Pocket Money for Young Children: When to Start, How Much and How to Make It Teach

Pocket money, or an allowance, is the first time most children hold money that is truly theirs. That's what makes it such a good teacher. A few coins a week can teach waiting, choosing and saving better than any explanation, because the choices are real.

Money has been close to my heart since my dad taught me to save as a boy, and investing has become a passion of mine. This is how we approach pocket money at home, why I believe it's worth starting early, and what official guidance says.

Why start so early

Why bother with jars and saving goals at five? Because the habits behind money are the habits behind a good life with it: saving, being patient, waiting for something better instead of having something now. And because of compounding: money that grows, and then the growth grows too. Compounding needs only two things, something put aside and time, and a child has more time than anyone.

I believe it matters more now than ever. With AI, nobody knows how work will change over our children's lifetimes. If more of the work is done by machines, owning a small piece of the companies behind them, or simply a small share of your own country's economy through an index fund, may matter almost as much as a salary. Investing even small amounts, starting early, is something every family can begin to teach today.

What $2 a week from age four can become

Imagine a girl born in 1985. When she's four, in 1989, her parents put $10 into a fund that follows the S&P 500, 500 of the largest companies in the US, and keep adding:

• $2 a week from age 4 to 14,
• $10 a week from 14 to 24,
• $50 a week from 24 on.

Today she's 41. The $1,050 put in as a child, mostly $2 at a time, is worth about 30 times what went in. The $46,350 she put in as an adult is worth about four times as much. Same market, same person: the difference is time.

It wasn't a smooth ride. In 2008 the market fell by more than a third, and at 24 her savings were worth only a little more than she had put in. What paid off was the habit pocket money teaches: keep going, and wait.

How we worked it out: each year's S&P 500 return with dividends reinvested (from Aswath Damodaran at NYU Stern; about 11.6% for 2026 up to the end of October), money added every week, no fees or taxes. SPY, the best-known S&P 500 fund, only started in 1993; before that, index funds that followed the S&P 500 already existed. Past returns don't promise future ones, and this isn't financial advice: it's why we believe starting early matters.

Pocket money is where all of this begins: a jar, a goal, and finding out that waiting pays.

When to start

There's no official age. What matters is whether your child is starting to understand that money buys things and that you can run out. For many children that's somewhere around four to six.

Before that, money is mostly a game, and that's fine: the US Consumer Financial Protection Bureau notes that children aged 3 to 5 are usually too young to understand abstract money ideas. What they can learn at that age are the habits underneath: patience, keeping going, and noticing trade-offs, like time or a treat now against something better later. Our guide to teaching kids about money has games for that stage, like the ant and the grasshopper and "one sticker now or two after lunch".

A good sign your child is ready: they ask to buy something, and they can count a few coins. Our guide to early maths at home helps with the counting.

How much

There's no right amount, and official guidance doesn't give one. Three questions help more than any figure:

1. What will it be for? If pocket money is for small treats and toys, the amount only needs to cover those, slowly. If it replaces things you'd buy anyway, it can be a bit more.
2. Can they save up for something in a few weeks? The amount should make a small toy reachable in two to six weeks of saving. Much longer and a young child gives up; much shorter and there's nothing to wait for.
3. Can you keep it up? A small amount paid every week teaches more than a big amount paid sometimes.

Some families use a simple rule, like a fixed amount per year of age, rising on each birthday. It's easy to remember and it grows with the child. Whatever you choose, coins and notes your child can hold work better than a number on a screen at this age.

Chores: linked or not?

Families disagree, and both approaches can work.

• A basic amount, no strings. Pocket money is for learning to manage money, and helping at home is just part of family life. This keeps the money lesson separate from arguments about tidying up.
• Extra for extra jobs. On top of the basic amount, a child can earn a little more for bigger jobs, like washing the car. This teaches that money comes from work. The CFPB puts it simply for school-age children: you can earn money through an allowance or by doing jobs.

What tends not to work is taking pocket money away as a punishment for something unrelated. It turns a money lesson into a behaviour lesson, and the money lesson gets lost.

Turn it into a saving habit

This is where pocket money earns its keep.

• Jars your child can see. One for spending soon, one for saving for something bigger. Older children can add a third for giving. Split each week's money between them.
• A goal with a picture. Stick a picture of what they're saving for on the jar, and mark progress on it each week.
• Let them make mistakes. If they spend it all on something that breaks the next day, don't rescue them. The disappointment teaches more than anything you could say, and it costs little at this age.
• A family "bank". Offer a small bonus on money left in the saving jar for a month. It's a first taste of interest, and of why waiting pays.
• Talk about your own choices. "We're not buying that today because we're saving for the holiday."

By age

• 3 to 4: money as play: a toy shop, counting coins, waiting games. No pocket money needed yet.
• 5 to 6: a small, regular amount; two jars; saving up for something within a few weeks.
• 7 and up: a bigger goal over months, a "bank" bonus for saving, maybe extra for bigger jobs.

Where Penny helps

Money is one of the most useful things a child can learn, and one of the least taught: few schools get to it in the early years. We're building Tiny Hands Learn: Money, free for every family, where Penny the pig teaches saving, waiting for something better and where money comes from, through games, short videos and stories. You can try a one-minute game with Penny today.

Questions parents ask

What age should a child get pocket money?

There's no official age. Many families start around four to six, when a child understands that money buys things and can count a few coins.

Why teach children about money so young?

Because the habits behind money, like saving, patience and waiting for something better, start forming early, and because time is what makes savings grow. In our example, $1,050 put aside between ages 4 and 14 grew to about $31,000 by age 41.

Should pocket money be linked to chores?

Either way can work. Many families give a basic amount with no strings, and a little extra for bigger jobs.

How do I teach my child to save their pocket money?

Use a clear jar for saving, a picture of the goal, and an amount that makes the goal reachable in a few weeks. Then let them choose, and live with the choice.