From the March/April 2002 NCL Bulletin (Vol. 64, No. 2)

Teens Spend Money, Want Credit, Need Education

Teens are consumers—big consumers. A Teen Research Unlimited study found that American teens spent an average of $104 per week in 2001, a total of $172 billion. And yet, research shows they are lacking the skills to deal with their finances responsibly.

The National Consumers League commissioned a survey by Opinion Research Corporation International that tested teens’ knowledge of financial issues and examined their attitudes toward money, work, and savings. It also questioned how they plan to deal with credit cards and other loans. Findings showed that, while teens are thinking about saving, paying for college, and obtaining credit cards, they may not have a grasp of exactly what a credit card is, how much of college expenses their parents can pay, or what they’ll make when they get their first job.

Work, Money, and Savings

It’s not news to anyone who has visited a fast food restaurant in the past decade that many teens are working; 62 percent say they get most of their money from part-time employment, summer jobs, or neighborhood jobs such as babysitting or raking leaves. Over half (55 percent) say they work mainly for spending money. Another 35 percent mainly save the money they make.

Saving money is important to American teens; about nine out of ten save money, though 36 percent admit that they’re saving for specific items they want to purchase. Almost one quarter (22 percent) are saving for college and 27 percent save for no particular reason. Four out of ten say they save half or more of their money, and three out of four have a savings account. Only about one in five teens report having a checking account, and small percentages say they have ATM (12 percent) and debit cards
(8 percent).

Paying for College

Teens are falsely optimistic about their ability to obtain scholarships and grants to pay for college; 38 percent say that’s the main way they’ll cover the costs. One in four say their parents will carry the burden, 12 percent plan to work through school to pay the costs, and only ten percent believe they’ll mainly use student loans to cover the cost. According to a report by The College Board, loans comprise 58 percent of college aid packages, while scholarships and grants make up only 25 percent. Most of NCL’s survey respondents (56 percent) believe their parents will pay for 20-50 percent of their college bill, while 12 percent don’t expect their parents to make any contribution.

Life After College and Credit Cards

Over one-third (38 percent) of teens believe they will make under $25,000 in their first job out of college. The reality, according to the Collegiate Employment Research Institute, is that the average college graduate with a bachelor’s degree makes between $29,300 and $34,600. One in five survey respondents think they’ll make more than $36,000 in the first year. Teens are planning to get credit cards; 58 percent plan say they’ll get their first card before they graduate from college.

When teens plan to get their first credit card

This interest in credit cards is noteworthy since over half (52 percent) wrongly believe that a credit card is an informal agreement to pay money owed. And where are they learning this? Sixty-three percent say they get most of their information about money, credit, and other financial matters from their parents. But parents might not be the best resource. The average American family carries almost $9,000 in credit card debt. And even if their parents are providing sound advice, over half of the teens admitted that, when they do talk to their parents about money, it’s to ask for some to spend.

Financial Privacy, Shopping Online

Though thought to be more Internet savvy than their parents, teens have some disturbing misconceptions about shopping online. Sixty-eight percent mistakenly believe it’s safer to pay for goods bought online with a check or money order than by giving a credit card number and 55 percent wrongly think that businesses must go through a screening process to make sure they are legitimate before they can put up a Web site. When asked the same two questions in 2001, adults knew a bit more than the teens, with 41 percent correctly answering the safest way to pay question, and 73 percent knowing that companies are not screened before they put up site. Teen respondents also showed a lack of understanding of important financial privacy issues. A majority (70 percent) wrongly believe that it’s illegal for banks to share a person’s financial information with other affiliated companies.

NCL's Consumer Education Campaign

NCL has launched a new consumer education campaign with an unrestricted educational grant provided by Bank of America. The goal is to help change misconceptions and provide teens with a financial education foundation they can carry with them as they make important financial decisions later in life. The campaign includes new lessons on banking and credit for teachers and LifeSmarts coaches as well as media outreach to promote LifeSmarts, the League’s program to bring consumer education to high school students. The lessons are available online at www.lifesmarts.org. Survey results are available at http://nclnet.org/finances/teensurvey1.htm