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

The Dodd-Frank financial reform bill includes creating the Office of Financial Literacy to offer knowledge and money management tools for consumers. Flickr photo.

The financial reform bill Congress hopes to finally pass by the Fourth of July includes establishing a new Office of Financial Literacy. The new Dodd-Frank financial reform bill also includes a new Consumer Financial Protection Bureau to enforce ethical behavior from banks. But ultimately, consumers will have to educate themselves about  money management to stay out of financial trouble. The Office of Financial Literacy will try to make it easier for them to do that.

A national strategy for financial literacy

The Office of Financial Literacy as written into the Dodd-Frank financial reform bill isn’t the first effort by the government to encourage financial management from consumers. A 2003 law that provided people a free credit report once a year also established the Financial Literacy and Education Commission, which was charged with developing a national strategy for financial literacy. In 2004 the FLEC launched the MyMoney.gov website to provide a central location where consumers can find money management tools and useful government financial information.

The FLEC financial literacy website

Recently the FLEC’s financial literacy website got a new look. The new version of the site creates online access where users can find information about how to plan for life events that have financial implications, such as birth or adoption of a child, home ownership or retirement. There are also answers to questions users may have about a variety of personal or professional situations. MyMoney.gov offers money-management tools including a savings calculator, household budget worksheets and a college prep checklist.

Americans are literally lazy about finances

To promote financial literacy, the government has pushed knowledge more than regulation. The assumption is that the more high-quality information and money management tools consumers have, the better choices they will make. But most Americans are financially lazy. It’s common knowledge that we should spend less, save more and shop around for the best credit card rates. But most of us don’t.

American financial literacy lacking

In a survey of American financial literacy, the Wall Street Journal reports that the Finra Investor Education Foundation — the research arm of the securities industry regulator — found that about half of those 45 or older hadn’t tried to calculate their retirement needs. About half of almost 1,500 people surveyed also admitted to occasionally carrying a credit-card balance and paying interest. And only one in five knew that when interest rates rise, bond prices fall. In addition, the survey found that 57 percent of adults who earn more than $75,000 a year don’t shop around for credit cards, and 46 percent don’t compare prices on auto loans. Plus, most adults don’t check their credit records each year.

Debt-to-income ratio is the key

Debt is the most painful consequence of inadequate financial literacy. Seerpress.com reports that even though the current average debt-to-income ratio of in America is down to 122 percent from 133 percent in 2007, it still should be below 100 percent. In contrast, from 1960 to 1985, the debt-to-income ratio in America stayed well below 70 percent. The government is trying to do its part by imposing stricter policies and offering free advice. But true financial literacy could be as simple as not spending more than you make. That is a personal responsibility.

Understanding the important bond between money and children now will reap great results in the end. (Photo: Thinkstock)

“Money is what makes the world go ’round,” some say. To a great extent, this is a very true adage, one that has been known for many years. Money and children are the prime focus when looking for a ray of sunshine in the future. They are the adults of tomorrow, the ones who will be making the final decisions when our days are over. But how well will they manage? Can you affect the bond between money and children, and could it provide a better outlook for their financial futures?

Money and children – the earlier the better

Many adults these days are struggling through financial problems, big and small. The recent recession has proved that even the most responsible individuals can fall flat on their faces with a single blow. What about adults who were never taught the true value of money? Where are they now financially? Are they repeatedly stuck from one pay day to another? One thing’s for sure, without the proper understanding of money, financial disaster will be the only outcome. That’s why it’s absolutely crucial that you start teaching your children about money when they are still young.

Not only will they begin to develop strong saving habits, but they will also learn to make smart purchases and understand the true meaning of “investment.” As they advance into their adult lives, this “understanding” will slowly develop into a powerful instrument that will secure financial stability and help them achieve success in multiple of ways. Isn’t this something you want for your children’s future? If so, start teaching them about money now.

The man in the mirror

“Monkey see, monkey do” – that’s how children are, it’s true. Do not underestimate the brilliance of a child. Don’t forget that children will take into account how you manage money. They learn a lot just by watching you and your personal financial dealings: spending, withdrawing, cashing, saving, etc. So be a role model for your children and set a fine example. Pave the right path for them to follow and remember, always allow room for mistakes. Surely you’ve made a few of them yourself.

