spend on pocket money and Christmas presents for their child between the ages of 6 and 17 is £5,372. That’s not to mention birthdays and other occasions.
With so many children receiving hundreds of pounds each year through allowances, savings, presents and more, how do parents approach teaching them about the ins and outs of money?
Parents are more likely to talk to their child about money in 2019 than they were in 2016
According to the MoneyHelper, getting children used to talking about money early can help them avoid financial issues in the future. In fact, children’s attitudes towards spending and saving can be formed as early as 7 years old.
Around one-third of parents (32.5%) said they ‘regularly’ talk to their child about money and finances, whereas the majority (56.4%) said ‘sometimes’.
Understandably, parents are more likely to talk to a child about money as he or she gets older, rising from 78.4% who discuss finances ‘sometimes’ or ‘regularly’ at age 6 to 95.1% at age 17. Put another way, parents are five times less likely to say they ‘rarely’ talk to their child about money at age 17 than when they are 6.
By comparing the results of our 2019 survey with findings from previous research we conducted in 2016, we see that parents say they’re more likely to talk to their child about money ‘sometimes’ or ‘regularly’ in 2019 than they did in 2016 (89% versus 79%, respectively). Moreover, they are over five times less likely to say they never talk to their child about money than three years ago (4.3% in 2016 versus 0.8% in 2019).
As well as talking to their children about money in a general sense, the majority of parents (61.6%) also recall discussing a ‘grown-up’ family-related financial issue with them, like not having enough money to pay the bills. Mums were 18.5 percentage points more likely than dads to say they’d discussed a family money problem with their child (70.7% versus 52.2%).
Mums were also more likely than dads to say they regularly talk to their child about money in general (38% versus 22.5%) and less likely to say they rarely discuss finances (6.4% versus 15.7%).
Parents today are 4.4 times more likely than their parents were to talk about money with their child
Compared to three years ago, parents today seem a bit more likely to say they often talk to their children about money, but the contrast is far greater when we compare the current generation of parents of 6–17-year-olds to the one before.
Based on the recollections of their adult children, parents in the previous generation were 31 times more likely never to talk about money with their children than those grown-ups are today with their kids. And regular conversations about money and finances between parent and child are now 4.4 times more common than roughly 25 years ago (32.5% vs. 7.4%).
This increase in parent-child communication may partly explain why 4 in 10 parents today said they feel their child has a better understanding of money than when they were their age, while only 14.4% believe it’s worse. However, that doesn’t mean all parents are highly optimistic about their children’s understanding of money, especially compared to their feelings in 2016.
Parents in 2019 were almost half as likely than in 2016 to rate their child’s understanding of money as ‘very good’ (14.8% vs. 7.8%) – instead rating their understanding as ‘fairly good’ or ‘not very good’ more frequently than in 2016.
Half of parents believe digital money is harming their child’s understanding of money
What could be causing a sizeable proportion of parents to feel their children’s understanding of money has room for improvement?
There are arguably more changes happening today to the way money is stored, transferred and tracked than at any other time in history, from digital purchases to cryptocurrencies, contactless, and even deviceless biometric payments. Money is increasingly a concept represented by numbers in an app than notes or coins in a wallet – so what do parents make of it?
Half of parents believe the growth of digital money and the decline of cash are having a negative effect on how their children understand the concept of money. Only 13.4% consider these changes a positive influence, while a slightly higher proportion (17.6%) aren’t sure yet what to make of these developments, and 18% believed they make no difference.
Some parents might feel pessimistic about the influence of digital payments because they’ve been stung by them – 1 in 5 (22.4%) said their child had bought something online using their account and money without permission. The average value of an unauthorised purchase was £44.70, and the amount was typically higher among older children (£31.20 for 6– 9-year-olds versus £56.50 for 14–17-year-olds).
There are also more abstract influences that could potentially confuse a child’s understanding of the value of money and the importance of spending it wisely. Nearly three-quarters (73.5%) of parents said they think loot boxes in video games hurt the development of their child’s understanding of money. (Loot boxes are like a lucky dip in which players spend real money in the hope of unlocking special characters or equipment in a game, but with no guarantee of anything good or valuable.)
Digital payments may concern some parents, but hands-on experience with real transactions can also be extremely helpful. We asked parents whether their children had interacted with a range of tools and whether they believed they were helpful in developing their understanding of finances.
One in 3 parents said their child has a debit card of their own, and 94% said it was useful for improving their knowledge of finances, ranking higher than anything else on our list.
In second place was the classic piggy bank, which is understandably more common than children’s debit cards (87.5% versus 33%) and only slightly less useful (91.6%). A savings account was also considered helpful by 84.9% of parents. The least useful items were those which had nothing real at stake: a calculator, money-themed board games, and a toy cash till.
Parents still use classic approaches to help their children learn about money. Nearly 9 in 10 kids aged 6–17 have had a piggy bank and over 7 in 10 received pocket money.
But parents’ opinions are mixed on their children’s understanding of money. On the one hand, they are far more likely to say their kids have a better understanding of money than they did at their age than to say worse. But on the other hand, parents are less likely to say their children’s understanding of money and finances is ‘very good’ compared to three years ago. This change could be due to the world of money changing so rapidly, including the rise of loot boxes in video games (which 7 in 10 parents said were unhelpful) and digital payments (which 1 in 5 parents said their child had made without seeking permission).
But conversations between parents and their children about money are also on the rise, with mums and dads today saying they regularly discuss finances with their sons and daughters 4.4 times more often than their parents did with them.
In fact, by the time their child reached the age of 10, the majority of parents (59.7%) said they believe he or she knew the difference between a financial want (something they’d like to buy but could live without) and a financial need (something they must buy to survive). And, on average, parents reported giving children more pocket money when they believed they understood this difference (£20.40 per month versus £14.50).
The results are based on a survey of 1,019 Britsh parents with children aged 6 to 17 in October of 2019 that explored their children’s experiences with money and the ways children gained financial understanding in 2019. Parents were asked to answer with their oldest child in mind. Responses were weighted to mirror the distribution of children’s ages at the national level.
The results regarding the number of children who receive pocket money, the amount of pocket money given to children and the amount spent at Christmas by age are based on a modelling procedure to smooth the general trend of these variables, as they vary systematically with age. This estimates the most likely amount a typical child of each age is given as pocket money, or the value of their Christmas gifts, as well as the probability of them receiving pocket money at all.
For each analysis, a generalised linear model approach was used. Initially, statistical significance was established to confirm these factors systematically varied with the child’s age. To best capture the relationship between age and these variables, we tested standard linear, as well as models with higher-order polynomials to capture deviations from linearity. Only whether a child received pocket money or not required higher-order polynomials to capture the decreasing trend as age progressed past 13. A binomial model was used to model the probability of receiving pocket money, while a Gaussian model was used for the amount of pocket money and Christmas spend.
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