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 Turns out most kids think they'll soon earn six-figure incomes. Here's why their expectations are so removed from reality and how you can help your offspring avoid the fallout.
Plenty of adults are delusional about money, so it shouldn't come as too much of a shock that teenagers can be unrealistic when it comes to their future finances. Still, the extent to which teens misjudge their prospective earning power says something interesting -- about them and about the rest of us.
Tidbits from the "Teens and Money" survey Charles Schwab released earlier this year are referred to in this article. This poll of 1,000 Americans aged 13 to 18 from a variety of socio-economic backgrounds found that 73 percent believed they would earn "plenty of money" when they become adults.
In fact, the teenage boys expected to make an average $174,000 annually. Teenage girls expected to earn $114,200.
The reality check:
- Median earnings of men who worked full time, year round in 2005, the latest year for which Census Bureau statistics are available, was $41,386.
- Women working full time made a median $31,858.
- Fewer than 5 percent of the U.S. population makes more than $100,000, according to the bureau. Only one household out of six report a six-figure income, according to the Federal Reserve's 2004 Survey of Consumer Finances.
Great expectations
You might expect teens to overestimate their potential earning power if they were planning to become professional athletes, actors or recording artists. But the most popular of the 20 career options were medicine (including jobs as doctors, nurses and medical technicians), technology (including jobs in programming, network operations and computer repair) and teaching.
Yes, teaching. Now you begin to see how truly out of whack these kids' earnings estimates are.
So what, you might say. Let the kids have their fantasies. They'll find out the truth soon enough.
But that's the problem. These adolescents will soon be making decisions about money that will affect their lives for years, even decades, to come. Those who misjudge their earning power could:
-Take on crippling student-loan debt. These debts cut into their ability to save for retirement, buy a home or meet other financial goals.
-Overspend on credit cards. Eight out of 10 college students have at least one credit card, and many graduate with significant balances.
-Overspend on everything else. People who don't understand that there are limits to their financial resources, and that tough choices must be made, are suckers for a credit industry that's happy to let them overspend.
-Fail to take advantage of the time value of money. Once overcommitted, young people find it tough to come up with even the paltry amounts it would take to make them rich in their later years.
3 things parents can do
So what's the antidote? Most parents don't want to quash our children's dreams, but there are ways to tune them into reality. For instance:
Talk with your kids about their career aspirations. Have real conversations about their interests and what jobs might suit them and research together what those jobs actually pay. Contrast that with what people typically spend on shelter, food, transportation and other living expenses in your area. (If you're comfortable revealing details of your family's finances, you can show them what you spend.)
Give your kids some hands-on experience with money. If your children's only money skill is knowing how to successfully nag you into buying something, they will be woefully unprepared for the real world -- either that, or you'll still be supporting them when they're 50. Better to start turning chunks of cash over to them now, either in the form of an allowance or in payment for work around the house, and let them make decisions on how to spend it.
Adjust your own attitudes about money. Recognize that even if you do win that raise, or that lottery jackpot, you'd adjust pretty quickly to the improvement in your circumstances and would soon want even more. That's not to say you shouldn't be ambitious or want to improve your family's financial circumstances -- far from it. But expecting money to be the magic-ticket solution to all your problems is just as unrealistic for you as it is for your teenager.
-From MSN.com (Liz Pulliam Weston, author)
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