Giving children pocket money to help them understand economic principles in personal budget management and reduce gender gaps in financial matters: Does it work?

Abstract

AbstractMost children who receive pocket money have no idea how to manage it as they have never been taught financial literacy. However, the existing literature does not focus on the level of financial education and guidance children receive or the degree to which parents supervise their children in making decisions about pocket money. This research aims to fill the gap. This study focuses on the financial decisions of children aged 12–16, comparing 105 parent–child dyads in which the child gets pocket money to 101 parent–child dyads in which the child does not get pocket money. The study's results demonstrate that, unlike previous studies, getting pocket money has no impact on children's excessive consumption of fast food and sweets, whereas society's impact on children's consumer decisions increases when they are given pocket money. In contrast, if children believe their parents make good financial decisions and if parents share the household financial decisions with them, children will make better financial decisions themselves. In addition, consistent with previous research, girls – more than boys – see themselves as influenced by their friends in the context of consumer decisions and perceive of themselves as excessive consumers. Implications for parents as well as government policy are discussed.