Sue Scheff: Teen Flunk Personal Finance by Connect with Kids

“It’s easy for these students to get the credit, go and buy a stereo, go and buy a television, go buy all this stuff that they want, and then all of sudden, they’re in a lot of debt.”

– Carol Pizza, economics teacher

Teenagers in the U.S. spend more than $150 billion a year, according to Teenage Research Unlimited (TRU), an organization that tracks teenage consumer behavior and attitudes. Yet, how much do teens today understand about basic finances such as saving, investing and borrowing? Not much, according to a new national survey.

In the survey, teens were asked several questions about money, including: If you lose your credit card, what’s your liability? Here’s how some high school students answered:

”One thousand dollars,” Blake guesses -- incorrectly.

”Five hundred dollars,” guesses David. Wrong again.

But Lauren answers correctly: “Fifty dollars.”

Next question: where will money grow the most over 18 years?

Lauren asks, “Savings account?”

Denise agrees: “Savings account.”

They are both wrong; Kelly gets it right: “Stocks.”

In a recent national survey, more than 6,000 12TH graders were tested, and they answered more than half of the questions incorrectly. College students also took the test this year, and they answered 38 percent of the questions incorrectly. Experts say that what teens don’t know about money can hurt them.

Carol Pizza, an economics teacher, explains, “It’s easy for these students to get the credit, go and buy a stereo, go and buy a television, go buy all this stuff that they want, and then all of sudden, they’re in a lot of debt.”

Pizza says parents can teach their kids about debt, bills and balancing a budget by giving them hands-on experience with the family finances.

“They need to encourage their child to help them with their bank statement every month, reconciling their checking account. Just let them be more involved; let your child know more about your finances, know how much your mortgage is a month.”

Pizza also suggests giving teens a credit card, but with strict spending limits, so they learn how easy and painless credit cards can be -- until they get the bill.

“We’re getting to the point where we’re almost in college and we’re going to be getting our credit cards,” says David, a high school student, “and if you get into a lot of debt then your parents are going to have to pay and you’re going have to pay, too, and it’s not going to be a good situation.”

Tips for Parents

Several factors, including the media, peers and personal successes and failures, influence children’s attitudes about work, money, spending and saving. But according to the National Council on Economic Education, parents exert the most influence on children’s ability to make sound financial decisions. Children need to see their parents practice sound money management – saving, budgeting and making rational (instead of impulsive) decisions about purchases. The Americans for Consumer Education and Competition suggests the following tips to help improve your child’s financial fitness:

Start financial education early by giving your child a weekly allowance.
Discuss the difference between “must have” purchases, such as school supplies, and “would like to have” purchases, such as a new video game.

Discuss family financial matters (family budget, routine shopping, purchase of a new car or home, planning a vacation, paying for college, etc.) with your child.

Discuss with your child his or her options when he or she receives a monetary gift (saving, investing, giving to charity, etc.).

Incorporate the media (newspaper articles, television, etc.) as a tool to educate your child about financial matters.

Work with your teen to develop a realistic budget. Set long- and short-term financial goals and the plans for achieving them.

Explain the advantages of waiting to make a purchase today, such as the latest gaming system, to save for another desired item, like a car or college education, tomorrow.

Promote shopping around before making purchases. This step generally assures a better deal and discourages impulse buying.

Use financial (checking account, credit card, etc.) statement reviews as a teaching aid to evaluate spending habits, promote sound financial practices and to instill fraud review practices.
Stress the importance of safeguarding personal and financial data, such as Social Security, personal identification (PIN) numbers and credit card information, as a means of preventing frauds like identity theft.

Foster charitable giving by urging your teen to donate some percentage of his/her allowance, however small, to the organization(s) of his or her choice.

The Americans for Consumer Education and Competition
National Council on Economic Education


As a parent advocate (Sue Scheff) this tip sheet and information is fantastic to help us to explain to our kids about money, credits cards and more. has many great articles and DVD's to help parents with all ages of children today.

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