Allowance breakdown: How kids are spending

America's youth will command more than $21 billion in pocket money by 2010, according to one study. Here's how they're dropping their cash.
By Abby Ellin

Karen Quinn, a New York City-based author, likes to think of herself as a progressive parent. A former lawyer and businesswoman, she paints, writes books (three novels to date) and tries to avoid pushing her two kids -- Sam, 15, and his sister Schuyler, 16 -- into gender-based pigeonholes.

But when it comes to money, she finds Sam and Schuyler are spending right along gender lines.
Both drop the biggest part of their weekly allowances on food -- fast food for Sam, who gets $80 a week, and Chinese and Japanese takeout for Schuyler, who is given $120. Movies are a close second. But after that, Sam's money goes to ring tones, music and videos; Schuyler spends her money on clothes and shoes.

"It's amazing that the gender stereotypes are so consistent," says Quinn. "I don't encourage them one way or another -- they can buy whatever they want. But it's been fascinating to see how they spend the extra cash."

As youth spending continues to rise, marketers and analysts are putting more effort into figuring out just what American kids are buying with their pocket money. And the results suggest that Sam and Schuyler's spending divide is typical.

A 2004 study conducted by TNS, an international market research firm, found that 79% of boys from ages 10 to 14 spend their money on games, compared with 42% of girls -- who prefer to buy CDs, books and clothes.

Gender differences aside, U.S. kids spend the biggest chunk of change on entertainment and technology: American kids spend most of their money on games (63% of all U.S. kids), clothes (31%) and CDs (27%), according to the TNS report.

"When shopping with their parents, kids are often allowed to make choices for themselves, increasing their overall spending power," says Keith Holzmueller, vice president of TNS' Research Insights Group.

Today's kids -- even those as young as 3 -- wield an enormous amount of spending power.
According to estimates in "The Kids' Market in the U.S.," a 2006 report from market-research publisher Packaged Facts, kids aged 3 to 11 comprise a U.S. population subgroup of 36 million that had a collective $18 billion in purchasing power in 2005. The report projects that kids will command $21.4 billion in discretionary spending by 2010, with annual family expenditures on kids' products set to reach approximately $143 billion.

And as the amount of money in kids' wallets increases, it falls to parents to figure out how to teach their kids to responsibly save, budget and spend their cash.

Six-year-old Gabriella von Esmarch wanted an iPod so much she could taste it. But with no birthday or holidays on the horizon, her parents told her that if she wanted it badly enough, she could buy it by herself with money she earned doing chores around the house.

Gabriella and her mother, Gina, a high-tech consultant in San Francisco, went to the store together to see how much it cost ($89). They counted how much money Gabriella had in her piggy bank -- $60 -- and came up with a plan together.

"We then told her that if she emptied the flatware out of the dishwasher, set the dinner table, cleared her plate after dinner, made her bed and put out her clothes for school, she could earn the money for her iPod Shuffle," her mom recalls. "I really wanted her to have that pride of ownership."

Frank McKinney, a Florida real-estate developer, teaches his daughter to not only save her $1-a-week allowance but to also make interest on it.

Christine Louise Hohlbaum, an American entrepreneur currently living in Paunzhausen, Germany, is teaching her kids to earn their money and save it for things they truly want.

"In the beginning, the kids were keen on buying candy at the local store, and we allowed them to test their own financial limits and learn the value of money," Hohlbaum recalls. "They quickly learned how expensive things are. They no longer spend their money on frivolous things, but rather consider what the future might bring. They've become more discerning and are learning how to set priorities."

Recently, for example, the three of them went to a toy store. Her daughter, who is 8, bought herself a notebook for school and a necklace she really liked; Hohlbaum's 6-year-old son decided not to spend anything and save up for a very expensive toy.

"How many weeks will it take?" he asked his mother.

"If you don't spend anything, you can get it by Thanksgiving," she told him. He nodded, she was thrilled: "He's learning a sense of time, too."

[Source: MSN]