Creating a strong financial future

It doesn’t matter where you come from, rich or poor, the focal idea regarding money and children is still the same. How well you train your children about money is what will determine their financial futures. The time and effort you invest today in teaching your children about money will reap great results in the long run.

Money management – what’s that?

The one aspect of my life today that I wish I could have changed is the fact that as a child, I was never taught anything about money. The only thing I understood about money was there was never enough of it, and I couldn’t have any. Sure, I was taught to have a good strong work ethic, but I was expected to do these things with no incentives ever offered.

One way you can begin this process

To give your child an allowance for doing chores above and beyond regularly expected duties is an excellent way to create the opportunity to teach your kids how to handle money responsibly. If you’re ready and willing to ride this bandwagon into the new century, you must practice consistency with your kids, especially when money is concerned.

It makes sense; who do you think is going to be in charge of your finances when you do finally lose your mind? You better hope you equip your kids with the skills needed for this important responsibility.

The second aspect your kids must learn

You must teach your kids the value of a dollar, better yet the value of what makes the dollar valuable. You can’t expect your kids to grow into responsible, independent adults if you continue to give in and give them whatever they want, whenever they want it. You are, in fact, damaging your kids when you spoil them too much.

Why do parents do this?

Sometimes, because your childhood was not the best, you may never want your kids to go without. Maybe guilt is eating you up because you’re never around. Whatever the reason, it’s not good enough! Parents like that should be reprimanded. We are breeding the attitudes of the next adult generation who are going to be calling the shots one day. Can you imagine a society full of adult kids who whine and cry and pout when they don’t get their way? We might as well start building adult daycare centers because they won’t know how to survive in the real world.

This is not hard to understand

Kids need boundaries when money is concerned, and they need to be told why. So teach your kids about saving money and working to get the things they want. This will show them how to appreciate what they have and give them a sense of accomplishment that cannot be matched by anything you could ever buy them. Your kids may start out kicking and screaming, but they will thank you in the long run, guaranteed.

Money management online

Banks are offering customers pie charts and amortization schedules to get a clear view of their money. The reasoning is that customers who are more in control of their money will see banks as more viable financing tools. That means when they need loans or new retirement account, they will be more likely to work with the bank that offers them online tools to manage money.

Michael Upton, senior VP at Bank of America, (see http://www.msnbc.msn.com/id/35018578/) said, “The more informed customers are about their financial lives, the better customers they make for us in the long term.” Many banks today are taking their online model from Mint.com. Mint is a website that offers consumers the ability to merge data from various sources and give a clear picture of their finances. It gained a huge popularity and industry insiders were watching closely the capabilities the website offered.

Online banking on the rise

Industry analysts are showing that about 60 million people do some type of online banking in the US. The number using personal finance management tools is much smaller, but banks are hoping to turn that around. Although right now less than half of all US banks offer personal finance management, smaller banks and credit unions are quickly moving into the online territory. They understand how important it is to offer additional services, and they know how much focus consumers are putting on their own personal finances now. Upton added, “The recession was a good lesson for people who didn’t prioritize their savings. Now a good number of consumers are changing their ways.”

How the larger banks fit in

Interestingly, bigger banks are not moving as quickly to utilize personal finance tools. It’s the smaller banks that are integrating them. The reason for this is that larger institutions have more elaborate features, and the ability to combine account data could take considerably longer to implement. For customers using large banks to watch their money now, it involves combining systems from serial mergers. That’s a large task for any institution to take on. For example, Wells Fargo has a “My Spending Plan” tool that categorizes spending and has a budgeting script. It only is able to pull date from the bank’s accounts though, which some say limits its usefulness to the consumer. That’s because it is common for people to have a dozen or more accounts with various banks, brokers, and credit card companies. “Consumers want to simplify their financial lives,” said Mark Schwanhausser, a senior analyst with Javelin Strategy and Research. “There’s a screaming need for someone to come through and help them organize, and pull all that account data in one place.”(see http://www.msnbc.msn.com/id/35018578/)

The next step in banking

Schwanhausser said that to serve the customer more, banks need to make their personal finance tools more prominent to the user. Consumers watching their money now want a much more diverse and flexible resource. In today’s high-tech world, it’s crucial that banks keep up. Offering finance tools that are customizable and draw all account information to form a complete picture of finances is the next step to serving banking customers.

