Of all the demographics with a strong opinion on their financial fortunes, who knew America’s youngest would be the most worried about their financial futures?
Yet that’s exactly what a new study from Junior Achievement and Citizens Bank claims.
According to the report, stressed high school students are worried about their financial futures, with more than half (54%) of teenagers saying they’re “unprepared” to finance their futures.
More than two-thirds of teens (69%) say that rising education costs have affected their plans for additional education after high school.
And while 31% of U.S. students don’t expect their plans to be impacted, almost as many (28%) say they are now only considering in-state schools for college, while 22% plan to live at home and commute to college, and 10% are considering getting a two-year degree versus a four-year degree.
The report, which indicates wide-ranging concern among teens regarding financial anxiety and the future, also points to a digital divide between the haves and have-nots, which further holds many lower-income teens back from a decent college education.
“Of those teens planning to pursue a four-year degree, two-thirds (66%) expressed some level of concern about having the technology needed to complete a degree,” the study noted. “Factors that contribute to this concern include the cost of devices (52%) and poor Wi-Fi access/connectivity (28%). This lack of access becomes an inhibitor to young people to learn, work and even go to college.”
An “Overlooked” Demographic
America’s teens have good reason for expressing doubt about their financial futures as the national debt has exploded, home prices grow increasingly out of reach, college financing via student loans has imploded, and public schools and parents de-prioritize financial literacy.
“Yes, teens are an overlooked demographic when it comes to money and finance,” said Courtney Hale, founder of Super Money Kids, a financial literacy organization geared toward young Americans. “It’s evident when you consider that 38 states do not require personal finance as a high school graduation requirement. It’s evident when realizing that the cost of college increases at double the rate of inflation which means that the cost of college doubles every nine years.”
Teens absolutely have a right to be worried about their financial futures, Hale noted.
“Beyond the skyrocketing cost of college, there are not enough “good” jobs to employ our graduates,” she told TheStreet. “More than half our college students will be unemployed or underemployed following graduation. We’ve entered an era where college might be a bad investment for some kids.”
Getting Teens on the Right Path to Financial Literacy -- and a Better Financial Future
American parents should be on the front lines of financial literacy. It’s their kids, after all, whose financial futures are threatened by actions taken by adults.
“In age-appropriate ways, acquaint children with the importance of saving for the future,” said Patricia Roberts, chief operating officer at Gift of College, Inc., in New York, N.Y. “For example, when a child receives a cash gift, for instance, encourage them to deposit a portion of it in a savings account. Also, introduce your children to the manner in which you are saving for emergencies, shorter-term goals like vacations or things you need or want to buy for your home, retirement, and post-secondary education.”
Roberts offers parents some more tips to get their kids financially ready for college and beyond.
Educate kids on college savings accounts. If you have a college savings account earmarked for your child, show them a copy of the statement and explain how you are funding it. “Research suggests that low- and moderate-income children who are aware that someone is saving for their future are three times more likely to attend college and four times more likely to graduate from college,” Roberts told TheStreet.
Walk the Talk. Children learn more by what they see than what they are told. “Parents have the opportunity to model healthy financial behavior and this is extremely valuable especially when financial education is not offered in school or elsewhere,” Roberts said.
Change the gift equation on family celebrations. Parents should encourage friends and extended family to skip unnecessary stuffed animals and other gifts (like clothing that is quickly outgrown) for special occasions.
“Instead, consider contributing to a child’s college savings account,” Roberts said. “With 18 birthdays and at least 18 holidays between birth and higher education, these gifts can add up over the years and can help cover a portion of a child’s educational pursuits. A gift toward higher education is a gift that won't be outgrown and as such, is a win for all involved.”
Educate kids about budgeting. Likewise, in age-appropriate ways, parents should talk to their children about the family budget and give them an opportunity to weigh in on what could be reduced or eliminated.
“This can help to reinforce the concept that how much you can save has a lot to do with how much you spend,” Roberts said. “Reducing everyday expenditures even slightly can lead to big savings.”
For instance, when expenditures are lowered and savings are invested monthly over eight years (from the time the child is 10 years old until age 18) with an estimated five percent annual rate of return . . .
-- Cutting costs by $1.00 a day can yield approximately $3,500
-- Cutting costs by $2.50 a day can yield $8,800
-- Cutting costs by $5.00 a day can yield $17,600
-- Cutting costs by $10.00 a day can yield $35,300
Above all, parents shouldn’t panic about their kid's financial futures, even as the challenges stack up.
“Just make sure to plan,” Robert said. “With help, small consistent steps toward saving for future expenses coupled with sensible decisions along the way, we can help kids achieve their financial goals."
