Teen Spending Habits Create Unrealistic Approach to Adult Life

Teens live in the best of all worlds moneywise. Teen spending habits show that they spend a lot of money. However,  teens have few responsibilities or obligations for their spending habits.

What do teens buy?

The Piper Jaffray  25th semi-annual project “Taking Stock With Teens”  begins with an overview of teen spending by category.

teen spending

Teens don’t have regular bills, debt, loans, insurance payments, and mortgages. Consequently, they can walk into the mall with a carefree attitude about spending. But is this a good way for them to prepare for adulthood, just around the corner? What is teen spending teaching them about money management?

What do teens expect to earn as adults?

We know many teens spend without much responsibility. Furthermore,  they also have an out-of-this world expectation of their earning as adults.

According to a 2007 Schwab Survey teenage boys expect to make an average of $174,000 annually, while girls expect to earn $114,000.

The reality is that in 2014 the median household income was $53,482 and per capita 12-month income was $28,555.

Why are teens so unrealistic about money?

In today’s society kids receive money at an early age. Usually they can spend it any way they want. As they grow they have more money but little responsibility for their expenses.

Over the years kids develop free-spending habits that will be difficult to break. The most critical years are those last few years before becoming a legal adult—the teen years.

One of your responsibilities as a parent is to guide your kids through a transition to the adult world of money. You can do this by creating a semi-independent stage for your teens. Consequently, they can  assume responsibility for more of their own day-to-day expenses, such as school, transportation, and education.

Make teen spending include real expenses

You can do this by using the strategy explained in The No-Cash Allowance. What you will be doing is transferring money that you would spend to your teen to manage. This includes keeping track in their accounts and paying for the expenses on time.

As a result your teen could manage funds in high school for most of their day-to-day spending. This can include clothing, entertainment, education, extra-curricular activities, and phone expenses. Such an approach prepares teens for adult spending responsibilities.

Even though you may be providing most or all of the funding the key is to transfer responsibility to your teen to manage the money certain personal expenses. In creating such a real-world money situation, The No-Cash Allowance provides a consistent process that teens can use to learn how to manage money for real-life expenses.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school. 

Do Kids Need Cash to Learn How to Manage Money?

Do kids need cash at all?
Do kids need cash to learn financial skills?

Here’s a new question for parents to consider about allowances. Do kids need cash to learn how to manage money? Cash is the traditional way to pay allowances with kids starting their money experience with cash spending.

As we continue to increase our use of cashless spending this issue is part of the allowance discussion. Recently a mom asked me, “If I don’t use much cash, why should I give my kids a cash allowance?”

That was the same question I asked when starting my kids allowances. Because I was a credit card and check writing mom, getting cash was inconvenient. Very likely I wouldn’t have the right amount of cash on allowance day.

More importantly I risked not paying my kids allowances on time because I used very little cash. I did not want to become that unreliable parent muttering, “I’ll pay you later”.

Like most people I don’t like getting paid late (or not at all) and didn’t want my kids to never know if they would get the allowance or not. Or to have to ask repeatedly for something I promised them.

My solution was to grab paper and pencil and write their allowance as a number. That developed into a years-long allowance method that taught my kids how to manage money as a number.

A seven-year-old child who records weekly allowances as a number will make almost 900 deposits before high school graduation. This hands-on experience combined with subtracting each spending decision teaches kids the bottom-line value of their money.

Having kids keep track of their allowance with pencil and paper gives them a visual understanding that money exists as a number. Kids deposit money as a number, but have the ability to withdraw as cash with the parent acting as banker. Seeing the balance change with each money event is a learning experience in itself.

Giving the child responsibility for tracking their money relieves parents of trying to remember allowance payments and eliminates confusion about if or when allowances were paid. In her book she explains how to transition to a digital spreadsheet, savings and checking accounts, all part of the process in helping kids be prepared as adults to manage money in the digital world.

According to the 2012 MasterCard World Beyond Cash Survey, three in four Americans (73 percent) report using less cash than ten years before. A recent survey by Bankrate says that 9% don’t carry any cash at all. Of those that do, more than two-thirds carry $50 or less.

Kids see ATM withdrawals but don’t see deposits added as a number.

By 2012 consumers were visiting an ATM 7.4 times per month with the average withdrawal being $60. At the same time consumers are relying more on credit and debit cards, sometimes using their debit cards to get cash back when they shop.

Kids see swiping but don’t see debits subtracted as a number.

A report by Javelin Research showed that in-store cash sales declined 10% from $874 billion in 2012. In 2014 the company expects that cash will account for less than one-fifth (19%) for the first time ever. In a 2003/2004 Study of Consumer Payment Preferences 31% of in-store purchases were reportedly made with a debit card.

Kids don’t see transactions made without cash.

Parents get paychecks, receive tax refunds, and pay bills online using electronic payment systems. While these transactions show up routinely on banking statements, kids are not seeing that money exists as a number.  Kids also don’t understand that money can be spent only in one form or another whether it be as cash, check, debit card, credit card, or through an electronic transaction.

Today’s kids spend cash but don’t connect cash to a number because no one expects them to.  Give your kids a pencil and paper instead of cash. Let them be responsible for keeping track of their money.

In looking at the changes in the past ten years, it is reasonable to believe that the cashless trend will continue. Future advances in technology and information systems will create new and different ways to spend and receive money.

The answer to the questions, “Do kids need cash to learn to manage money?” is a resounding “no.”

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school. 

Helping parents teach their kids how to manage money as a number.