Until recently, few businesses thought of children as independent consumers. In fact, the first estimate of their buying power ($2 billion) did not appear until 1968.
The current crop of kids has changed all that. There are 33 million children between the ages of 4 and 12 in the United States, and their number is rising. Today children are viewed by businesses as independent customers. But just how much clout do children actually have? Almost $9 billion worth, according to a nationally representative sample of children aged 4 to 12 surveyed in 1989. This figure is up from $4.7 billion in 1984, an 83 percent increase.
Children's income averaged $4.42 a week, or $229.84 a year in 1989. The most rapid growth in income has occurred among children aged 5, 6, 7 and 12. Today's children receive more money at a younger age than children in the past, and their incomes rise markedly when they enter elementary and middle school.
Allowances have increased from 49 percent to 53 percent of children's total income. About half of children received an allowance in 1984, compared with 60 percent last year.
Children aged 4 to 12 receive 15 percent of their money as gifts from their parents and 15 percent from household work. Twelve percent of their income comes from work they do outside the home, and 5 percent is gifts from relatives or friends. Overall, 83 percent of children's money comes from home and 17 percent from outside. Banking on the Next Generation Today's children are better savers than the children of 1984. They saved a total of over $2.6 billion in 1989, or 30.5 percent of their income. This figure -- over four times the adult rate -- is not unnoticed by bankers.
The biggest savers are 4-year-olds, who save over half their income. As children grow older, their saving rate declines rapidly: to 37 percent by age 5; 27 percent at age 6; and finally to a low of 17 percent at age 7. Then the rate moves up and levels out at about 30 percent for children aged 9 to 12.
The overall saving rate of 30.5 percent is the highest recorded for children in two decades. Between 1968 and 1984, the saving rate was fairly steady at around 15 percent, so the doubling of the rate in five years is remarkable. It could be that parents are providing children with more money, and children are both spending more and saving more. Or children might be learning the virtue of savings. As more parents work, they may be encouraging their children to become more self-reliant by managing money at an earlier age.
American children spent just over $6 billion in 1989, 41 percent more than in 1984. Four-year-olds spend just 83 cents a week, but 6-year-olds spend $2.59 per week. By age 12, spending rises to an average of $6.90 a week.
These amounts are small in comparison with what adults spend, but all of the money is discretionary. Around the age of 8, children learn to spend money for future purchases. Children spent more than $1 billion during the 1989 Christmas selling season, and at least half of that came from their savings.
Preschoolers often have trouble understanding money and prices. Few 4-year-olds understand sales tax, for example. But by the time they complete the third grade, most children can handle money confidently. Some sixth-graders even have checking accounts and credit cards. Where Does the Money Go? Children aged 4 to 12 spend about $2 billion on candy, soft drinks, frozen desserts, fruits and other snacks such as potato chips, popcorn and peanuts. They spend $1.9 billion on toys, games and crafts, and almost $700 million a year on clothing. The clothes children buy with their own money are often particular styles or brands that parents consider too expensive. They also spend over $600 million on movies, spectator sports and live entertainment (including snacks and souvenirs). Owners of video arcades and marketers of video games can count on $486 million a year.
Of the remaining $264 million, about half goes to electronic equipment such as TV sets, portable stereos, telephones and video game sets. The rest is spent on fragrances and cosmetics, cassettes and compact discs, movie rentals, stamp and coin collections and some mail-order purchases.
Children visit stores on their own before they get into grade school. Half of 6-year-olds buy from at least one store a week. About three-quarters of 7-to-9-year-olds make independent trips to stores, visiting an average of two stores a week. By age 10, all children buy things on their own at least twice a week and in at least two different stores.
Children also make independent purchases when they are with their parents. In fact, the independent purchases of younger children are usually educational experiences led by parents. By age 8, all children make some independent purchases while shopping with their parents. By age 9, children often buy from three different stores a week while with their parents. A 10-year-old averages about five visits a week to five different stores, or 250 store visits a year.
We asked 112 children aged 8 to 10 to "draw what comes to your mind when you think about going shopping." Among the results: All the children drew themselves shopping for their own needs. Sixty percent also drew themselves as shoppers for their households. Shopping means buying, not window-shopping or accompanying a parent shopping. Eighty-two percent of the children drew themselves actually reaching for the products and 11 percent drew themselves heading out the door with sacks full of goods. Shopping means going to a supermarket (40 percent drew this), a specialty store such as a clothing or toy store (26 percent), a discount house (13 percent), department store (12 percent), shopping mall (6 percent) or convenience store (3 percent). The children did not draw themselves going to drugstores, variety stores or restaurants. Children drew themselves buying 38 categories of goods, 58 percent of which were foods. The top four foods were fruits, vegetables, soft drinks and cereal. Candy and gum were far down the list. The top four non-food categories were toys, clothing, video games and cosmetics/toiletries. Shopping meant buying a specific brand in 20 of the 38 categories. All of the food brands and 90 percent of the non-food brands drawn are also marketed to children. (One third-grader correctly spelled the brand name "Esprit," but misspelled the words "shirts" and "skirts.") Only 16 percent of children drew a price, and in every case the price was associated with non-food. Almost 70 percent of the children in the drawing were smiling, and 42 percent of the adults were smiling too. Three-fourths of the children drew themselves shopping alone. None of the children drew themselves shopping with their fathers.
James McNeal is a professor of marketing at Texas A&M University. This article is excerpted from the September issue of American Demographics,
1990 American Demographics Inc.