The teenage years are filled with firsts. From their first summer jobs to first cars, teens know how to spend money but do they know the first thing about saving money? Capital One and ING DIRECT USA, a direct bank, recently sought to uncover teen spending and saving habits in a survey of 12- to 17-year-olds and their parents.
The Truth about Teens and Money
When it comes to their finances, only 17 percent of teens claim they know a lot about how to manage money, found the survey. Perhaps the most alarming response is the lack of clarity between debit and credit.
- One in four (24 percent) teens incorrectly think that using a debit card is borrowing the bank’s money rather than using their own money.
- The most important lessons teens want to know when learning how to manage money are learning to save (35 percent) and understanding how to budget (28 percent).
- Overall, 44 percent of teens get the majority of their money from a job outside of their home, while slightly less than a third (30 percent) get it from allowance or helping around the house.
- For teen girls, 50 percent obtain the majority of their money through a part-time job outside of their home (babysitting, paper route, etc.) compared to 38 percent of teen boys.
Having “The Talk”
Parents have their plates full when it comes to shaping their children into responsible young adults and conversations about delicate topics can be tough. The survey revealed that:
- Parents are more prepared to talk to their kids about drugs and alcohol (35 percent) than finances (26 percent).
- More than half of teens (52 percent) learn the most about money and financial topics at home.
- Sadly, more than one in ten (11.8 percent) teens said no one at home helps them manage their money.
- Close to 15 percent of older teens ages 15 to 17 said no one at home helps them manage their money.
“A parent’s role in setting a financial example for their children is critical,” commented Jim Kelly, head of Direct Bank, ING DIRECT USA. “Yet many parents feel unprepared to set an example and that is why we’ve developed tools such as Planet Orange and the MONEY account to help get the conversation and habits started as early as possible.”
Parenting in Today’s Economy
While tough economic times can sometimes equal tough financial decisions, the parents of teens surveyed attempt to make the best decisions they can in the circumstances.
- More than half of parents surveyed (51 percent) would not consider withdrawing money from savings they have set aside for their child.
- 40 percent have sacrificed contributions to their child’s savings during the current economic downturn.
- Close to one in five parents (19 percent) have withdrawn money from savings they have set aside for their child.
- Less than one-third of parents (31 percent) think they are an excellent financial role model for their children.
- One in five (21 percent) parents rate themselves as fair or poor role models.
- Just one in 10 (9.6 percent) teens describes their parents as poor or fair financial role models.
Building the Financial Education Toolbox
Here are a few tips to kick off the budget and savings discussion with teens:
- Turn errands into money lessons: Couponing is all the rage right now so use the weekly trip to the grocery store as a practical way of explaining spending and saving. Make a game out of finding the most affordable cereal or competing for a bigger savings at the register than the last trip to the store.
- Keep it simple: Don’t overcomplicate the conversation with technical jargon or turn it into an economics lecture. Talk about saving for rainy day items such as a trip to the movies or a new video game – make it relevant and it will resonant even more.
- Practice what you preach: Whether you’re a savings savant or cash-strapped mom or dad, have candid talks about your financial successes and missteps. Make it a priority as a family to be more mindful of spending less than what is earned and celebrate how money is grown over time.
For more tips and tools, check out BankIt.com, a financial education program developed collaboratively by Capital One and Search Institute.
The national phone survey was conducted within the United States by TNS on behalf of ING DIRECT USA in March 2012 among 1,000 teens age 12-17 and included 558 parents of children 17 and under. The findings were released Wednesday, July 11.
Photo courtesy: ING DIRECT