Recession curbs teen shopping habits. Image: Paul Keller/Flickr/CC BY

The recession is now being felt even in the youngest demographic of consumers. Teen spending is on the decline, according to the just-released 2011 Teens & Money Survey from Charles Schwab & Co.

Once big spenders feel the pinch

Traditionally, teens ignore economic trends and spend impulsively no matter the pinch on the purse strings at home. However, teen spending is down 14 percent this spring. The impact is significant. As a group, teens spend an average of $125 billion in the U.S. each year.

No budge on home entertainment

Teen spending has dropped in nearly all the markets which they traditionally impact the most: apparel, beauty products and entertainment activities like restaurants, concerts and movies. The only place teens seemed unwilling to cut corners is in home entertainment. Music, DVD and video games rose from 7 percent to 8 percent of teen spending.

A greater awareness

According to the Schwab study, 90 percent of teenagers surveyed said they were affected by the recession. Schwab concludes that they have a heightened awareness of financial issues than they did four years ago. Most said they were more appreciative of the things they have and are less likely to spend impulsively.

The ‘Recession Generation’

Carrie Schwab-Pomerantz, senior vice president of Schwab Community Services, said: “It seems clear that the great recession has changed the mindset of teens. It has given these ‘Recession Generation’ youth(s) a deeper appreciation for what they have and how hard their parents work. This may be the silver lining to the economic downturn.”

Financial education begins at home

“To help quench their thirst for material goods, teens appear to have opened up to the idea that learning about money management is a potential solution to the problem,” said Bryan Sommer, founder of Kids Money Management.

The majority of the teens surveyed cited their parents as their main educators on money matters. Eighty-two percent of surveyed teens say their parents have taught them the basics of financial management.  And 77 percent go so far as to call their parents great financial role models.

Unemployment a factor

Unemployment accounts for some of this trend in teen spending. The teen unemployment rate, at 22 percent, is the lowest it has been in 10 years.

Sources

Newser
Commoncensus
Daily Finance

Debt relief is a hot topic in today’s recession. Many consumers are searching to find extra money for savings, bills and personal expenses. They also are seeking ways to fund retirement, college and other large expenses that will require thousands of dollars. Due to the recession, however, there are many changes in business’s dealings with their employees and how they are able to help them manage their finances.

Changes in the 401(k)

One surefire way to plan for retirement has always been company-matched 401(k) retirement savings accounts. They are tax free, up to a level, and have proven to be a great way to store away money, little by little. Unfortunately, the recession’s aftermath has changed the way employers handle this account.

New research is showing that, in an effort to save money, 25 percent of U.S. employers are either eliminating or ending matching contributions to employee 401(k)s. According to a study done by Charles Schwab Corp, an additional 25 percent of employers are also planning on utilizing a “limited enrollment” plan, rather than the standard open savings plans available to all employees. Steve Anderson, director of the retirement division of Charles Schwab, stated, “Most view this as a temporary step. They don’t see that as a long-term approach.”

Research on 401(k)s

According to research done by Charles Schwab, consumers are looking at their 401(k) as their primary debt relief tool as they retire. They also said that their most valuable feature was the company’s matching contribution. If this contribution is eliminated, even if for just a period of time, they would consider other methods of saving for their futures. Anderson added, “Although companies are using the method of scaling back 401(k) contributions temporarily, many workers are interpreting this as a tactic their company may utilize at any time in the future.”

Another result of cutting into the 401(k) as a money-saving tool is companies are losing employee trust and loyalty. Of the 107 human resource and 112 senior finance executives polled, 63 percent said that added worries about their retirement savings were “creating a more difficult work environment.” Lonnie Richardson, financial analyst, stated, “It’s hard to work for a company for 20 years, build up a trust and then have them threaten your retirement security. …I’m not saying they purposefully did it, but just knowing it is an option makes it hard to rely on them for my family’s future. Now they are saying ‘We’ll contribute to your retirement if we can.’ That’s a lot for me to stomach.”

Consumers have to be proactive

Despite the Charles Schwab study, many consumers are still looking positively at the 401(k). They are mostly realistic and understanding. Charles Avery of Glenbrook Massachusetts is one of the many workers for a company that discontinued the 401(k) contribution. He believes that it’s a necessary action. “For my company to stay afloat they cut everything … some pay, some workers, contributions. …I’d rather have to deal with that than have the company fold and have to start over job-wise. Plus I can always get a second job to create more savings for retirement in the meantime.”

Avery is like many Americans who are proactively working to solidify their financial futures. Many people will have to do the same, as businesses are still wading through the murky waters of the recession. To handle bills, find debt relief and still manage to save is going to be difficult, but not an impossible task.