Mozo Piggy Bank Report 2021: Our kids and pocket money

Key findings from our report:

• 71% of parents got pocket money as children and that number is similar today.

• 63% of parents say they currently give pocket money to their kids.

• $10 per week (or less) is the going rate, say the majority of parents.

• Cash is still the payment method of choice, but digital payments are made by some.

• 39% of parents have opened a savings account for their child’s pocket money.

• 12% say their kids have a banking account through a school program.

• Kids’ savings account rates are low, but some still offer above 2.00%.

Introduction: Is a penny saved a penny earned?

Think back to your childhood and chances are that buying lollies at the local corner store or saving up for new toys were two things on your wishlist. They might even have been what you spent the bulk of your pocket money on.

Well some things never change, because Australian kids are still using their pocket money to buy the same old simple pleasures like lollies and toys - when they aren’t stashing it away in a piggy bank, that is.

Some differences are inevitable though, especially with the digitisation of our financial systems and the world in general. Debit cards, credit cards and even money apps are becoming common in the way children interact with money, and everything from online gaming and shopping to food delivery services are now a part of the spending patterns of kids and teenagers.

Those are just some of the insights from the 2021 Piggy Bank Report which, using nationally representative research* commissioned by Mozo, explores the way Australian children are receiving, spending and saving their pocket money, as well as the attitudes of parents and adults on children's finance.

A lesson of great value: the case for pocket money

For many Australian children, receiving an allowance or pocket money is a rite of passage. It’s often the first time they will get to interact with and make serious choices about money, and money which is actually their own.

According to Mozo’s latest survey, a large proportion of Australian adults (71%) said that they received pocket money as a child and that number is still similar today, with 63% of Australian parents reporting that they currently give pocket money to their kids (under the age of 18).

Despite its prevalence, however, pocket money remains a contentious topic. Not everyone thinks it’s a good idea and different households certainly take different approaches to administering it.

At its heart, pocket money can be a great introduction to financial education, says Mozo Spokesperson, Tom Godfrey. 

“Giving your kids pocket money in return for helping out around the house can be a great way to teach them the value of money,” he says. “It can also be a good way to introduce them to simple personal finance concepts such as saving, interest rates and the difference between credit and debit cards.

“Whichever pocket money payment method you agree with your kids, it can be a good opportunity to discuss how money works.”

Contrary to these positive lessons, questions remain around how kids should earn money. Opinions are pretty resounding on this point because 93% of Australians believe that kids should have to earn their pocket money by doing things like household chores.

So are kids really putting in the hard yards when it comes to earning an allowance, or do they just have carte blanche on their parents’ wallets?  

Our findings show that most parents give pocket money, in part, as a reward for effort. As many as 89% of parents said that their kids earned their money by helping out with household chores, tidying their rooms, washing up and walking the family dog.

On the flip side, 11% of parents said they just gave their kids money.

How much are kids pocketing?

If you’ve got a picture in your mind of parents reaching into their wallets for a crisp $50 note every week, you’re going to have to rethink things because there are very few pineapples being handed over, and even lobsters are on the rarer side (that’s 50s and 20s for those scratching their heads!).

According to our survey results, the vast majority of parents (70%) give their kids $10 or less in pocket money each week, with the most popular amount being somewhere in between the $6 and $10 mark.

What is true about that picture is the cash part of it. 

To put this into perspective, a 2020 Reserve Bank publication on cash use in Australia, cash transactions have plummeted in the last 15 years - falling from close to 75% of all transactions in 2007 to roughly 35% in 2019. 

Yet when it comes to pocket money, cash is still king. 78% of Australian parents said that their kids receive pocket money in cash, which is far above other payment methods like debit cards (15%), credit cards (6%) or digital money apps.

“While its use is certainly becoming rarer in general life, there’s seemingly no substitute for cash when it comes to pocket money,” says Godfrey.

“For younger kids in particular, being able to see, feel and interact with notes and coins is not only a huge thrill, it makes the act of receiving pocket money more realistic in a way that’s hard to replicate with digital transactions.”

Spending trends: from the humble lolly bag to UberEats

We know how kids are earning their pocket money, how much they’re getting and how they’re receiving it, but how are they actually using it? As it turns out, today’s kids aren’t just propping up the nation’s candy suppliers and toy stores.