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Mismatched Money Styles

It’s one of the oldest recipes for romantic comedies out there – spendthrift girl falls in love with penny-pinching boy and the two spend the rest of the movie bickering over their conflicting money management styles. In real life, though, this situation isn’t nearly as funny. A mismatch in financial personalities can lead to serious conflict – even divorce – if the parties aren’t willing to work with each other on their shared financial future.

Of course, this doesn’t mean that you’re doomed to eternal marital strife if you find yourself in this situation. With a little practice, it is possible to overcome these differences and create a healthier, happier future – at least as far as your money’s concerned. Here’s how to get started:

Lesson #1 – Practice Good Communication Skills

Unfortunately, money is one of those things that no one ever talks about, so it can be difficult to begin an open and honest dialogue with your partner about your financial situation. However, you’ve got to start somewhere, so focus on speaking in “I” phrases (for example, “I feel” rather than “You make me feel”) and listening to everything your partner shares with an open mind. Be patient with one another and respect that it might take some time to work through months – or even years – of differences.

Lesson #2 – Discuss Your Financial Goals

Instead of focusing on your differences, concentrate on the things that bring you together as a couple – your shared financial goals. For example, if you have shared credit card debt that needs to be paid off, focus your energy on eliminating the debt, instead of on what each person is or isn’t doing right. If you’re saving for the down payment on a new home, discuss the steps that each of you can take to ensure that you reach your goals together. By teaming up to strive for your common goals, you place yourselves on the same side of the argument – instead of fighting one another’s natural spending habits.

Lesson #3 – Set a Budget Together

Once you have your financial goals in mind, it’s time to lay out a concrete plan for reaching them together. The best budgets require both parties to make sacrifices and compromises, while still leaving some room for error. A plan that requires one partner to change completely to match the other – for example, a plan where the free-wheeling party is required to cut all extraneous expenditures – will only lead to resentment in the long run.

After you’ve put together your joint budget, support each other as you make progress towards your goals. And, although it can be difficult, try not to chastise each other for small mistakes – whether from the spender who falls out of line and makes an extra purchase or the saver who diverts funds away from the shared goals. Keep your final goals in mind and you’ll find that it’s easy to work together as a team – no matter how different your usual money management styles may be.

Managing personal loans, mortgages and finances for aging parents can be difficult. For your entire childhood and young adulthood your parents managed their own finances. They made payments and grew investments on their own. Now they are aging and showing signs of needing help. Despite the difficulty of facing the responsibility of taking over for parents, it is necessary to be aware of their situation and know how to help.

Money management for aging parents

So what are the priorities when it comes to managing finances for aging parents? The biggest hurdle is to bring up the situation tactfully. Once that is done, then it’s time to get down to business and get everything in order. Here are some tips to handling money management for aging parents:

• Get the financial paperwork together. The first thing to do is get all paperwork together. You want to find out where your parents keep their wills, bank statements, investment paperwork and any other revenue documents. If they are scattered around, now is a good time to help parents organize and keep everything in one place.
• Organize other paperwork. You also want to have birth certificates, marriage certificates and general paperwork together. It should be kept in the right place for easy access in an emergency. This location should also include dissolution certificates, Social Security and military service records.
• Ask questions. A lot of parents make financial decisions without consulting their adult children. They could have investments and accounts that you have never heard about. For their own protection, it’s wise to at least know about the extra accounts and how to manage them if your parents can’t.
• Safety deposit boxes. Safety deposit boxes were more commonly used by older consumers than younger ones. It’s important to know where the keys are for access and to be listed as having approved access with the bank. Most banks won’t let someone with only the key into the box. You’ll have to be included on their list of approved visitors to gain access.

These are the first steps to gaining a handle on your parent’s finances.

