Young people contribute £4.89 billion to UK economy

Young people spend almost £5 billion each year in the UK
Average weekly spend for children across all ages has reached a record £13.10
On average, children receive £6.84 in pocket money each week
This is a 500% increase since 1987
Almost one in ten under-15s has made an online purchase
The most popular purchase across all age groups was confectionery.

Research commissioned by O2 Money in partnership with NatWest published today by the London School of Economics 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 worth £4.89 billion to the British economy each year ‘ twice the value of the UK toy industry. The research 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 per cent.

According to the LSE findings, the average child will spend over £6,000 between the ages of seven and fifteen, this equates to spending of £10.27 per week for seven to ten year-olds and an average of £15.25 per week for those aged between eleven and fifteen.

Fraser Campbell, Head of O2 Money said, “The research underscores the economic importance of young people. Their unprecedented spending power 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.”

This increased spending power among young people is in stark contrast to their parents, who according to recent research from the Post Office have been cutting back monthly spending across many essential items as a result of the recession, in particular, reducing expenditure on food by an average of £56 per month, on clothes by an average of £35 per month and on Petrol by £34.20 per month. This suggests that parents are protecting their children from the direct impacts of the recession, reducing their own spending habits and enabling children and teenagers to increase theirs.

The research also shows the extent to which young people are outspending their pocket money income. Whilst the average income from pocket money is £6.84 per week, across the age groups, the equivalent average spending figure is £13.18 per week. This suggests that young people are acquiring an additional £6.34 above and beyond their pocket money income each week through part-time work, gifts from family or additional household chores to improve their spending power.

Despite advances in toys and technology, the most popular purchases for children of all ages continues to be confectionery. Boys are however spending three times as much as girls on technology and computer games while girls outspend boys on clothes and shoes by 2 to 1. The research does demonstrate the increasing use of the internet by young people to buy things, particularly computer games

Dr David Kuo, Director at the popular financial website the Motley Fool ‘ Fool.co.uk, added,

“Our children and teenagers will be confronted with an alphabet soup of financial products when they become adults. It is, therefore, vital that they know the ABCs of money handling early because the financial challenges they face as they grow-up will be more complex not simpler.”

An earlier LSE Report, also commissioned by O2 Money, found that seven was the critical age for parents to start teaching their children about money management, coinciding with the first Child Trust Fund top-up. The report’s author, Dr Rajiv Prabhakar, suggests seven key areas parents need to educate their children about by seven:

Coin recognition ‘ what coins and money and how to keep money safe
Saving money ‘ knowing how to work out how long it will take to save up for something
Spending ‘ making sure you understand the difference between ‘wants’ and ‘needs’
Basic budgeting ‘ how to keep track of what you’ve spent and plan ahead
How interest works ‘ how both savings and debt can grow over time
Value of items ‘ learning the difference between expensive and valuable and how something that costs a great deal, won’t necessarily maintain its value
Bills ‘ understanding how we pay for services (like mobile phones) and knowing the cost of a text and a call

The new Load & Go card from O2 Money is a practical tool that can help teenagers from the age of 13 upwards to begin budgeting and managing their money in a more adult way. The card can be loaded with cash that can then be spent like a normal debit card, but to help keep track of spending on the go, teens are sent free real time balance alerts via text every time they spend. Load & Go also opens up the wealth of discounts and offers available online to teenagers by allowing them to make online purchases, but with the card blocked from sites categorised as selling over 18 products or services.

The O2 Money cards are now available to apply for from O2’s website. For more information, please visit www.o2.co.uk/money

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