Of the most common uses of pocket money, parents said that kids were stashing it away in a piggy bank (31%) or a savings account (29%), followed by spending it on old favourites such as toys (17%) and lollies (15%).

However, the transaction changes a bit when it comes to pocket money spent with a debit card or using a parents credit card. Though as Godfrey notes, these instances are usually tied to kids that are a little older.

Perhaps unsurprisingly, online services were the in-demand destinations for card spending, with the most popular being food delivery services like UberEats and Deliveroo (27%), streaming platforms like Netflix (26%), online shopping websites like The Iconic (26%) and video games services (25%).

Bank on saving habits, despite lower interest rates

Aussie kids aren’t just spending their pocket money, they’re also being encouraged to channel it into savings by their parents.

According to the survey results, 39% of parents have opened a savings account for their child’s pocket money and 12% said their kids had an account as part of a school banking program. A further 19% said that they hadn’t opened a dedicated account, but that their kids kept their savings in a piggy bank.

The majority of parents are also making extra contributions to their kids’ savings, with 60% of those that do, contributing $1-10 each week and 28% adding an additional $11-$20 per week.

“No matter how much money your kids are putting aside in savings each week, developing an understanding of the benefits saving can bring is one of the most important lessons to learn when it comes to managing money,” says Godfrey.

The lessons aren’t always a practical step for parents though, not when savings account interest rates aren’t what they once were. According to an analysis done as part of our 2021 National Savings Report, between February 2019 and 2021 the average ongoing savings rate in the Mozo database dropped from 1.55% to just 0.42%.

Australia’s young savers haven’t been spared either, as banks have made significant cuts to kids’ savings rates in the past few years. Godfrey says there are plenty of accounts that are more rewarding than others, however.

“Whether you choose an account with or without bonus interest conditions, there are providers in the market offering rates above 2.00% which will give your kids a better chance to grow their savings.

“Whichever account you choose for your kids, not letting them get distracted by colourful cartoon characters spruiking accounts and showing them the benefit a little research can bring is time well spent.”

Among the kids savings accounts with the highest rates at the time of publishing are CUA’s Youth eSaver, which has an ongoing rate of 2.50% and no monthly conditions, as well as Auswide Bank’s Ziggy Kids Saver (2.01%) and Australian Unity’s Kids Saver Account (2.00%) - both of which have minimum deposit requirements.

 Of the major banks, Westpac’s Bump Savings Account offers the highest rate at 0.65%, followed by the Commonwealth Bank’s Youthsaver (0.60%) and ANZ’s Progress Saver (0.40%).

Alternatively, if you’re interested in looking at some recent award-winning kids’ savings accounts, you’ll want to take a look at the 2021 Mozo Experts Choice Award recipients in the Pocket Money Saver and Pocket Money Regular Saver categories.

5 tips for pocket money success

Pocket money can be both educational and fun for kids, but as you can see it does require a little bit of thought and planning. Here are our top tips for success:

• Establish the ground rules: Before you implement a pocket money system, make sure you set up the basic rules. What will your child need to do to earn their pocket money? How much will they be paid? Which day will you pay them? Once those are set and explained, make sure you follow through and maintain consistency.

• Don’t be afraid to be firm: Speaking of consistency, if pocket money is a benefit to earn, not one which is automatically given, then you may need to withhold payment at times when the expectations you’ve set aren’t met. Don’t be shy about doing it, but make sure you’re clear as to the reasons why.

• Encourage saving and goal setting: While giving your kids the freedom to spend their own money as they please is important, you may also want to encourage saving and longer-term goal setting as well. Whether it’s a new game or piece of clothing, helping them set up a goal, showing them how long it will take and how much they’ll need to contribute could be a great lesson.

• Stick with what works for you: As our research shows, different parents give their kids varying amounts of pocket money, and the chores or tasks each parent sets will be different. There’s no one-size-fits-all solution, so do what works for your kids and your budget, and don’t worry about what other parents are doing.

• Keep the conversation going: Pocket money can be a great way to introduce money to kids, but it should just be the first chapter in an ongoing conversation you have with your children about the world of finance. If you’re looking for more inspiration, check out Moneysmart’s guide on teaching kids about money .

*Mozo conducted nationally representative research through Researchify in March 2021 in which 2,078 participants were surveyed about pocket money and kids’ banking habits.

This report was a collaboration between JP Pelosi and Tom Watson.