The preoccupied parent: How financial concerns affect child investment choices

We examine the hypothesis that low parental investments in children may be a consequence of the adverse cognitive effects of poverty: financial worries preoccupy low-income parents with immediate concerns, shifting their attention away from stimulating parenting tasks. We test this hypothesis in an online experiment studying the purchase decisions of UK parents, including their responsiveness to financial subsidies for child development products. Both low and higher-income parents respond to a subsidy on such products, increasing their demands. However, when primed with financial worries under the same budget, low-income parents respond less to the subsidy, prioritizing instead the purchase of products addressing immediate household needs. This lower responsiveness to subsidies appears to be driven by worried parents further away from their last payday. Stronger safety nets and better alignment of financial subsidies to payday cycles may help achieve more investment and better child outcomes in poorer families.