Finances are a family affair, according to a recent survey by American Express. In fact, a surprising seven in ten (71%) parents of children between the ages six and 16 say their children understand we are in a recession. This number suggests that talks about the current economic environment are happening at kitchen tables across the country. The survey also reveals that 91 percent of parents say they are committed to instilling lessons of financial responsibility upon their children in 2010.
The latest American Express Spending & Saving Tracker, the sixth in a monthly series, reports on consumers' views about the economy, spending and saving trends, and approach to family finances. The research sample of 506 households with children between the ages 6-16 included the general U.S. population(1), as well as two subgroups -- the affluent(2) and young professionals(3).
Not only are America's youth attuned to the country's economic downturn -- some are even internalizing a sense of responsibility for the family budget. One in five children (20%) has indicated to a parent that "maybe we shouldn't buy that due to the recession." Interestingly, kids of the affluent were most apt to suggest that a parent hold back on a particular purchase -- 31 percent.
Money Talks: Top Three Lessons from Parents to Kids
Parents are not leaving their kids to figure it out on their own. More than nine in ten (91%) parents will be focused on offering valuable financial instruction in 2010. The top lessons are as follows:
- Understanding of debt and its impact on saving and spending (30%).
- Teaching the value of a dollar through reward systems like an allowance (25%).
- The basic teaching of how money is earned and used in everyday life (21%).
"While the past few months have taught families to change some of their spending habits, it's clear that these lessons aren't beginning and ending with the adults in the family," said Pamela Codispoti, American Express senior vice president and general manager, Cardmember Services. "Parents seem to be seizing the opportunity to teach kids the ABCs of money, including using tools like allowances, to help them grasp the financial basics -- from saving to spending to management of debt."
Raising Kids' Money Management IQ
Beyond simply doling out cash, for many parents providing an allowance is part of the financial education process and another way to raise their children's money management IQ.
- Sixty-two percent of parents in the general population give their children a weekly allowance.
- Among the general population giving a weekly allowance, the average amount given is $12, or an average of $48 per month.
- Almost half (47%) of parents give an allowance with the expectation that it will be spent rather than saved.
- Twenty-three percent give an allowance for kids to spend however they please and put no restrictions on what it is for.
- Thirteen percent give an allowance for kids to spend on weekly non-essentials; i.e. movie tickets, toys, games, etc.
- Ten percent give an allowance for kids to spend on weekly essentials; i.e. gas, lunch money, etc.
- Thirty-two percent say the primary reason for giving an allowance is to reward their children for school grades or household chores.
- Eighteen percent give an allowance specifically to be deposited into their children's savings account or piggy bank.
American Express Spending & Saving Tracker research was completed online among a random sample of consumers aged 18+. A total of 506 households with children between the ages of 6 and 16 were interviewed. Interviewing was conducted by Echo Research between January 5 and January 11, 2010. Overall, the results have a margin of error of +/- 4.4 percentage points at the 95 percent level of confidence. For access to previous American Express Spending & Saving Tracker results, please visit www.americanexpress.com/aboutus.
About American Express
American Express Company (www.americanexpress.com) is a leading global payments, network and travel company founded in 1850.
(1) The research was conducted online January 5 -11, 2010 among a random sample of 506 households with children between the ages 6-16
(2) Affluent -- defined as having a minimum annual household income of $100,000.
(3) Young Professional -- defined as less than 30 years of age, having a college degree, and a minimum annual household income of $50,000.