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7.4.3 London Borough of Merton Guidance on Pocket Money and Savings

SCOPE OF THIS CHAPTER

This chapter focuses on pocket money and savings for children. It is important that children are supported and enabled to have some experience of ‘budgeting’ from the earliest age possible and encouraged to have savings.

RELEVANT GUIDANCE

Share Foundation

DfE, Junior individual saving account for looked after children (2017)

GOV.UK Child Trust Fund

AMENDMENT

In May 2017 the date of the Junior individual saving account for looked after children (DfE) statutory guidance was updated. Please also note that the maximum amount that can be paid into a Junior ISA is £4128 per annum.


Contents

  1. Introduction
  2. Expectations of Foster Carers Regarding Pocket Money
  3. Savings
  4. Junior Individual Savings Accounts (ISAs) for Looked After Children
  5. What are Junior ISAs?
  6. Who can Pay Money into Junior ISAs?
  7. Which Looked After children are Eligible?
  8. Administration of the Scheme


1. Introduction

Having pocket money is good for children and young people. It gives them a sense of independence and develops their skills in deciding what to buy and what it costs. Receiving pocket money helps children and young people understand the value of money, and develop budgeting skills essential for independent life.


2. Expectations of Foster Carers Regarding Pocket Money

Pocket money should be given to children and young people for their own use and not to pay for regular entertainment, clothes or personal toiletries. This is not to say they cannot spend their pocket money on these items if they choose to do so over and above what foster carers would normally allocate from their foster care allowances.

Carers are expected to encourage older children and young people to open a personal savings account to help them manage their pocket money and other money given directly to them for birthdays and festivals. It would assist them in saving for items they wish to buy.

There should be flexibility about how pocket money is paid and be compatible with other children living in the home, taking into account the age and capacity of the child.

Primary school aged children would be expected to be paid their pocket money weekly, preferably on a set day. Older children may prefer to receive their pocket money and any other allowances given to them for personal toiletries and entertainment, monthly and paid into their personal savings account. This will depend on their maturity and should be discussed with them and their social worker.

The amount of pocket money must be clarified at the start of a placement and discussed at the placement planning meeting. The amount arrived at must be compatible with the foster carers’ birth children still living in the home and other foster children. Although we have suggested the minimum amounts for each age, setting the appropriate level should be regularly reviewed with the child’s social worker and the carers’ supervising social worker. If the child or young person is dissatisfied with the amount he or she is allocated it should be made clear how they can raise this issue and with whom.

It is recommended that an increase in pocket money is linked to the child or young person’s birthday to mark their increasing age.

The recommended age range weekly pocket money allowances are as follows:

  • 5- 10 years - £5.00;
  • 11-16 years - £10.00;
  • 16+ £20.00 - (additional amount for young person to purchase all non-essential clothing).

There can be an expectation that some contribution to family living be given by the child or young person in exchange for their pocket money such as light household chores and top ups can be earned for additional chores like other families. This is particularly important in long term placements where the child will be living as a child of the family. This will need to be discussed with the foster carers’ supervising social worker and the child’s social worker.

The rate of pocket money paid to young people should be realistic so that a smoother transition to independent living is made. A young person needs to develop budgeting skills as early as possible and the ability to live within the allowances paid to them when they become independent. This process should start in early adolescence so that false expectations of how far money will go are not built up. The rate of pocket money and other allowances paid to encourage independent living must be discussed with the young person’s social worker and the foster carers’ supervising social worker and be reflected in their Pathway Plan.

Withholding pocket money is not an acceptable sanction for children and young people and alternative acceptable sanctions should be used.

When a child or young person goes into respite care there is an expectation that the respite carer will pay the child or young person’s pocket money. If the amount is paid monthly into a savings account for a young person then some discussion will need to occur as to who is responsible for payment or part payment.

3. Savings

Foster carers and social workers must encourage all children to save regularly and all looked after children should have an account whereby savings are deposited for them on a regular basis. The Foster carer, child’s social worker and the supervising social worker should decide who would help the foster child to open an account.

The minimum amount that must be saved for each looked after child aged 5-17 is £10 per week and for any child aged 0-4 this should be £5 per week.

In most cases, accounts should be opened in the child’s name. If it is impossible to open an account in the child’s name due to lack of the child’s paperwork, the foster carer should confirm with their supervising social worker that they are opening an account in their own name for the child/young person.

When a child or young person leaves a foster placement, the account book must be provided to the supervising social worker. Where the account is in the carer’s name, this should be closed and a cheque, usually made payable to the child for the amount in the account must be returned to the supervising social worker to be held in trust for the child.

There will be situations where a young person will receive a significant amount of money under the arrangements for savings. Money placed in a savings account for a child or young person will be transferred to the young person at the age of 18. It is expected that work will have been undertaken by the foster carer and social worker with the young person prior to their 18th birthday so that they understand the most appropriate way of managing this money.

There may be some situations prior to the age of 18 where it would be appropriate for a child or young person to access money from their savings account. In exceptional circumstances, a child or young person can only access the savings account prior to their 18th birthday with the agreement of their foster carer and social worker.

4. Junior Individual Savings Accounts (ISAs) for Looked After Children

In November 2011, the Government announced a new scheme to support long-term savings for Looked After Children. Those who did not previously benefit from a Child Trust Fund (CTF), and had been Looked After for 12 months or more, received a £200 Government payment into a Junior Individual Savings Account (Junior ISA).

(See DfE, Junior individual saving account for looked after children (January 2017))


5. What are Junior ISAs?

Junior ISAs provide a tax-free way to save for under 18s. The money in a Junior ISA belongs to the child, but they can't take the money out until they are 18. They can then decide what they want to do with it. Because savings are locked into the account until the account holder's 18th birthday, Junior ISAs are for building long-term assets, rather than day-to-day savings.


6. Who can Pay Money into Junior ISAs?

Anybody can put money into a Junior ISA. The total limit for payments into Junior ISAs is £4128 in each tax year. For eligible Looked After Children, the Government will open the accounts, making a one-off initial payment of £200 (or pay this into existing accounts already held by Looked After children). Additional payments could then be made by carers, local authorities or young people themselves.

Children over the age of 16 are responsible for managing their own accounts. Once their account is opened they will be able to make decisions about how best to look after their money for themselves, though they still won't be able to access their savings until they are 18. The scheme will provide financial education to help Looked After children make the best choices about what to do with their savings.


7. Which Looked After Children are Eligible?

All children in the UK who have been Looked After continuously for 12 months or more and who were not eligible for a Child Trust Fund (see GOV.UK Child Trust Fund) (i.e. were born before 1 September 2002 or after 1 January 2011) are eligible for the scheme. This includes children who are subject to a Care Order and who are accommodated under Section 20, whether in residential care, with a foster carer or at home.

Looked After children born between 1 September 2002 and 1 January 2011 have previously received support for their long-term savings through the Child Trust Fund (CTF). Junior ISAs were designed to replace CTFs following the end of the CTF scheme. No one can hold both a CTF and a Junior ISA. With effect from 6 April 2015, funds can be transferred from a Child Trust Fund to a Junior ISA. The advantage of doing this is that interest rates for Junior ISAs may be higher than those for Child Trust Funds.


8. Administration of the Scheme

The Department for Education has contracted The Share Foundation to administer the scheme. The Share Foundation will open and manage accounts using independent selection advice while children remain Looked After. They will also seek to raise additional funding from charitable sources for distribution to the accounts, and support the financial education of Looked After Children at appropriate times so that they can understand how best to use the financial asset of their account.

End