Teens' Financial Expectations May Be Overly Optimistic

March 27, 2007 (PLANSPONSOR.com) - Teenagers expect or want financial independence, but their knowledge of financial matters falls short of what they need to know to be successful in the adult financial world, according to a recent survey by Charles Schwab & Co., Inc.

The annual Teens & Money survey found that teenagers expect (86%) or want (88%) to be free of their parents’ financial safety net by the time they are 25; however, only 41% consider themselves knowledgeable about how to budget money, how to pay bills (34%), how credit card interest and fees work (26%) or whether a check cashing service is good to use (24%). Fewer teens know how income taxes work (14%) or what a 401(k) is (13%).

According to a press release on the survey, teens want to learn more, but aren’t getting the financial coaching they need.

Nearly nine in 10 (89%) say they want to learn how to make their money grow, 65% think learning about money management is interesting and 60% say that learning about money management is one of their top priorities. However, only 30% believe their parents/guardians are concerned about making sure they are learning the basics of smart money management.

Even if they are lacking the knowledge to take responsibility of their finances, the teens surveyed are confident they will be making money and consider making money an important goal. American teens confidently predict, based on the career that interests them most, they will be earning an average annual salary of $145,500, when only 5% of the U.S. population currently earns a six-figure income and the average national wage stands at approximately $40,000.

Other results of the survey include:

  • Teens spend an average of $19 in a typical week, with the majority (59%) making purchases online.
  • 84% also have some money saved, with average savings of $1,043.
  • Teens are more likely to have a cell phone (74%) than a savings account (60%).
  • 29% have incurred debt (close to $300, on average).
  • 51% believe that “it is easier to buy things with a credit card than cash, and given the choice, 29% would actually prefer using a credit card.