Guess what the recession hath wrought: A little teen sobriety.
According to the just-released 2011 Teens & Money Survey from Charles Schwab & Co. (SCHW), nine out of 10 teens say they were "affected by the recession," causing major shifts in perspective that include a greater appreciation for what they have and an increased awareness of financial hardship. Most said that, as a result of the recession, they are more grateful for what they have, less likely to ask for things they want, and have a greater appreciation for their parents' hard work.
"It seems clear that the great recession has changed the mindset of teens. It has given these 'Recession Generation' youth a deeper appreciation for what they have and how hard their parents work," said Carrie Schwab-Pomerantz, senior vice president of Schwab Community Services, in a prepared statement. "This may be the silver lining to the economic downturn since it gives parents and educators an enhanced opportunity to communicate critical lessons about financial decision-making.
That sounds good, especially for parents of teens like me, who know that their favorite sentences always begin with either, "I want, I need, Can I?"
The importance of saving is one of the significant lessons that teens report they learned over the past few years. In fact, according to the survey, nearly 80% consider themselves "Super Savers," as opposed to 23% who characterize themselves as "Big Spenders." Fewer than 5% agree that "you might as well spend as much as you can today, because you never know what tomorrow will bring."
Knowledge is Power
The big question though, is whether this sobriety will also spur young people to learn more about money? The survey shows they need to.
While over three-quarters of teens today (77%) believe they are knowledgeable about money management, when probed on the practical details of personal finance, they reveal some significant gaps in understanding. Fewer teens today than in 2007 actually know how to write a check (60% today vs. 67% in 2007), balance a checkbook or check the accuracy of a bank statement (35% vs. 51%) or understand whether a check cashing service/store is good to use (25% vs. 31%), according to the survey.
Bryan Sommer, founder of Kids Money Management is hopeful. "To help quench their thirst for material goods, teens appear to have opened up to the idea that learning about money management is a potential solution to the problem," he believes.
The survey showed they are indeed interested in money topics, saying they'd like to learn things such as how income taxes work, strategies for saving money, how to budget money and how to manage a credit card. Perhaps surprisingly, teens also said they're willing to spend time in the classroom learning about money management in hopes of avoiding mistakes in the real world.
As for where they're learning their money lessons now, most said it was from the school of mom and dad. Those surveyed said parents continue to be the primary source of personal finance education for teens. A significant majority of teens (82%) say their parents have taught them the basics of money management, and 77% say their parents are great role models when it comes to money management.
However, apparently parents could do a better job of teaching and talking. Smart money management is not at the top of the chat list, falling squarely between conversations about drugs and alcohol and dating/sex, according to the survey. The top three subjects teens would like their parents to talk to them more about are how to invest money, how to establish good credit and their career aspirations.
Talking to the Kids
For parents who are unclear about how to get the money conversation started, Schwab-Pomerantz, offers this advice:
Seize opportunities. "Use daily opportunities as 'teachable moments'. For example, when you're paying bills or your mortgage -- let them see what it costs to run a household and how bills get paid and a checkbook balanced," she told DailyFinance. Furthermore,"If you give them an allowance, consider paying them only once a month to help them learn how to budget their money, she adds.
Give guidance on credit. "Teach them the right way (vs. the wrong way) to use a credit card while they're still under your roof so you can help them understand how important it is to only charge what they can afford to pay off on a monthly basis -- to avoid interest charges and other fees," says Schwab-Pomerantz.
Show and tell. She suggests showing them your 401(k) or IRA statement and talk to them about the different tools for investing. "If you show them a saving calculator, they'll see how painless it is to start accumulating a really nice nest egg if they start early on," she adds.
Just say no -- you may not get as much resistance. "I think parents can leverage this to help kids make more affordable college choices. State schools and scholarships are key to making college affordable and kids are more likely to understand this now," says Brette Sember, author of The Everything Kids Money Book.
Share your values. "It is a great time to teach your values via money. We are not our stuff. As a family we can cut down the non-essentials and still enjoy life and be together. This is a time to get back to basics," says Neale Godfrey, author of Money Doesn't Grow on Trees and chairman of the Children's Financial Network.
The Positive Lessons of the Recession
Quite frankly, "Kids are extremely smart and understand that money is tight. Personally, I have seen a bigger appreciation of money from the kids; it's not so cool to flaunt your stuff when you know your friends may be struggling," says Lori Mackey, founder of Prosperity4Kids and a youth financial expert.
Today's teens may indeed be the new "Recession Generation." Says Mackey, "Their memories will be long lasting. The financial crisis changed things drastically with how people think about money. Every child was affected by the financial crisis personally or had a close friend who was affected in one way or another."
In my house, there's no confusion. My teenage daughter knows that occasional parental perks like a trip to Miss Jessie's for a $300 hairdo and Coach shoes are history -- at least, until she can pay for them herself. Let's just say she has a new hunger for getting a job, and what money she does get, she's a little less free about spending. She has now inherited her mother's passion for the clearance rack. I broke out into a big grin the day she told me she really didn't way to buy anything that wasn't on sale, because I don't.
What's the takeaway? Mom, dad, take advantage of this period of temperance. At every appropriate moment talk that money talk. Better still, set the example. Actions speak louder than words.
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