What Induces Children to Consume (More)?
43 Pages Posted: 30 May 2019 Last revised: 5 Jan 2021
Date Written: January 4, 2021
Abstract
Based on a lab-in-the-field experiment with 246 elementary school pupils, we find that, similarly as for adults, lower interest rates and opt-in defaults make children more likely to consume immediately instead of saving; moreover, the amount of savings decreases with lower interest rates. Our analyses reveal a substantial degree of heterogeneity: while boys react more strongly to interest rate changes and girls react more strongly to defaults, children start to get susceptible to savings rewards around third grade, when they receive an allowance, and with a lower allowance; this suggests that savings behavior is learnable and malleable to a certain extent. Our findings shed new light on the development and malleability of traits related to intertemporal consumption.
Keywords: Time Preferences, Household Finance, Behavioral Finance, Experimental Finance
JEL Classification: C91, D14, D91
Suggested Citation: Suggested Citation