Media Briefings

Parents’ Spending On Their Children: New Survey Evidence

  • Published Date: August 2011

There is no easy answer to the question ‘how much do parents spend on their children?’ using conventional data. But based on a novel Danish expenditure survey, which asks respondents directly about how they allocate spending to individual household members, a new study finds that the average Danish family allocates 44% of its total spending on non-food and non-durable items to children.

But the research by Dr Jens Bonke and Professor Martin Browning, published in the August 2011 issue of the Economic Journal, also finds considerable variation across households, which largely depends on the ages and numbers of children.

Spending is typically higher for older children: expenditures on an only child aged 15-17 are three times those for a child aged 0-4. And as might be expected, spending increases with the number of children, though there are clear ‘economies of scale’ in a bigger family.

For most people spending on children is of great interest either because they plan to have a child or because they want to compare their own costs with those of other families. Information on spending on children is also an important contribution to policy debates, such as determining the level of child benefits, of child support payments by non-custodial parents in the event of divorce and of foster care payments.

Table 1 shows the assignment of non-food expenditures across household members among couples with children, which the researchers have found by analysing the survey data. Not surprisingly, alcohol and tobacco are mostly assigned to the parents, while some expenditures on clothing, recreation and personal services also go to the children.

Taken as a percentage of all assignable goods, respondents allocate about one half of expenditures to individuals – parents and children – and one half to the household. It should be noted, however, that in comparison with net household income, only about 12% of the latter is assigned.

Table 1: The assignment of expenditures on parents and children in households with children (in 2010 thousands of euros)

 

Household

Parents

Children

Alcohol, tobacco, eating out

1.58

0.77

0.15

Clothing

0.40

1.30

1.30

Household services

0.83

0.09

0.04

Transport

1.86

0.61

0.09

Recreation

1.82

0.60

0.83

Personal services

0.49

0.67

0.37

Total

7.00

4.02

2.79

The main findings are that the average Danish family allocates 44% of total assignable spending on non-food non-durables to children. The specific amount depends on the ages and numbers of children.

Expenditures on an only child aged 15-17 are three times those for a child aged 0-4. A second child increases expenditure by 41% and a third child increases expenditure by a further 22%. This implies that there are significant ‘scale effects’ in spending on children.

The study also finds that expenditures on children and adults increase with net household income. Hence, for children spending on private goods increases with 4.3% and for adults with 7.3% per 10% increase in household income.

Individual characteristics also matter for the spending on children. If the mother has had a child by a previous partner, this reduces child expenditures by 24% (there is no effect for the father having had previous children).

Finally, increasing the wife’s share of gross income (holding total household income constant) reduces expenditures on both children and adults. The fall in spending on children is surprising but the fall for adults is larger – minus 18% and minus 27%, respectively.

These findings do not take into consideration the fact that parents shift resources between times when they do not have children and times when there are children present in the household.

First, parents save for children before they are born, ‘dissave’ when children are present and start saving again when they leave home. Second, having children leads to a reallocation of a given total expenditure between goods: expenditures on alcohol, tobacco, food out and leisure go down, while expenditures on baby goods go up.

ENDS

Notes for editors: ‘Spending on Children: Direct Survey Evidence’ by Jens Bonke and Martin Browning is published in the August 2011 issue of the Economic Journal.

Jens Bonke is at the Rockwell Foundation Research Unit, Copenhagen. Martin Browning is at Oxford University.

For further information: contact Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com); Jens Bonke via email: jb@rff.dk; or Martin Browning via email: martin.browning@economics.ox.ac.uk