Teenagers and the Economy

Teenage girl with cash

My buddy Jimmy and I have been friends for over 35 years.  We grew up together.  We went to Mass. Maritime together.  We always had each other’s backs.  Jimmy always could carry a room with his left-handed humor and his amusing Irish-wit.  Jimmy married his high-school sweetheart, Maureen, the same year Jill and I got married.  We all had kids around the same time.  Jimmy and Maureen have three kids like Jill and me.  Unfortunately, with all the kids schooling and sports over the years we lost touch a bit, so I was pleasantly surprised when I received a call from him last Monday.  Folks, you know the kind of call, you catch up on old times, talk about work, economy, a little politics before moving into life in these crazy times. If there is one thing ol’ Jimmy and I have in common . . . teenagers! 

So I asked him how his kids were, and he joked that now that his youngest has gotten her driver’s license, he’s just her “ATM.” I thought he was referencing some sort of texting abbreviation like LOL or OMG. He quickly clarified and said, “No Jeff, I use to be a chauffeur and an ATM, now I’m just an ATM, dispensing cash.” 

Hmmm . . . I missed Jimmy.

I chuckled and told him my daughters would be surprised to know that there’s someone out there as skilled at telling “dad jokes” as I am. But after we hung up the phone, I got thinking about teenagers and their relationship with money. In particular, I started wondering how that relationship is being impacted by the economy at large and what’s changed for them between high school and early college days. So, last weekend I did a little digging and this week I would like to spend our time together to share what I learned.

When I started to look into teenage economic behavior, I found that they behave pretty much like the rest of us when it comes to the strength or weakness of the economy. In fact, a recent study by Analysts at Piper Sandler showed that teenage spending during 2020 had slowed to the lowest levels since the turn of the century. The study looked at the responses of 9800 teens in the US with an average age of 15.8 years old. Among teens ages 15 to 19, average annual spending dropped 9% from last year to $2150.  This was even lower than a significant trough in teen spending that occurred during the great recession a decade ago. 

Far from being irrational or unpredictable, teenagers have actually dealt with the pandemic much like the rest of us.  As I think about that, it makes sense because they are experiencing some of the same dramatic changes as the rest of the world. The vast majority of teens aren’t going to school anymore. Instead they are participating in virtual school or some sort of hybrid of online and in person learning. In addition, teens just aren’t experiencing the opportunities to socialize in person outside of school, also limiting the opportunities to spend. While the pandemic may have caused teenagers to reel in their spending, the shift to lower teen participation in the retail marketplace was already a trend prior to Covid-19.  Teens had spent less in each successive year from 2014 through 2018 before starting to climb in 2019 prior to the pandemic.

One longer range trend that might explain lower teen spending is that the number of teens in the workforce has dramatically declined since the 1980s. In 1979 roughly 60% of teenagers had part-time employment. That number has shrunk to 33% as of the summer of 2020, including a 4% decrease from the summer of 2019. Most of that is attributable to a shift in how Americans view what the teenage experience should be. There is a much greater emphasis in completing high school and going on to secondary education these days, for one thing.  High school graduation rates, which hovered around 77% from 1975 to 2000, are reaching all-time highs and are now around 85%. High school students are finding a more demanding educational experience with things like advanced placement classes and colleges looking at public service as part of their admission process. The modern teenager isn’t lazy, but instead finding their focus on increasing their educational profile rather than increasing their discretionary income.  

Even if teenagers are spending less, they probably should not be disregarded when it comes to consumer spending.  They can be as powerful as almost any group in defining new trends in society when it comes to cultural issues like fashion, music and entertainment. They often influence how their parents spend money, too, particularly when it comes to technology – such as smart phones and anything that’s electronic with a screen.  Even though old folks like Jimmy and I like to complain that today’s teens are too reliant on technology, we best be careful.  The teens of today may soon be creating the technology that is keeping me alive and healthier thirty years from now.  

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, Mansfield & Southlake, TX. Jeff can be reached at jeff@cutterfinancialgroup.com.

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