Financially Naive Teenagers Finally Feeling The Pinch
Parents are suddenly saying ‘no’ and their kids are saying, ‘What do you mean?’
Indulged. Entitled. Those labels have become hot-glued to middle-class and affluent teenagers born after the last major economic downturn, in the late 1980s. They were raised in comparatively flush times by parents who believed that keeping children happy, stimulated and successful, no matter the cost, was an unassailable virtue. A 2007 study found that nearly 75% of parents caved in to their children’s nagging for new video games, half within two weeks.
The annual discretionary spending by teenagers, whose money comes from allowance, gifts and part-time jobs, had dropped 27% to $2,600, from its spring 2006 peak of $3,560. Panicked, stressed parents are struggling to explain and impose restraints, just when teenagers are expecting more spending money, not less. Many adolescents respond with anger at what they see as a bait-and-switch world, fear for their families and confusion about budgeting.
American teenagers, many of whom have weak quantitative skills, are generally naïve about finance. Meanwhile many had debit and credit cards, some were hard pressed to explain the difference. Regardless of family means, most did not have after-school jobs.
Parents hardly relish these conversations. As they sit down with their teenagers, they are agonizing over their own feelings of failure. “Parents are going to feel they’re not giving their kids everything,” said Madeline Levine, a California psychologist. “The kids are going to be confused. They’ve never known not having what they want. And the parents are going to have to tolerate their kids’ anger.”
In familial relationships, money can be a proxy for love and trust. When money has to be limited, underlying tensions become exacerbated. For some families, the financial crisis has been a rallying point, compelling them to articulate values and priorities for the first time. Market researchers say that teenagers are, out of necessity, adjusting. Last week’s survey showed that the amount teenagers allocated for clothes had increased 1%, but that they were patronizing stores with lower-priced labels.
Anecdotes like these prompt economists and therapists to find something positive in all the economic turbulence. The sooner we have these conversations in the family and as a society, the sooner we can focus on core values, and have a more realistic dialogue about the meaning of happiness and money.
