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American Demographics, Dec, 1999

Talk about a trickle-down economy. As grown-ups cash in on the '90s boom, kids are profiting as well. Their allowances are soaring, and so is their interest in all things monetary.

When Jay Zagorsky embarked on a study of how much allowance today's youngsters get from their parents, he had a hunch it was a lot more than the typical buck-a-week of his generation. One clue loomed just down the street at the local high school in his Boston neighborhood: a parking lot filled with shimmering Volvos and BMWs, all driven by students, even though the school and neighborhood were designed so students could walk to school.

But even Zagorsky, a research scientist for Ohio State University's Center for Human Resource Research, was taken aback at the results of his allowance study, which he coauthored with Jennifer Hering.

Data gleaned from the latest National Longitudinal Survey of Youth 1997 confirm Zagorsky's suspicions that many of today's youngsters are living the lush life. The U.S. Department of Labor-sponsored survey of 8,984 youngsters aged 12 to 16 as of December, 1996, indicates that the median amount of allowance and cash kids get from parents and guardians is $50 a week. And about 40 percent of all American youngsters in that age bracket - some 10 million - receive an allowance and regular handouts from their parents. Translation: About $1 billion a week, according to NLSY '97 data, to spend on everything from snacks to clothes to cars. Since most teens have few bills or financial obligations, most if not all of that billion-a-week is discretionary income. Marketers and retailers hoping for strong holiday sales numbers may want to bear that in mind.

"Retailers are becoming increasingly competitive for [teen] business, and one key to understanding this group of big spenders is to find out where the money comes from," says Zagorsky, who adds he was shocked by the $50-a-week figure. "I have a fourth-grader and a fifth-grader and I don't give them anywhere near that much."

It should be noted that for purposes of the study, "allowance" was broadly defined: it included a weekly sum, usually linked to chores, and also cash handouts for trips to the movies or ice skating and such. Zagorsky cautions that the amounts were self-reported by the teens, which means that they may be slightly elevated, perhaps to impress the interviewers. However, the overall findings do appear to be in line with similar studies. Zagorsky found that overall, teens in the Pacific and Mountain regions are slightly more likely to get an allowance and handouts than teens in the South and South Atlantic. Teens in the East North Central region receive the most (a median of $75 a week), compared to teens in the East South Central ($30 a week) and South Atlantic ($38).

Not surprisingly, the amount teens get from their parents or guardians rises as household income increases. The median allowances for teens who live in households with annual incomes in the $30,000-to-$40,000 range is $21 a week, whereas for teens in households with $100,000-plus annual incomes, it's $175 a week.

That's why Southern kids are getting the least, Zagorsky says. The South claims the lowest median household income of any region in the United States, as well as the largest number of people with household incomes of $5,000 or less - 7 million. By comparison, there are only about 3 million households in the Northeast with incomes that low. "There are pockets of the South that tend to be rich, especially around the Atlanta area. But then there is Mississippi and the Delta. Places like Arkansas and Alabama pull [median incomes] down, too."

The high median allowances in the East North Central region, on the other hand, can be attributed to the fact that there are a large number of sizable Midwestern cities that don't have huge pockets of poverty, places like Cleveland and Cincinnati, that are much more homogeneous than, say, Los Angeles or New York, Zagorsky explains. "So the income gap just isn't that large."

Religious affiliation appears to have little effect on the percentage of teens who get allowance; it's about half, regardless of faith. There are, however, some notable differences in the amounts received. Muslim teens, for instance, get $23 per week, while their Protestant and Mormon counterparts get more than twice that - $55.

It's also worth pointing out, Zagorsky says, that nearly two-thirds of those teens who get allowance get it weekly. So they have a steady source of cash on hand. "There's a huge amount of disposable income here," he says. "If you compare the ratio of disposable income to income...adults sometimes have very little. These teens have relatively low debt. They shouldn't be ignored."

Zagorsky's findings only add to the eye-catching dossier of demographics and studies that continue to show that today's generation of youngsters is bigger, richer, more consumer-oriented, and probably more sophisticated about money matters than any of their predecessors. There are some 31 million 12-to-19-year-olds in the United States. By 2010, there will be 34 million, eclipsing the previous high of 33 million at the peak of the baby boom.