Deal-Seeking Dad: Are Kids Getting Smarter About Money?

Seems adults aren’t the only ones affected by the downturn in the economy. Despite the popular stereotype of kids stimulating the economy at the local mall, a recent Charles Schwab survey finds 9 out of 10 teens have been seriously affected by the recession – both financially and emotionally.

My 18-year-old son could testify to that. When the real estate bubble burst, I lost my job as marketing director for a large real estate company, something that certainly shifted the entire family’s attitudes about money.

We’re more open now about our finances, and that’s had an impact on both his knowledge and attitude. He’s much more cautious about spending money, questioning whether he – or I – really need to make this or that purchase.

The Charles Schwab survey, which drew from just over 1,000 teens age 16 to 18, showed nearly two-thirds (64 percent) are more grateful for what they have, and the majority (58 percent) are less likely to ask for things they want as a result of the recession. In addition, a majority (56 percent) now have a greater appreciation for their parents’ hard work, and more than a third (39 percent) appreciate their families more.

Could this be due in part to parents being increasingly open with their teens about money issues? That’s been the case with us. Major decisions, such as purchasing a car or selling our home, are now discussed in the open.

Teens: aware but not informed

Yet when it comes to discussions about exactly how finances work, well, I’m no shining example of financial education. While my son has his own checking account and ATM/debit card, he doesn’t know much about how our mortgage works or how much insurance costs. Those are difficult concepts to grasp even for some adults.

On the practical details of personal finance, the survey points out some significant gaps in understanding compared to four years ago. Some are understandable: Fewer teens today than in 2007 actually know how to write a check (60 percent today vs. 67 percent in 2007), but that’s likely because more and more of us are moving to online banking. Face it, four years from now, none of us will likely remember how to write a check.

But the survey showed other areas where teens know less than they did a few years ago, and it’s a concern to any parent like me…

  • How credit card interest and fees work (declining from 43 percent in 2007 to 32 percent today)
  • How to manage a credit card (from 64 percent to 39 percent)
  • How to balance a checkbook or check the accuracy of a bank statement (from 60 percent to 43 percent)
  • Understand whether a check cashing service/store is good to use (25 percent vs. 31 percent).

Carrie Schwab-Pomerantz, a vice president at Schwab, said while the results seem counter-intuitive, given teens’ supposed greater knowledge in finances in the wake of the recession, they may actually indicate that teens today have a better barometer of reality.

“It could be that the effects of the recession have given these young people a reality check – making them realize they aren’t as knowledgeable about financial tools and products as they may have once thought,” Schwab-Pomerantz said.

In other words, more of them know they don’t know.

Getting a jump start on financial literacy

The Schwab survey isn’t the only research done on the money smarts of teens. The JumpStart Coalition first began measuring that in 1997. JumpStart is a national coalition of organizations dedicated to improving the financial literacy of pre-kindergarten through college-age youth.

A recent JumpStart survey showed that 32 percent of teens used credit cards and 43 percent had access to ATM machines. Yet the vast majority of teenagers don’t understand how to compare credit cards in terms of fixed or variable annual percentage rates, finance charges, grace periods, and so forth.

My son is perhaps atypical. We didn’t give him an allowance, but our family discussions about finance, particularly over the past couple of years, seem to have served him well as he entered his freshman year of college.

By working on a part-time basis and saving his scholarship money – an advantage of living at home while attending a community college for his first year – he was able to open an account at our local credit union. In so doing he was able to…

  • Make purchases online
  • Keep a ledger of his transactions
  • Check his balance and financial history online
  • Transfer money between savings and checking accounts

So in his instance, at least, the online tools provided by our credit union have helped him understand how finance works.

Of course, the proof is in the pudding. So we took a very revealing JumpStart survey together. He got 28 of 31 correct, while I got 29. So we’re not perfect, but we did score significantly higher than the average. Most of the answers to the questions seemed to require only a judicious helping of common sense or some pretty basic math.

His response to the survey results? “Sometimes I wonder about my generation.”

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