How to save pocket money


Let’s take a look at the following options of where you can save your pocket money:
In your piggy bank
This will mean that you receive your pocket money in cash and that you have a piggy bank, envelope or wallet where you put that cash to use it from during the month.

What’s the advantages of saving in a piggy bank:
It can be convenient to have your cash with you.
You don’t pay any banking fees.
If you get cash you can immediately deposit it into your piggy bank.
What’s the disadvantages of a piggy bank:

You don’t earn interest, which actually means that in the long run the money you saved is worth less.
It could be difficult to track your spending and savings.

You might be tempted to use more money if you keep everything with you.
Tips:

You can still save. Use a separate envelope/piggy bank to keep the money you don’t want to spend and save towards a bigger goal.
Only put the amount that you want to spend in your wallet if you go on an outing 

In a bank account
This will mean that you either receive your pocket money in cash and deposit the amount you want to save into a bank account, or that you deposit everything and spend from and save in that account or that your parents do a direct transfer into your account and you spend from and save in that account.

What’s the advantage of saving in a bank account?

  • It’s not always safe to carry cash with you and if you have a bank account you can pay with your card or do online banking.
  • You can earn interest on your savings.

What are the disadvantages of a bank account?

  • You might have to pay transaction and administrative fees.
  • You could fall victim to phishing schemes where people try to get your banking details. Make sure your parents/bank talk you through the warning signs.

Tips:

  • Bank accounts could have different pockets so that you can save some money in the one and earn a better interest, while spending from the other pocket. This could prevent you from impulsively spending the money you wanted to save.
  • You could also ask your parents to give you a portion of your pocket money in cash and transfer the amount that you wanted to save directly into your bank account.
  • Compare different bank accounts to find the one that offers you exactly what you need.

With your parents
You can save with your parents by either keeping all of your pocket money with them and getting it from them as and when you need it or you can only keep the part of your pocket money that you want to save for a long term goal with them.

What’s the advantages of saving with your parents?

  • It can help keep you accountable for saving a certain amount each month.
  • You can learn some valuable money lessons from them when you discuss with them what you want to spend your money on.

What are the disadvantages of saving with your parents?

  • You might not always be with them when you want to make a withdrawal.
  • Your parents won’t give you interest unless you contract this with them.

Tips when saving with your parents:
You will have to keep track of how much you save with your parents. You can explore some of the pocket money manager apps to see if there is anything that you and your parents want to use to manage the money.
You can negotiate earning interest with your parents.  

In an investment
In addition to having a bank account or other system where you keep the money you use throughout the month, you might want to save some money through investments.

What’s the advantage of making investments?

  • It has the potential to earn you more than the regular interest you get from a bank account.
  • You can learn a lot from this exercise, preparing you for financial wellness someday.
  • What’s the disadvantages of investments:
  • You can lose some money if it’s invested in the wrong way or the markets take a dip.

Tips:
You will need the help of your parents and a financial advisor to make the right decision. If you are too young to make the investment in your name it might have to be in your parent’s name.  

You might want to read more about how much pocket money kids should get.