Time for change

The amount of pocket money that parents shell out could dictate whether children become spendthrifts or savers

It is the advice that every cash-strapped parent has been waiting to hear - giving children too much pocket money is bad for them, according to economists.

A paper presented to the UK's Royal Economic Society concluded that overly generous allowances may lead children to become spendthrifts. Allowing them to do a paper round or paying them to do household chores, on the other hand, can set them up to become savers for life.

Sarah Brown and Karl Taylor, both professors of economics at the University of Sheffield in England, analysed responses to questions in the annual British Household Panel Survey. Now incorporated into a larger study, the survey has been conducted since 1991 by the Institute for Social and Economic Research to gauge opinion on matters as diverse as finance, relationships and religion.

But it was the interviews with children on their pocket money that proved particularly illuminating for the researchers. While most children saved some money for toys or new mobile phone accessories, 22 per cent said they spent all of it immediately. Those who received the largest amounts, without having to work for it, were most likely to spend without saving.

So how much pocket money do children get? Ask your students how much they expect to receive - and what they do with it. Do they think the amount is fair? Do they have to earn their pocket money? And would they view it differently, and make different spending choices, if they did?

A survey in the UK last year showed that the average weekly pocket money for 8- to 15-year-olds was #163;5.98, with the amount increasing as the child grew older. On average an eight-year-old received #163;4.20, going up to #163;5.78 by the age of 11 and #163;8.17 by the age of 15.

But columnist Sam Wolfson wrote in The Guardian newspaper this month that the figure is increasing. "The bank of mum and dad is forking (out) over #163;12.05 on average, going up to #163;22 in the school holidays," he says, going on to pose the question of whether children should receive pocket money at all.

"Pocket money used to be a token gesture," he explains, "but toys just kept getting better ... That kind of innovation costs."

His own creative suggestion is for children to make money by setting up licensing agreements for all the "cute films" their parents made of them when they were little: "30,000 views of you trying to ride your dog might have seemed like a laugh to Mum and Dad, but monetise that with a few ads and you could keep yourself in (soft drinks) for life".

What off-the-wall business ideas could your students come up with?


- Ask relatives how much pocket money they received as they grew up. Did the amounts change as they aged?

- Is it a good idea to give children money? Explain your answer.

- Should children have to earn their pocket money? What sort of chores or tasks could they do?

- How much pocket money would you have at the end of a year if you saved #163;1 every week? What would you do with it?

- In what ways could someone who does not understand numbers, or the value of money, be exploited or taken advantage of?

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