Teens and Money

We, as teenagers, have different interests than our parents and other adults. We hold different values for the everyday tasks we accomplish, for the items we consume and for the things we want; particularly when it comes to spending money.

More than half of us will have a part time job and enjoy the idea of being part of a work force, earning a pay check at the end of the week. While a mature adult might be more conservative with money, we are much more liberal when it comes to buying things that we want. Like many, I have taken up a job on the weekends. I like the fact that I am getting money of my own and it is all mine. A couple of weeks ago, my parents sat with me and talked to me about money – spending vs saving money.

They said that I do not have any ‘needs’ like paying a mortgage, a car, or the insurance. I am fed well and most of my needs are taken care of. They said that as parents, it is their job to teach me about money; particularly, saving money. According to them, money that the teenagers make are free of ‘stress’ and it is the extra money. I should save more than 50% of what I make.

I initially thought that it was absurd and told them that I would make my own decisions. Probably, somewhere in the depth of my brains, I had a feeling that there probably was a lot of truth in what my parents said. I decided to do my own research and what I found was quiet enlightening. Teen spending in the US, which includes products bought by and for teens, was $260 Billion industry in 2014. We spend 21% of this money on clothing and a whopping 18% on food (outside the house).

Our spending percentage is substantially higher for clothing, entertainment, food and personal care when compared to adults. For example, if an adult spends 4% of their income on clothing, we spend 30% of our income. If adults spend 2% of their income on food, we spend 26% of our income on food. Most of the food money is spent in Starbucks, Chipotle, etc.

and not in grocery stores. Out of curiosity, I started looking up for more information about how many of us save and for what purpose. Teenagers are less ambitious about saving for a car and more interested in spending money on electronics that will help connect with their friends virtually. Most of us save money, however more to buy something else – like electronics or the designer clothing. Probably only 20% of us are saving for ‘college’, which is the largest expense as a teen. Most of us believe in our ability to get scholarships and grants to pay for our college, though it is not true.

We do end up borrowing substantial amounts of money. What was even more interesting was the fact that large financial institutions like Piper Jaffrey have been tracking teen spending for years. They look at the brands that are capturing teen interest and the brands that are losing popularity among teens. These decisions are used to make important financial investments that are very successful. In fact, a now 19 year old Rachel Fox who is a known actress and investor, has come up with a stock index called ‘MyGenLoves”.

It now has 21 stocks of products that we teenagers drink, eat, wear, have or would love to have. This index has done better than S 500 index by close to 10%. This includes things that I would love – Pandora, Netflix, Chipotle, Facebook and Apple. This made me think of how our spending habits are making someone else so successful. This little research has helped me understand and respect money. It also gave me an insight to the teen spending power and the impact it has on our economy. There is no doubt that we are great consumers.

Unfortunately, we do not save enough. Our knowledge of money management just in the last 7-10 years is on a decline. Though we like to know more, fewer of us have bank accounts. We do not shop for the best deal and we buy what we want irrespective of the price. Our generation will be paying more money for college tuition than our parents and the rate of increase in the cost is more substantial.

Most of all, our parents are the greatest role models for teaching us to save money, so I should listen to them. Probably, you should too.