Teens are notorious for being careless with their money, keeping wads of cash stashed in their pockets and wasting it on fast food and other frivolous purchases.
According to a survey by JumpStart Coalition for Financial Literacy, a nonprofit organization dedicated to raising the financial awareness of youth, teens are well deserving of this stereotype. In 2008, JumpStart surveyed 6,800 seniors in 40 states on a range of financial issues, testing their knowledge of credit card rules, income tax laws and other financial issues. The average score was 48.3 percent, the worst average since JumpStart started its surveys in 1998.
Most teenagers are consumed with day-to-day concerns such as school, friends and fun. Few think about their futures and how to save money, but they should. “The teenage years are a good time to go out, have fun, and not have too many things to stress about, like college, jobs, family, retirement and all those things. But learning about money now is going to make the rest of your financial life a whole lot easier and a lot less painful,” said Joshua Holmberg, author of the Teen’s Guide to Personal Finance.
Some teens are trying to learn how to handle their money through local school programs. Deelontee Hutchins, 17, and Amber Hall, 18, from Arsenal Technical High School, signed up for a personal finance class to explore future careers and become more business savvy. Sam Hou, 17, and Evan Rhea, 18, from Carmel High School, took a similar class at their school to learn how to manage money and expenses.
These students agree that the teenage years are a pivotal time to learn how to manage their finances. “Until you grow up and make some mistakes, you’re not going to realize how to take care of your money. So by learning how to avoid the mistakes, you’ll really have a better future in general,” said Evan, 18.
But these teens are the exception, Holmberg said. Most people – adults included – learn about managing money only after losing it.
“The fact that schools don’t teach personal finance as a mandatory subject, I think, greatly contributes to the epidemic. But I think the general lack of interest is the reason why there’s not a proliferation of information available to young people, and it’s a shame,” said Holmberg, who acknowledged that he wasted a lot of money in his youth and wrote the book when he found no other books on the topic.
Before their classes, some of the teens said they were careless with money and spent it on frivolous things.
“Whatever money I got, I would like spend it on silly things, like electronics or something so stupid that I already had when I just wanted a newer version,” said Amber.
Some teens may spend unwisely because they aren’t really spending their own money, Sam says. “They just don’t really care at the moment ’cause their parents are usually the ones who give them the money.”
According to Holmberg, money is important to everyone – it’s necessary to cover expenses and can also provide some of life’s luxuries as well.
“Money is important in life, whether you’re 13 or 113. And the earlier anyone understands money, the better they can understand how to make money work for them, instead of them working to make money,” he said. “As you get older, money becomes even more important because your responsibilities become greater.”
The economic turmoil of the past few years has made clear that many people – not just teenagers – need to develop good financial literacy skills, particularly when jobs are scarce. “Five years ago when the economy was really good, students were very careless with their money – you know, lots of vacations, lots of designer clothes,” said Debbie Lesjak, who teaches personal finance at Carmel. “Now you can see students who are being more, more frugal and better consumers.”
These students have learned that good money management comes down to three basic elements: budgeting, spending and saving. With budgeting, a set plan lays out where money needs to go to cover expenses and to allow for some savings to cover future expenses.
While teens don’t usually have to be concerned with having money to cover rent and utility payments, they often have to cover their cell phone bills and gas for the car. And once they graduate, they face college costs or possibly the need to buy a car.
That’s where saving is important, and the sooner the better.
“Well, if you want that car, you might have to forgo buying these other little things for a year or so and start saving for that automobile. Just because you want the automobile doesn’t mean you can get it; you’ve got to plan,” said James Davidson, who teaches the financial literacy course at Arsenal Tech. He also is a manager at the Finance Center Federal Credit Union branch there, which provides banking services to students.
Sam is working now, but before the class she didn’t have a job. “All I knew was just like how to spend my money. Since I didn’t have a job, I didn’t save.”
Evan does not have a job right now but works in the summer. Still, learning about financial planning was important for him. “The most important thing I learned was to make a budget. Otherwise money will burn a hole in your pocket really fast if you don’t know where it’s going, if you’re not paying attention to it,” he said.
Amber works at a fast-food restaurant and has begun following a budget. “I pay for my own cell phone bill and my car insurance … and then my school fees or anything that comes up with school, and then I save the rest in my bank account,” she said.
Deelontee doesn’t have a steady job and tries to watch his money. He said the class helped him to distinguish between wants and needs — “to accept the things you have and to let you know that you can do a lot with what you have.”
All of the teens were concerned about future expenses, especially the ever-increasing costs of attending college.
“Young people need to understand that it’s probably more likely that they’re going to have to contribute to the cost of college more so now than in generations past,” Holmberg said.
Amber agrees that college is foremost in her mind.
“Teenagers today just need help with how to manage their money. Instead of spending it on careless things they could be saving for their college because it’s hard to get scholarships,” she said.
Beyond college, managing money becomes even more important.
“If you don’t pay your bills, next thing you know, you’ve lost your car, you’ve been kicked out of your apartment or you’ve lost your house,” said Davidson.
“That’s a really hard way to learn.”
Holmberg wishes he had learned how to manage his money when he was younger. “If I had known what to do with an extra dollar or an extra $5 and put that into a mutual fund when I was 15, or put it into a savings account when I was 15, instead of going to 7-Eleven just dropping it on a Slurpee, 10 years later that $5 in a mutual fund could’ve been worth $25,” he said. “That $5 in a bank account could’ve been worth $10.”
Assistant editor Sigal Tavel, 14, and reporter William Andrews, 13, contributed to this story.
Copyright 2010 Y-Press