Children’s piggy banks are paying a high price for the cost of living crisis after almost a third of parents cut back on pocket money during the last year.
The average amount that is going into the pockets of under-16s each week has dropped by 23% to £4.99 this year from £6.48 in 2021, according to research from the lender Halifax – the lowest amount since 2001.
The UK has the highest inflation among G7 countries, with it reaching a 40-year high of 9.4% in June in response to soaring food and energy costs.
Last week the Bank of England said it expected inflation to rise to 13% by October. It warned of a recession lasting longer than a year, as it raised interest rates for a sixth consecutive time last week to tame inflation.
Two-fifths of parents are still giving pocket money to their children and a third of them are expecting their offspring to do more around the house to earn it.
While parents have reduced pocket money, many told the lender they were prepared to make changes to their lifestyles to make sure they can still top up their children’s funds.
Half of parents say they would sacrifice spending on their own leisure, such as going to the pub or eating out, or forgo purchases such as makeup and designer goods (45%). Just over two-fifths said they would stop spending on their own hobbies, and a quarter would spend less on the weekly supermarket shop.
Emma Abrahams, the lender’s head of savings, said: “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.”
Children are spending their pocket money on video games and sweets (both at 39%), followed by toys (30%), clothes (29%) and hobbies, for example books (28%).
Only a fifth of parents (22%) say their children are most likely to save their pocket money.
Halifax interviewed 629 parents of children aged eight to 15 in June.
In 1987, when the lender undertook its first pocket money survey, children received an average of £1.17 each week. The amount remained relatively stable throughout the 90s before doubling between 1998 and 2000. As interest rates rose, pocket money followed suit – but dropped during the financial crisis, from £8.01 in 2007 to £6.13 in 2008. It rose to £7.71 by 2019, before falling back again during the pandemic to £7.55 in 2020 and £6.48 in 2021.
Chris Payne, father of a six-year-old boy and triplets (four-year-old girls), said: “As a parent of four and working full-time in the emergency services sector, financial planning is important to us – and part of this is how much pocket money we give to our kids.
“Like others, we are experiencing the brunt of rising costs, and this means tweaking our lifestyles to accommodate new ways of living – but we haven’t compromised our approach to giving pocket money.”
Abrahams said: “We know finances can cause concern for households. Pocket money is a luxury that only some parents are able to offer their children and, for many, it’s not a feasible option. Having an open and honest conversation with your children about what you can afford to give is likely to improve their understanding and relationship with finances in the future.”