American teenagers spend an astounding nine hours a day with digital technology, watching videos, listening to music and playing games. And if you think this is just a US phenomenon, consider that 90% of children under the age of 18 in China have access to a mobile phone, comparative to the US's staggering 88%. Specifically in the teen years, aged 13-17, a survey by the nonprofit Common Sense Media found that 95 percent of U.S. teens have their own mobile device, spending an average of 7 hours a day on screentime. The impact on social norms has been immense: Teens are spending more hours with media and technology than they do with their parents, time in school, or doing any other thing. This complicates the task of educating teens on financial responsibility, an historically parental duty.
With all the technology at their fingertips, teens still typically use cash for money management and spending. After all, credit cards in the hands of teens can be a scary prospect! We know that teens are comfortable with technology, and anyone who has been around a typical teenager knows full well they are comfortable spending money (albeit, someone else's money). But just because they are comfortable with using technology doesn’t mean they’re learning good money management or how to spend money responsibly online.
According to a survey by Junior Achievement, 84 percent of teens look to their parents for information on money management. However, 32 percent of kids feel that their parents don’t talk to them enough about how to manage money. (Hint to teens: See stats above and get your head out of the phone for a few minutes to talk to your parents) In fact, most U.S. teens admitted they lacked the knowledge to understand how to effectively reconcile spending with savings and investing. Budgeting is the first thing kids should learn. Could using a credit card help?
Recent findings suggest that some parents are already embracing the idea of credit cards for their children. In a report that T. Rowe Price published this year, 17 percent of parents of children ages 8 to 17 said their offspring had credit cards. “I view a credit card as a tool,” said Jack E. Kosakowski, president and chief executive of Junior Achievement USA, a nonprofit group that promotes financial literacy and entrepreneurship among young people. “If parents use it as a teaching opportunity, it’s a great thing.”
Of course, the magic is in the discussion that the parents can have with their children when that monthly bill comes. Parents can show teens the difference between paying the minimum payment due on their monthly credit card bill versus paying down their debt as soon as possible. The credit card can be the perfect tool to introduce that conversation every month. Teens can get comfortable with spending and really understand what can happen should they let things get out of hand. Having remote controls over credit cards will ensure parents and teens get spending limit alerts and remote management to turn the card off should a card get misplaced. "I swear it's in my locker at school."
Programs that are for teens and their parents together might be the answer. Kids still lean on their parents for this education, and yet many parents struggle with money management themselves. As a credit union, you can help by providing events, webinars and materials that the whole family can use. You can also cater to a teens preference for technology and offer online calculators, videos and interactive tools that illustrate these basic financial principles. Create materials that talk about issues specifically for teens, such as safe online shopping, spending within limits and how to keep card data safe.
Financial educators recommend parents start slowly and introduce responsibility as the teen earns it. Starting with a savings account, then adding a checking account with a debit card and then perhaps a credit card. As a credit union you can make it easier for parents to help get their kids started down the path to a financially responsible future.