A new video has hit the internet to teach kids how to better manage their finances. The video comes after a study found children will earn up to £5,017 between the ages of 7 and 16 – but one in four will spend it as soon as they get it.
Researchers found pocket money, cash from relatives for birthdays and Christmas and for getting good grades means the average child can expect to collect around £444 a year – a total of around £4,000 over the nine years.
And almost half of children will earn an extra £1,017 during that time by creating a ‘business’ to make their own income by selling old belongings, cleaning neighbours’ cars and babysitting.
But many are frittering the hard-earned cash away with 49 per cent of parents admitting that while their children understand the concept of saving money, they don’t usually do it.
The study, by cloud accounting software company, Xero, which commissioned the research to mark it’s Making Cash Flow Child’s Play initiative also found almost a third of children want to run a business of their own when they grow up, with a blogger or vlogger the most popular choice.
The study, of 2,000 parents of children aged 6-16, found that from the age of seven-and-a-half, the average child will be given £16.62 in pocket money – a total of more than £199 a year or around £1,695 up to the age of 16.
A further £66 is received in birthday money from friends and relatives each year, while an average of £67 is handed over every Christmas in cash.
Gifts of money at Easter amount to £32 a year while other cash handed over from loved ones adds a further £58 to the annual total.
Good grades or reports during the 9 school years also sees the average child given an annual £33.
On top of this, an enterprising 49 per cent of children have tried to make their own money by selling unwanted belongings or doing odd jobs for family and friends, earning an extra £113 per year.
But while kids are clearly savvy when it comes to earning money, it seems they aren’t so shrewd when it comes to saving their earnings, with just one in twenty putting it into a savings account.
With poor cash flow management cited as the reason why two thirds of small businesses (65 percent) fail in the first five years of trading, and 27 percent of small business owners admitting they don’t keep track of the time and materials spent on a client’s assignment, Xero is calling for small business owners of the future to be taught basic accounting skills so these issues can become a thing of the past.
The Making Cash Flow Child’s Play initiative, supported by consumer champion, BBC Dragon and mum of four, Sarah Willingham, launches with a short film led by a ‘child accountant’ teaching some of the cash flow fundamentals to the entrepreneurs of the future.
Sarah Willingham said: “The small business economy is flourishing, and it’s more important than ever that the 5.4 million small businesses (SMBs) in the UK are set up to succeed.
“And as a mother of four, I think it’s essential that we teach children about the importance of good budgeting and the basic principles of sound money management from an early age to set them up for the future.”
Xero’s Director, Small Business, Darren Upson added: “It’s great to see so many kids in the UK aspire to be their own boss in the future.
“Their digital mindset, ingrained from growing up in a technology rich environment will cascade through to the workplace and will benefit all types of business, helping evolve traditional businesses into the modern era.
“With the right tools and habits, managing cash flow can be so easy – whether you’re a business owner of today or an aspiring business leader of tomorrow.”
Top 10 ways kids make extra cash:
1. Selling old toys/belongings on eBay
2. Selling things at school
3. Cleaning neighbours’ cars
4. Doing a paper round
5. Mowing/watering neighbours’ gardens
7. Saturday job
8. Cleaning for neighbours/relatives
9. Walking dogs
10. Charging for technical support
The average child receives:
Pocket money – £16.62 per month (from the age of 7.5) total of £1,695.24 between 7.5 and 16
Per year (between ages of 7 and 16):
Getting good grades £33.17 (£298.53 from year 3 -year 11)
Birthday money £66.24 (£596.16 from 7-16)
Christmas money £66.71 (£600.39 from 7-16)
Money from grandparents or other relatives £57.94 (£521.46 from 7-16)
Easter money £32.04 (£288.36 from 7-16)
Total received from 7-16-years-old: £4000.14
49 per cent will also ‘earn’ £113 a year from a side business (£1,017 from 7-16)