Pocket money can make your kids poor savers

Study reveals that children who were given a weekly allowance free by their parents were less likely than those with a part-time job to put money aside

Parents, please note! Giving your kids pocket money may lead them to become financially irresponsible and poor savers, a new research has claimed.

Children who were given a weekly allowance free by their parents were less likely than those with a part-time job to put money aside, the study from Sheffield University found.

This ability to save or not save tended to remain the same in early adulthood, the researchers said.

Sarah Brown and Karl Taylor, of the Department of Economics at Sheffield University, wanted to determine how parental attitudes and help shaped spending and saving habits.

They looked at the responses 6,000 children aged between 11 and 15 gave to the British Household Panel Survey, an annual study carried out by Essex University's Institute for Social and Economic Research, The Independent reported.

Pocket money dramatically lowered the chance that a child would save. A one per cent increase in a child's allowance was associated with a 22 percentage point fall in the probability of saving.

Researchers found parental attitudes to money did not make much difference to children's behaviour, with the amount that parents saved having no impact on the savings habits of their offspring.

The exception was that parents who were generally optimistic about money tended to have children who were less likely to save.

"Our findings suggest that the amount of the allowance or pocket money that the child receives from their parents is inversely associated with the probability of saving. In contrast, earnings from part-time work are positively associated with the probability that the child saves," the authors said.

The study was presented at the annual conference of the Royal Economic Society at Royal Holloway, University of London.