TEEN PAYCHECKS
“We know that the savings rate in our country is atrocious. As a matter of fact, last year was the first time since the Great Depression that we had a negative savings rate as a country. So as adults that have obviously very little value on savings, we're not passing it on to our kids to put much aside in savings, either.”
– Todd Mark, Spokesperson, Consumer Credit Counseling Service
17-year-old Vanessa Ceci works part time at a tanning salon. She says her paycheck belongs to her, and not her parents.
“They shouldn’t be too involved,” says Vanessa, “because it’s my money that I’m spending. Like, I’m working for it.”
“There are times that she’ll come home with a new purse,” says Vanessa’s mom Dianna, “or some more shoes that she doesn’t need - and we kind of get upset.”
Should parents decide how kids spend their money?
“It’s a good thing for parents to say, ‘you’ve got money coming in - these are the things that I would do if I were in your shoes,’” says Todd Mark with the Consumer Credit Counseling Service. “Not necessarily force them to, but strongly encourage them to.”
And, Mark says, one thing parents should strongly encourage in their children is saving.
“We know that the savings rate in our country is atrocious,” he says. “As a matter of fact, last year was the first time since the Great Depression that we had a negative savings rate as a country. So, as adults that have obviously very little value on savings, we’re not passing it on to our kids - to put much aside in savings - either.”
Vanessa says she now saves most of her paycheck---because that’s what her mom taught her to do.
“I like saving,” she says. “It makes me feel good knowing that I have money in my savings account. When I talk to some people they are, like, ‘oh, I only have, like, 50 dollars!’ I’m like, ‘wow! I have a lot more than that!’ So it just feels good because, like, in the future, I’ll be set up a little better than most people.”
And experts say that if you can afford it, encourage kids to save with a cash reward.
“Many parents really go the extra mile to encourage this by doing just as employers do with a 401(k),” says Mark. “And [they] say, ‘you are going to put 10 percent aside - we’ll match you dollar for dollar.’”
But, he says, for kids to learn the value of money parents should allow them to spend part of their paycheck any way they choose.
“Before, like, when I didn’t have a job,” says Vanessa, “when I wanted something, I was like, ‘oh, okay - swipe the credit card and, like, Mom and Dad will pay for it.’ But once it’s my own money and I’m spending it, I look at a sweater and I’m like, ‘wow, that’s really way too expensive. I have to work like eight hours for this.’”
Tips for Parents
■$179,000,000,000: how much money US teenagers spend annually.
■$1,585: average credit card debt for a college freshman.
■17: percentage of students who pay off their credit card balances each month
■63: percentage of students who say they get financial information from their parents.
■3: the number of states that incorporate personal finance into curriculum standards for schools (Utah, Missouri, and Tennessee).
■18: the number of states that require personal finance instruction be incorporated into other subject matter area.
The American Savings Education Council believes schools are an ‘obvious and natural avenue’ to reach young people with financial information, but the group also says the importance of parents ‘should not be overlooked or underestimated.’
How can parents help their children become ‘financially proficient’? In an address to the Federal Reserve Bank in Dallas, David W. Wilcox, US Treasury Assistant Secretary for Economic Policy, offered his own personal list of concepts parents can teach their children about personal finance:
■The concept of a budget constraint. Every graduating senior should understand that resources are finite, and accordingly that choices have to be made. A dollar spent on something today necessarily means either that a dollar less is available for spending on other items, or that a dollar less is available for saving for a better tomorrow.
■The concept of present value. Every graduating senior should understand that a dollar today is worth more than a dollar in the future. This is the fundamental reason why the time to get started on retirement saving is now, regardless of how old you are.
■The concept of risk. Every graduating senior should understand that the financial market is a very uncertain place. You could make more money than you expect, but you also might lose more than you expect. If something sounds too good to be true, it probably is.
What else? These suggested financial principles to impress upon children from the Kids’ Money Top Ten List:
■If you don’t have the cash to pay for it, you can’t afford it
■Begin a retirement and investment account now
■A sale in a store is not a sale if you can’t afford it
■Save at least 10% of each and every paycheck
■Always have and work toward a financial goal
■Money isn’t everything and greed is not good.
References
■Consumer Credit Counseling Service
■Financial Literacy and Education Commission
■The Department of the Treasury
■National Council on Economic Education
■Jump$tart Coalition for Personal Financial Literacy
