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The average amount of pocket money given to kids has dropped sharply, as hard-pressed parents feel the pinch from the cost of living crisis.
According to Halifax (opens in new tab), which tracks pocket money in an annual index, the average weekly payout is now £4.99, a 23% fall from last year when children received £6.48, confirming that kids are also feeling the impact of the increasing cost of living.
In fact, the payout is now at its lowest level since 2001, when kids received just £2.81 on average. Five years ago, the average amount of pocket money was a hefty £7.04.
The Halifax study found that as parents and guardians adapt to soaring inflation, nearly a third of them have altered how much they’re putting into their children’s piggy banks each week. Inflation is currently running at 9.4% (opens in new tab) - a 40-year high - with the Bank of England predicting that it could surge to more than 13% later this year.
Emma Abrahams (opens in new tab), head of savings at Halifax, says: “As household costs continue to rise, some parents are having to make difficult choices as they adapt to the conditions they face - from cutting down the family grocery bill, to passing on date night, or that much-wanted personal purchase at the shops.”
However, the research also revealed that it’s not all bad news for youngsters as although parents have cut back on pocket money, they’re prepared to make changes to their lifestyles to keep their kids’ cash flowing.
For example, half would rather sacrifice spending on their own leisure activities - such as eating out or going to the cinema - to protect their kids’ pocket money. A quarter said they’d spend less on their weekly shop, while almost half said they would give up treating themselves to personal items including make-up and designer goods.
Swapping to the cheapest supermarket (opens in new tab), reducing food wastage (opens in new tab) and knowing how to make extra money (opens in new tab) can also help parents to ease the pressure on their finances as the cost of living continues to rise.
What do kids spend their pocket money on?
The research interviewed 629 parents of children aged 8-15 in June 2022, and found that 40% of parents give their kids pocket money.
Although kids have less cash this year to spend on goodies, the most common purchases were gaming and sweets (39% each), followed by toys (30%), clothing (29%), and hobbies such as books (28%).
Interestingly, only a fifth of parents (22%) say their children are most likely to save their pocket money.
How to talk to your kids if you need to reduce their pocket money
If you’ve had to reduce the amount of pocket money you give your kids, it’s a good idea to explain to them why you’ve made this decision. It will help them understand what’s happening in the world right now, and that while money may be tight at the moment, it will get better. You could explain that you have had to cut costs in other areas, to highlight that everyone in the family is playing their part to save money.
Halifax's Emma Abrahams says: “Having an open and honest conversation with your children about what you can afford to give [as pocket money] is likely to improve their understanding and relationship with finances in the future.”
Being truthful about what you can afford can also help when you have to say “no” to something that your child is asking for, like an over-priced ice-cream. Or for example if you have to cancel a subscription like Netflix and they are sad they can’t watch their favourite TV show anymore.
In fact, kids are surprisingly resilient, and they may relish the opportunity at helping you save money. For example, spotting special offers in supermarkets, thinking of free activities that can be done close to home, or using a voucher from a newspaper or printed from the internet to help pay for a special day out.
If you’re struggling with the soaring cost of living, take a look at the government’s Help for Households scheme (opens in new tab), which has special discounts and could help your money go further this summer.