Kids boost UK economy by £5 billion a year

Research published today by the London School of Economics (LSE) uncovers, for the first time, the spending power that Britain’s children and teenagers are wielding, even during times of recession. In total, young people are now worth £4.89 billion to the British economy each year. 

The research, published by LSE and O2 Money, also demonstrates that the spending power of children has continued to increase significantly beyond the rate of inflation, meaning that in real terms, children are wealthier now than they ever have been.  In 1987, the average child received £1.18 per week and this contrasts with £6.84 in 2009, an increase of over 500%.

The average child in Britain will spend over £6,000 between the ages of seven and fifteen, an average of over £10 per week for seven to ten year-olds and more than £15 a week for 11-to-15 year-olds.

This unprecedented spending power means that these youngsters are handling more cash than any generation before them.  This is in stark contrast to their parents, who, according to recent research, have been cutting back monthly spending across many essential items such as food, petrol and clothes as a result of the recession.

While this suggests that parents are protecting their children from the direct impacts of the recession, it’s not all the work of the parents as the research shows that young people have outgoings significantly larger than their reported incomings.  Whilst their income from pocket money is £6.84 per week, across the age groups, the equivalent average spending figure is £13.18 per week, which experts believe is subsidised through part-time work, gifts from family or additional household chores to improve their spending power.

Fraser Campbell, Head of O2 Money said: “The unprecedented spending power of young people means that these youngsters are handling more cash than any generation before them.  With increased spending power however, comes increased responsibility and it is more important than ever that young people have the tools and support to guide them in making the right decisions and managing budgets from an early age.”

To help kids onto the right track from an early age, Dr Rajiv Prabhakar of the London School of Economics has compiled the following ‘Seven things you need to know about money by age seven’:

1. Coin recognition – what coins and money and how to keep money safe
2. Saving money – knowing how to work out how long it will take to save up for something
3. Spending – making sure you understand the difference between ‘wants’ and ‘needs’
4. Basic budgeting – how to keep track of what you’ve spent and plan ahead
5. Interest rates – how interest rates make money grow if left for a long time, but how they can also make debt grow
6. Value of items – learning the difference between expensive and valuable and how something that costs a great deal, won’t necessarily maintain its value
7. Bills – understanding how we pay for services (like mobile phones) and knowing the cost of a text and a call

For more information visit o2.co.uk/money.