Other issues to be aware of

Aging parents who are still capable of taking care of their finances may just need a little help, rather than a swooping takeover. For parents who are able to manage, their personal loans, mortgages, investments and day-to-day banking needs, there are some valuable questions to ask:

• Are they paying bills on time? If not, automatic bill pay can be a great way to avoid late fees.
• Are they using medications? Consider having medications delivered to the house so that parents don’t have to remember to go to the store and get them filled.
• Is their house safe? Do a walk-thru and make sure that carpets are bolted down for safety, handrails are installed and solid, and there are grab bars and nonslip shower strips.
• Check the perimeter of the house, too. Make sure the perimeter of the house is cleared of debris they may fall over. Make sure bushes are trimmed and out of the way and landscaping is clear and easy to maneuver through.

Planning for the future

It’s never easy to bring up the topic, but aging parents need to be prepared financially for the future. Talk to parents early and make sure there is a good amount of communication going on so that when you do have to step in, you’ll be prepared. Personal loans, mortgage loans, paperwork and investments can be difficult to manage if they aren’t organized. Take some time now to help aging parents streamline their finances now, so the future will be that much easier to manage.

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Online resources can provide financial education.

Our modern economy is extremely complex, and there are many ways that you can use your money beyond simply exchanging it for goods and services. In fact, learning about all the options and opportunities that are available can be an incredibly daunting task. However, taking the time to acquire a financial education can – and frequently does – pay very real, tangible rewards to those who go to the trouble.

Knowing how to use you money for maximum benefit and how to make it grow is truly one of the primary differentiating factors between successful people and others. The old maxim “knowledge is power” is fully applicable to money management regardless of your financial situation. Effective money management and taking advantage of the opportunities available can benefit people in any financial position, from someone making minimum wage to the extremely wealthy.

Where to look to get financial education

Many people get their first introduction to the concept of money management from school. Both high schools and colleges usually offer a wide array of courses that focus on various aspects of how the economy works and how you can both manage and invest your money to achieve desirable results. However, this is just an introduction to the concept. Students who go on to major in business or finance obviously learn a lot more about financial opportunities than other students do, but this is not the only way to acquire a financial education. Today there are many resources available to help anyone and everyone learn more about how money works and how to use your money more effectively, whether or not you have a background in business or finance. This is even more common today, in the current economic climate, where many people are looking for ways to make every dollar go further.

Government resources

There is an enormous number of government resources available to the general public that can help people learn about various aspects of money management as well as various opportunities and government programs that might be helpful. In fact, virtually every government agency – both federal and state – that deals with financial matters offer consumer tips and resources to the general public. There are so many resources available from the government that frequently they have to create special divisions that serve as a portal to educational resources. For example, the federal government has the U.S. Financial Literacy and Education Commission (mymoney.gov) that attempts to put many of the federal government’s education resources under a single umbrella. Further, if there are specific ideas or concerns – for example, taxes or securities – one can look at the websites of the government agency that oversees these topics and one is bound to find a lot of educational resources available.

Non-profit organizations

Beyond government resources, there are also many local, state, regional, and national level non-profit organizations that specialize in helping average Americans acquire financial literacy. Some of these focus on broad, general topics such as the National Endowment for Financial Education or the Foundation for Financial Planning. There are also many more specialized non-profits that help people learn more about particular aspects of financial literacy, such as issues related to buying a home or credit card debt. Almost every metropolitan area in the United States has one or more of these non-profit organizations and local ones are particularly helpful because they have a better understanding of local conditions and local opportunities that may not be available to people living elsewhere. Many of these non-profits have brick and mortar offices that you can visit and even run free – or inexpensive – classes and seminars for people wanting to learn more about effective money management.

Online resources

Both the government and non-profit organizations provide much of their information to the public via the Internet, but there are also many other resources to be found online. Many of these include free tools and resources that you can use to help make more prudent financial decisions, such as the famous mint.com. You can also find a lot of interactive resources online that you can use to get very specific information about various topics related to money management and prudent financial decision making. However, when looking online one has to be careful about the information that you find. There is a lot of mistaken, outdated, or outright false information online, so if you come across resources or advice that you would like to use, it is essential that you take the time to determine whether this material is valid or not.

Managing my money was a blur before payday loans (Photo: flickr.com)

Payday loans weren’t around when I first learned how to handle money. If they had been (and had I been eligible to apply for them), I’m sure I would have learned very quickly that in the real world you simply don’t get something for nothing.

