Lending Club Blog

Spare the Rod (and the Designer Jeans Too)

The troubled economy has been hurting many families for quite some time, though the effects are starting to be felt by a new group of people: teenagers. Many parents, who have always been the major funding source for their kids’ spending, have started saying “no” out of financial necessity.

The New York Times detailed this trend in The Frugal Teenager, Ready or Not. The article cites a survey that found “discretionary spending by teenagers, whose money comes from allowance, gifts and part-time jobs, had dropped 27 percent to $2,600, from its spring 2006 peak of $3,560.” While a portion of this may be attributed to cutbacks in part-time positions by struggling retailers, reduced handouts from Mom and Dad are likely a key factor as well.

Children asked to cut back on their spending responded in a number of different ways, but disbelief about the reality of family finances seemed to be the most common. One woman found her children more receptive to cutbacks after showing them specifics of their household expenses. It would seem that for all their confidence on the subject of money, few teenagers realize the actual costs of running a household. What’s more, parents who themselves are novices in personal finance have little hope of adequately teaching the subject to their children.

It’s not surprising for children who have always gotten what they wanted to be confused by difficult times. In many cases it’s more likely the parent’s fault for having always said yes. Regardless of where the blame lies, it is difficult to find a solution to this case, if one even exists.

As more children become affected, the problem may moderate itself to some degree. Frugality and thrift could become trendy as more children engage in the practice out of necessity. That, along with an increased awareness of financial constraints and learning to decide between multiple wants could be a real positive outcome of this whole mess. Whether you’ve always given your children just what they’ve needed, everything they wanted, or some combination of the two, now is an excellent time to further their financial education. You’ll likely learn something along the way as well.

Have you recently had to curtail your children’s spending? How did they react?

Saturday, November 29th, 2008 at 3:53 pm

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