What mock savings interest rate for kids pocket money?

[Scende]

Thinking of trying to incentivize the primary aged DC to save some their pocket money, but obviously savings accounts are piss poor and not an incentive!

They get £2.50 a week, and occasional holiday money. I'm thinking 10% a month (120% apr ).

This is totally lighthearted but I'm hoping to get in some important lessons, real life will be such a disappointment!

With the one DC - the one I really need to educate on finances - I think I'll not need to set any money aside...

10%! Are you taking on grown up customers?

Why do primary aged DC need to save pocket money?
Surely the life lesson is if you get £2.50 a week and want a toy that costs £10, then you can either save £2.50 for 4 weeks, or £1 for 10 weeks and get the toy. Or splurge all your money on sweets and not get it. If there's nothing they actually want to save for and there are things they want to buy now, they don't actually need to save ...

For your sake I hope they aren't too savvy on the maths (I assume they don't study compound interest in primary!). If they save everything for 5 years at that rate, that's in excess of £30k!

@UserStillatLarge

Why do primary aged DC need to save pocket money? Surely the life lesson is if you get £2.50 a week and want a toy that costs £10, then you can either save £2.50 for 4 weeks, or £1 for 10 weeks and get the toy. Or splurge all your money on sweets and not get it. If there's nothing they actually want to save for and there are things they want to buy now, they don't actually need to save ...

Exactly. That's the point of it surely?

Okay I worded it badly. Save SOME of their pocket money. Actually reading it back I did say some.

£1 saved will be ~9 pounds in a year. Rather than 2.50 spent on sweets/tat every week. £1 saved a week would, as you say, take 10 weeks to save for £10. Not really an incentive.

But I don't see what you are trying to achieve. You seem to be encouraging them to save because saving is a good habit (I don't disagree by the way). But, the incentive for saving is that you can buy something you wouldn't otherwise afford.

I think 10% interest a month as well as being unrealistic is also too abstract (and plenty of adults can't get their heads around compound interest; never mind children). IMO you'd be better to say that if they want a toy for £10, if they can save £1 for 5 weeks, you'll reward their good saving by giving them an equal amount towards said toy.

0.4% easy access.

Get them ready for the real world.

If they don’t touch it for a year, they can have 1%.

I would charge them for looking after it as I reckon that's the way things are heading

I'd keep it simple and add an extra £1 a month that they don't touch their savings or something

@StepGarlic

I'd keep it simple and add an extra £1 a month that they don't touch their savings or something

I like that

Another possibility is grandparents matching their saving. I know I would like to do that with ours

With my young teen I put £100 into an Income and Growth dividend fund within his JISA for his birthday. Every month I tell him he's earned 30-40p from it and he actually looks up from his screen and says cool. (high praise from this child)

He knows there is a significantly larger amount in a basic children's savings account his grandmother controls that earns a similar amount. Life lesson right there.

My primary children do the three pound thing. One to spend, one to save and one to donate. They usually have a small goal for the savings and will put their spend in if they want to get there more quickly.