How the Recession Changed Young People’s Attitudes About Money

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Everyone knows someone who grew up during the Great Depression, and as a result, eats green beans out of the can and sews up holes in socks.

The recently released Charles Schwab 2011 Teens & Money Survey (PDF) suggests that, in some small way, the recession may have instilled a similarly conscious attitude about money in young people who lived through (or are living through, as 80% of teens surveyed did not feel that the recession was over as of late February and early March of this year) The Great Recession. Some highlights from the data, which comes from an online survey of 1,132 American teens between the ages of 16-18:

  • “93% say their family was impacted by the recession (55% say ‘a little’ and 38% say ‘a lot’).”
  • “64% say they are more grateful now for what they have.”
  • “58% say they are less likely to ask for things they want.”
  • “73% say it’s important to have enough emergency savings in case times get tough.”
  • “77% describe themselves as “super savers,” and only 23% say they’re “big spenders.”

That’s the good news. The bad news is that the generation that was raised on the self-esteem movement has unrealistically high expectations for their careers. The average teen expects to earn a starting salary of $73,000. The national average for new college grads is just $50,034, meaning that students who sign up for student loan payments based on their salary expectations are likely headed for disaster.
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And now we get to the problem with the poll. The report claims that “… when probed about specific areas of knowledge, they reveal significant gaps. Only 35% know how to balance a checkbook or check the accuracy of a bank statement or how to manage a credit card; only 31% understand how credit card interest and fees work or what a credit score is; only 25% know whether a checking cashing service/store is good to use; only 22% know how income taxes work; and just 17% know what a 401(k) plan is.”

But their way of testing whether people know how credit card interest and fees work was to ask them if they understand how credit card interest and fees work.

Let me make a confession: I write about money — and am sometimes referred to as an expert — but I don’t even know whether I would claim to really understand how the byzantine world of credit card interest and fees works. I would be stunned if 35% of high school students actually understood how credit cards work. As Dave Barry writes in Money Secrets: Like: Why Is There a Giant Eyeball on the Dollar?:

I believe [credit card companies] put random, meaningless numbers on our statements, because they know that we, their clueless math-impaired customers, will not challenge them. It would not surprise me to learn that the credit card companies have an industry-wide competition to see who can get a consumer to accept the most absurd credit card balance.

I would actually look at the increasing percentage of young people who say they don’t understand credit cards as good news; maybe this will instill in them an entirely justified fear of the financial services industry.

In all, the poll results show that young people claim to be more conservative about money than they were a few years ago. I’ll believe it when I see their credit reports in 10 years.