What age should you give your child money?
Giving pocket money to children as young as 4 or 5 years helps them start learning about the value of money and money management. For example, when children get pocket money, they have to make choices about spending or saving. And if they're saving, they'll learn about waiting for things they want.
Wunder said six is the age where kids start being able to grasp some money concepts. “This is the age children are starting to understand math at school and are able to comprehend the consequences of 'if it's gone, it's gone' and setting aside money for things they really want,” he said.
There isn't a set age when you should start giving your child pocket money – it will be different for every family. Some families start pocket money for their children from the age of 4 or 5, while others wait until 9 or 10.
Younger attorneys are more confident that younger beneficiaries should have their money — often at age thirty-five or so. Older attorneys feel otherwise, and will often recommend a final distribution age that is much later, perhaps into a beneficiary's forties.
“Gifting money in your lifetime rather than through your estate has multiple benefits," said Goldman. “The assets can appreciate for more time - which is good for your beneficiaries - and you're moving the money out of your taxable estate.
| Your kid's age | Annual costs per child |
|---|---|
| 3 to 5 years | $13,600 |
| 6 to 8 years | $13,200 |
| 9 to 11 years | $14,100 |
| 12 to 14 years | $14,000 |
| Age | Allowance |
|---|---|
| 5 years old | $5.98 |
| 6 years old | $6.50 |
| 7 years old | $6.84 |
| 8 years old | $7.42 |
And as with other major household spending categories, like health care and college, the tab for bring up kids is surging, with the financial firm finding that the average annual cost of child-rearing stood at $21,681 in 2021 — up almost 20% from 2016.
It's important for kids to learn about how to manage their money before they are teens out and about without you. Giving kids pocket money when they are young helps them to slowly build financial skills so that they are savvy about spending and saving when they naturally become more independent.
The advantages and disadvantages of allowances for kids:
Pro #4: It can give children a sense of responsibility and independence. Con #1: It can lead to children spending unnecessarily. Con #2: It can create a sense of entitlement in children. Con #3: It can be used as a tool for bribery by parents.
Why parents should not give pocket money to their children?
Firstly, it can encourage them to spend unnecessarily. Secondly, it may be difficult to fit into your household budget. Finally, it can lead to arguments if children are not given the same amount of money as their siblings.
Kirsty Ketley, a parenting specialist, and mum to a six-year-old and a 10-year-old, said: “I think you give what you can afford. In my opinion, no more than £5 a week should be sufficient for a child under 12-years-old – though it depends what they are allowed to spend their money on.”
It is important to note that capital assets given during life take on the tax basis of the previous owner, when these assets are given after death, the assets are assessed at current market value. This may cause loved ones to miss out on tax benefits, such as a step-up in basis after your death.
Set up a trust
One of the easiest ways to shield your assets is to pass them to your child through a trust. The trust can be created today if you want to give money to your child now, or it can be created in your will and go into effect after you are gone.
From a practical perspective, the grandchildren's parents are often in the best position to know how to use the money for the benefit of their children and can spend or invest it appropriately on their behalf.
Families should handle these discussions in their own way, but a good general rule would be to exercise caution in criticizing adult kids if they ask for an early inheritance. There is tremendous pressure on young people to own houses and be financially successful. Some can't see a way forward without parental help.
Pocket Money – The Benefits
Pocket money reinforces this – teaching children the benefits of saving, careful spending, and money management. Lower Risk of Adult Debt: According to the ING survey of 12,000 parents across Europe, giving children pocket money reduces the risk of them getting in to debt as adults.
Current means: Giving money to your parents makes sense if you are in a situation that allows you to budget a set amount to send them each month. If you don't have the funds, however, it's in your best interest to decline the request.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
So, kids up to 12 or 13 years old might earn up to $1 a week for each year of their age ($10, $11, $12 or $13 per week), while kids 14 and older could earn up to $2 per week per year of their age ($28 and up) depending on how many chores they complete.
How much money should a 13 year old have saved?
“A good rule to live by is to save 10 percent of what you earn, and have at least three months' worth of living expenses saved up in case of an emergency.” Once your teen has a steady job, help them set up a savings program so that at least 10 percent of earnings goes directly into their savings account.
If you're using the $1 to $2 per-year-of-age rule, then a 12-year-old should get a weekly allowance of $12 to $24. This range is consistent with the average weekly allowance that parents pay, which is $19.39.
| Age | Pocket money weekly average (2022) | Pocket money weekly average (2021) |
|---|---|---|
| 8 year old | £3.67 | £3.99 |
| 9 year old | £4.12 | £4.50 |
| 10 year old | £4.90 | £5.27 |
| 11 year old | £6.21 | £6.56 |
It is good to reward them for their good behavior and to also make them understand what is wrong and what is right. But can we use money as a reward? According to some experts, it is OK until some extant, but not always. Rewarding our kids with money has both positive and negative effects on them.
How much does raising a child cost yearly? The $288,094 figure can seem incredibly intimidating — but remember, that cost is spread out over 18 years. Taking a rough average, that's around $16,005 per year — or approximately $1,334 per month.
