Children’s piggy banks are paying a heavy price for the cost of living crisis after nearly a third of parents cut spending money in the past year.
The average amount going into the pockets of under-16s each week has fallen 23% to £4.99 this year, from £6.48 in 2021, according to research from lender Halifax – the lowest amount since 2001 .
The UK has the highest inflation among G7 nations, hitting a 40-year high of 9.4% in June in response to soaring food and energy prices.
Last week, the Bank of England said it expected inflation to hit 13% by October. He warned of a recession lasting more than a year as he raised interest rates for the sixth straight time last week to tame inflation.
Two-fifths of parents still give pocket money to their children and a third expect their offspring to do more at home to earn it.
Although parents have reduced their spending money, many have told the lender they are willing to make lifestyle changes to ensure they can still supplement their children’s funds.
Half of parents say they would sacrifice spending on their own hobbies, such as going to the pub or restaurant, or give up purchases such as make-up and designer items (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, head of savings at the lender, said: “As household costs continue to rise, some parents are having to make tough choices to adapt to the conditions they face, whether it’s reducing the family grocery bill, making an appointment you lover or that highly sought-after personal purchase in stores. ”
Children spend 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 the most likely to save their pocket money.
Halifax interviewed 629 parents of children aged 8 to 15 in June.
In 1987, when the moneylender undertook its first pocket money survey, children received an average of £1.17 a week. The amount remained relatively stable throughout the 1990s before doubling between 1998 and 2000. When interest rates rose, pocket money followed suit – but fell during the financial crisis from 8 £.01 in 2007 to £6.13 in 2008. It rose to £7.71 in 2019, before falling back 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 industry, financial planning is important to us – and part of that is the amount of pocket money we give to our children.
“Like others, we are feeling the brunt of rising costs, and that means changing our lifestyles to accommodate new ways of life – but we haven’t compromised our approach to giving money of pocket.”
Abrahams said: “We know that finances can worry households. Pocket money is a luxury that only some parents can provide for their children, and for many it is not an 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.