Children are now feeling the effects of the credit crunch, with one in six parents cutting back on their pocket money.
In the last six months, around 2.2 million parents have either reduced the amount they give to their children or simply cut their allowances entirely, according to new research from finance group AXA.
Younger parents and those approaching retirement are most likely to cut spending on their children, with almost two thirds (63%) of 18-24 year old parents and two thirds (66%) of 55-64 year old parents changing the way they hand out money to children over the past six months.
Teenagers to feel the pinch
On top of reduced pocket money, parents are also cutting back on the amount of money they will lend to their kids.
The research found that teenagers are most at risk of being refused access to lending facilities, with one in ten parents of 16-18 year olds reporting that they have stopped lending money to their children altogether.
Those aged between 11-15 years are most likely to have their requests for additional funds turned down, with one in six (17%) parents saying they have cut the amount of cash available for purchases outside of their children's normal allowance.
Times are changing
"The Bank of Mum and Dad has so far been quiet on the issue of how it will deal with the effects of the credit crunch,” says AXA spokesperson Alison Green. “But now it has come out and shown teenagers have been hit hard.
"Over half of the teenagers we polled said their parents give them money if they run out and one in five knows they will get what they want if they are persistent enough. So there are plenty of young people who have got used to getting what they want, when they want it.
"But all that may change as parents find their finances stretched to breaking point for the first time in years. Parents are getting tough and kids are not going to like it."
Improve kids financial know how
Interestingly, the AXA survey found that a significant number of parents – 2.8 million – are now encouraging their children to save money, possibly in an effort to improve liquidity and reduce exposure to one-off demands for expensive items.
If you fall into this category, the good news is there are a few competitive children’s savings accounts on the market that will go a long way towards motivating your young one to start setting money aside.
The top paying account by a country mile is still the Halifax Child Regular Saver, with its whopping 10% rate. The catch is that your child will have to invest between £10 and £100 every month or they’ll be dumped into a far less competitive account.
If your child wants more flexibility in savings, there are a host of accounts out there offering rate of between 5% and 6%. View our children’s savings best buy table here.
