What Induces Children to Consume (More)?

Abstract

Based on an experiment with 246 elementary school pupils, we find that, similarly as for adults, lower interest rates, longer savings horizons, and opt-in defaults make children more likely to consume instead of saving; moreover, the amount of savings decreases with lower interest rates and longer time horizons. While boys react more strongly to interest rates and time horizons and girls react more strongly to defaults, children start to get susceptible to savings rewards and horizons 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.