Readying Teens to Live Within Means

Train up a child in the way he should go, as the saying goes, and when he is old, he will not depart from it.

Somehow that lesson gets lost for many families when it comes to teaching children about money -- even though there are a number of government agencies, nonprofits and private companies promoting financial literacy.

As parents, we know it's imperative to teach our kids to say no to drugs and alcohol. But can we honestly say we're doing enough to help them fend off consumerism and credit dealers? I'm doing my best but I could do better.

Most important, are you training your children to live off an average salary as young adults? Or are they now living so large based on your income that they will be incapable of managing their finances on a modest starting salary once they get into the real world?

According to one survey, today's teens expect to make big bucks when they reach adulthood. But what they know about personal finance won't help them live off what they most likely will earn. That disconnect is part of the reason why there are so many adults in credit card trouble or struggling to manage mortgages on homes they can't afford.

American teens believe, based on the career that interests them the most, that when they get older they will be earning an average annual salary of $145,500. Interestingly, boys expect to earn an average $173,000 a year and girls $114,200, according to the findings of Teens and Money, an annual survey released last month by Charles Schwab and the Boys & Girls Clubs of America.

The fact is, only about 14 percent of U.S. households have incomes between $100,000 and $200,000, reports the U.S. Census Bureau. The median household income in the United States is $46,326, according to the latest census figures.

While it's true that adults with advanced degrees earn more than those with just high school diplomas, many college students won't know how to get by on what they make once they graduate.

Adults with bachelor's degrees earned an average of $54,689 in 2005. Take out taxes and add in student loan and credit card debt and our young people have got a lot less to live on than they're expecting.

"It's great that teens are optimistic about their futures, but the reality is that these kids will face financial choices and decisions that are far more pressing and complex than anything their parents or grandparents ever encountered," said Carrie Schwab Pomerantz, chief strategist of consumer education at Schwab.

It's fine that teens hope to earn high incomes, but just in case things don't turn out as they plan, you've got to teach them to live within their means. That's key because there's a level of financial confidence among young people that doesn't reflect what they actually know about how money management, the Schwab survey found.

Nearly two-thirds of 1,000 teens surveyed by Schwab said they were prepared to deal with personal finance issues once they graduated from high school. The majority said they were knowledgeable about money management, including budgeting, saving and investing.