Why Do Teens Need Money?

Eighty-three percent of teens don't know how to manage money, according to a 2012 survey by ING Direct, as reported in Fox Business. Teens lacking money knowledge often become college students taking on long-term student loans and short-term credit card debt understanding little about the cost of credit. They don't know how to evaluate and compare loan opportunities or financing terms. Many lack even the most basic personal finance management skills, such as budgeting, graduating college and entering the job market already burdened by serious debt. Teens need money to learn financial management skills, essential to adult success.

  1. Where Teens Get Money

    • American teenagers are a powerful force in the consumer goods market. The annual spending power wielded by American youths between 8 and 24 years of age soared past the $200 billion mark, reaching $211 billion, as measured by a 2011 Harris Interactive Poll. Many teens work for their money, with 44 percent of teenagers engaged in part-time employment, according to Fox Business. Parents are another major source of money for teens, although only about 30 percent of teenagers receive a formal allowance from their parents. Birthday and holiday gifts figure significantly in a teenager's annual spending.

    How They Spend It

    • Teens in the United States spend a significant percentage of their money on clothing, personal care products and food, according to a 2013 article published in "The Atlantic." Clothing consumes about 21 percent of the average teen's money, with another 9 percent spent on shoes, closely followed by 18 percent used for food and about 10 percent for assorted personal care items, including hair products and cosmetics. Other expenditures include movies, music, concerts, electronics, video games and automotive expenses.

    Not Required in Most Schools

    • With a market share that surpasses $200 billion annually, clearly teens are spending money. However, there's more to money management than spending. Many teens are entering adulthood without the financial skills they need to function as adults. Most high schools don't teach practical financial skills, such as calculating interest and budgeting. In 2009, the federal government initiated the National Financial Capability Challenge, an online program for teachers and students, reports ABC News. The goal was to encourage schools to teach financial skills, theorizing that low levels of financial knowledge contributed to the recent economic recession. Just 22 states require high school students to take an economics course to earn their diploma, according to the Council for Economic Education.

    Less Money, More Learning

    • Teens need money to learn how to manage it, but not so much that no management skills are required, according to journalist and financial expert Jean Chatzky. The allowance is a powerful teaching tool often used incorrectly, explained Chatzky in an interview with Charles Schwab Foundation president Carrie Schwab-Pomerantz. An allowance shouldn't be set too high. The amount should require financial choices, so teens learn to prioritize spending, distinguish between wants and needs, and develop saving plans for costly expenditures. Teach budgeting and living within means by being firm about not advancing allowance money if teens run short or want extra for a purchase, says Chatzky. Instead, offer tasks to earn additional money for a practical financial lesson and valuable life learning.

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