MONEY, MONEY, MONEY--Show me the MONEY!
but, Are you Ready?
Teens face a lot of money problems. Many say they do not manage their own money at all. According to a 2012 Junior Achievement USA/Allstate Foundation survey, over 1/4 of teens do not expect to be able to support themselves financially until after the age of 25.
According to the same survey, only 56 percent of teens think they will be financially as well off, or better off, than their parents. Many students will wind up in hundreds of thousands of dollars of debt in the few years after graduating from high school, with a combination of student loans, credit cards, car loans, and mortgages.
Teens do not have confidence in their ability to handle their finances and their time, and this course is directed at changing that. Instead of working without goals, students will learn how to develop goals and achieve them.
Instead of habitually over-spending, students will learn the techniques of managing their finances with longer-term goals. Instead of thinking about how to spend resources they did not earn, students will learn how to imaginatively create wealth.
Instead of joining the 30% percent of student loan borrowers who are delinquent on their payments (and that's not counting those in deferment or grace periods), students will learn to avoid debt traps.
I teach this course from the point of view of a parent of young adults, and I show students how the real world works. In parts of the course, I bring my 15+ years of experience as a teacher of Economics, Business Law, Accounting, Computer Technology, Marketing and Finance to bear, as well as my experience as a Personal Business Owner, Conference Center Manager, and Mechanical Contractor to show students how broader economic events, business decisions, marketing and management can affect their personal finances.
Financial Struggles of Teens
Timothy Terrell - June 22, 2013
According to a 2012 Junior Achievement USA/Allstate Foundation survey, only 40 percent of teens say that they "manage their money in some manner." Only 56 percent of teens think they will be financially as well off, or better off than, their parents.
This is down from 89 percent in a 2011 survey. And many teens are planning to be dependent on their parents for an extended period of time--over one fourth of respondents to the survey said that they do not expect to be able to support themselves financially until after the age of 25.
Parents of today's teens grew up in a less complicated time--a teen's finances in the 1970s or 1980s would have consisted of a wad of cash and maybe a savings account mostly managed by parents. Spending was usually on a cash basis. Holding a debit card would have been unusual for a teen, and online transactions were nonexistent.
Today's teen is faced with a wide array of financial management options, from debit cards to PayPal and smartphone apps. Banks have special accounts for teens with options for parental oversight and money transfers. But the prevalence of electronic payment options means that spending can easily get out of control. Teens still need to know the basics, such as how to read a bank statement and how to budget. Many large purchasing decisions are made in the late teens and early twenties. With offers of large amounts of credit starting in the college years, teens need to know early on how to make wise decisions about borrowing and spending.
Teens have a wonderful opportunity to get off to a good start financially. For most teens, the vast majority of necessary expenses are covered by parents. The financial freedom that affords should be taken advantage of. Working 40 hours a week at only $9 an hour for 10 weeks per summer can put around $10,000 in a teen's account over three summers. A higher-paying job, part-time work during the school year, or an entrepreneurial venture could boost that sum considerably. What teens do now with those earnings from work, plus monetary gifts, can make a big difference when they establish their own household just a few years from now. It could mean paying cash for what other young adults are buying on credit, capital for a small business, or a head start on a down payment for a modest house.
As I teach my own children and the personal finance class for a local home school co-op, I want to explain how to avoid these common mistakes:
Working without a plan/goals
Impulse buying
Forgetting the full cost of items
Lending money to friends
Out-of-control spending on small items, leaving nothing for big-ticket items
Poor priority-setting
Thinking about spending, and ignoring earning
Developing financial self-discipline and appropriate priorities can be one of the greatest accomplishments of a teenager. Since financial problems can lead to or aggravate so many other life problems, such as stress (and accompanying health problems), marital difficulties, a derailed career, and disputes with extended family, getting off to a good start in these early years is vital.
One of the most important financial decisions in the late teen years is whether or not to go to college, and if so, how to pay for it. Student loans can be a crippling expense early in life, amounting to a car payment or even a house payment. The weight of the debt shows up in default statistics: In 2013, according to a New York Federal Reserve study, 11.7 percent of student loan borrowers are delinquent--90 days or more late on payments. That figure includes student loans that are in deferment or grace periods, where borrowers are temporarily not required to make payments. If those loans are left out, over 30 percent are delinquent. That is up from less than 20 percent in 2004. Student loan debt, according to Constantine von Hoffman of Moneywatch, was the only kind of household debt that continued to rise throughout the recent recession, and the total debt--nearly $1 trillion--has eclipsed credit card debt and is now the second largest category of debt after mortgages.
There are ways to avoid this financial catastrophe. I believe that personal finance courses for teens should emphasize entrepreneurship. As an economist in the Austrian tradition (following the thinking of Ludwig von Mises and Friedrich Hayek), I teach my college students of the importance of entrepreneurial behavior to a growing economy. Teens need to be introduced to the career option of entrepreneurship, so that they can make an informed decision about the costs and benefits of higher education. Given some ideas, encouragement, ambition, and a small amount of capital, most teens can do quite well for themselves in a small business. That could be lawn maintenance, eBaying, baking or crafts, photography, or a number of creative endeavors that provide confidence as well as real-life lessons that will never be forgotten.
Building good financial habits now will help teens immeasurably in the future. When they are able to put a large down payment on a house, give generously, pay cash for a car instead of borrowing, or weather a crisis with a healthy emergency fund, they will be glad they made wise decisions while still in high school.
WHAT YOU NEED TO DO:
Read the following article:
WHAT DO YOU THINK: Copy and Paste the following questions and comment into your BLOG and write responses to these questions. Use complete sentences and provide as much detail as necessary to thoroughly answer the question.
1. What kind of DEBT can you expect to have after college?
2. Do you think that your parents manage their money well? Explain. What would you do the same, what would you do differently?
3. Write a paragraph or two about what you expect your lifestyle to be like when you are in college, compared to once you have completed your education and entered into the workforce.
What would be your response to the following comment?:
The Millennials have seen their Baby Boomer parents leverage themselves to the hilt to finance lifestyles they could not otherwise afford. These kids have no idea where the money comes from, nor do they care as long as Mom and Dad continue to supply them with smart phones and North Face jackets. Once they finish college, the Millennials will finally learn, one way or another, the harsh reality that working for one's money is rather difficult.