Many of you have been in this situation before. When you were a child — and I know that you were a child at some point — you may have received an allowance each week. What an exciting time that was! All the hard work keeping up with chores, schoolwork and doing those extra-special things had finally come to fruition. Would you save all your pennies in the robot piggy bank on your dresser? Or would you run down to the local store with that fresh wad of dollar bills and spend it on that toy you’d been eyeballing for some time?

The possibilities were endless

Now, if you were like me, you were a spender. Even when you were at the store purchasing something like those new action figures, toy guns or robots, you had your eye on the next deal. Money was a fluid thing, and you saw no value in holding onto it just so that you could know that you were saving for a rainy day. Let that river run. Grab a tube, hop on and float your way toward some sort of buyers’ paradise.

Unfortunately it didn’t take much to get my parents to give me money. I was an only child, so I didn’t have to share their resources with brothers and sisters. Couple that with the fact that my father was often away from home as a requirement of his job. He felt guilty about that, and that guilt translated into a bit more of a willingness to buy me things if I needled him. Looking back, I truly am ashamed at some of the things that I did — the pouting, the kicking and screaming — but my parents also failed to take control of the situation. Thus, the lesson I learned was that if I needed money, all I had to do was come crying to mom or dad.

They’d give me something for nothing

Essentially, I could get something for nothing. I say nothing because all of the bellyaching and pleading wasn’t even worth its weight in feathers. I never had to pay mom and dad back. If I had, perhaps I would’ve learned something. If the bank of mom and dad operated the way payday loans do, it would have been quite clear that in two weeks the loan was going to be repaid. Not only that, but the fee for applying for the payday loans would’ve been spelled out up front.

But back to the spender I was then. I had no real conception of the value of money. Once I moved out of the house, had a job and had to make payments on rent and utilities, I began to understand that money didn’t exactly grow on trees or out of my father’s wallet. I was a man and I had to take care of not only myself, but my growing family. I would say that there were still occasional times when I went to my parents when I was in a desperate financial situation. They would oblige, but the weight of lessons lost became more palpable each time I rang them in search of quick cash. I knew that the ways of the past would no longer work for me as a mature person, yet old habits were hard to break.

Hiding from creditors wasn’t the answer

So I resolved to handle those little financial snafus myself. That in itself is a noble idea, but in practice all I did was dig myself a hole. Rather than budgeting better and saving more, I entered the world of credit cards. It’s a magical place at first, and I even made my payments on time regularly. But a period of unemployment and medical bills left me in a deep hole when it came to credit cards. Collections notices and calls flew fast and furious, but in my infinite wisdom I decided that I would never have to engage them in any kind of conversation. I was hiding from reality. By ignoring the problem and sending payments when I was able to, I felt that that would be enough. But since I had waited too long to speak with my creditors about forming a reasonable payment plan, they weren’t interested in my occasional payments.

I filed for bankruptcy

It was discharged a number of years ago. Since then, my spending habits have been rather different. I think more in terms of long-term goals than short-term gratification. Oh, I do splurge now and again, but it’s nowhere near as bad as it used to be. The most obvious reminder to me of the way I used to spend money is my music collection. It began in junior high and today I have several hundred compact discs to show for it. I used to spend almost everything I earned on new music.

Today, I make a budget and stick to it. I make sure that I have what I need, and more importantly, that my family has what it needs. When I get involved in anything that deals with money, I refer to my records. It’s nice that way because having documentation of your spending habits paints a very clear picture. You know where your money is going and you know what areas may be cause for concern.

With payday loans, I knew when repayment would occur

That kind of documentation has also been key in the choice I’ve made now and again to apply for payday loans. I remember when I needed to put a security deposit down on my family’s first apartment. I was earning enough money to pay the rent and take care of our other expenses, but the deposit happened to come at a difficult time. It was a very desirable apartment and I needed to put the deposit down quickly in order to secure it. Applying for payday loans to bridge that gap helped me get that brand new apartment. The terms were very easy to understand. All I had to pay was $15 for every $100 borrowed. This amounted to $345 ($300 payday loan plus $45 as the solitary fee). I knew the exact date on which the payment for my loan would be deducted from my checking account, which made it very easy to plan my budget.

If you need payday loans and would like to know where your money is going (and when), click the button to apply here.