Batten Down the Hatches
After 2.5 years of economic chaos, it's no surprise that the future is a bit murky at best. Having lived through Covid-19, a worldwide shutdown, supply chain unrest, a war in the grain capital of the world, outlandish natural gas prices, and even Monkeypox, it's safe to say that at this point anything can happen next. Now imagine you were a teen, who has spent some of your formative years hearing all these negative economic milestones on an endless loop. Although you might think your teens are not listening, it is time to set them up for success when it comes to the economy. As the father of a 14-year-old myself, and two other young adults, I would encourage you to have this conversation with your children openly as you teach them about money.
Unfortunately, economists do not have a crystal ball, and can’t say for certain what the economic future holds. If you are a betting person, odds are that things will get wilder before they calm down. “Historically the economy has always been going up and down,” said Yiming Ma, an assistant professor at Columbia University. And if you knew you were bound to get a cold, you would take precautions and make preparations for dealing with it, as well as teach your kids how to handle it. It is important for consumers to understand what they could encounter in order to best prepare.
Although the economic world is uncertain at best, there are some negative downturns that have come to light, and it is important to inform your children without scaring them. According to a report at the Deloitte Economist Network, “Inflation rose to 9% in June from 8.6% in May, demonstrating that inflation has likely yet to peak. This unabated surge in inflation is likely deteriorating consumers’ purchasing power, with real weekly earnings down 5.6% since end-2020 despite a 6.6% rise in nominal earnings.” With the cost of staples such as gas and food, consumers are spending less on big purchases to offset this. Also, discretionary spending, from quick trips to buy a fancy coffee, to more substantial trips or treats, is also on the downward trend. Unfortunately, these are probably the trips that are going to hurt your kids the most.
According to the Conference Board, “Consumer confidence fell for a third consecutive month in July,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.” In light of all of the bad news, it is time that consumers made some moves to prepare for the precarious future.
Lean Into the Storm
So just like the motto of the Boy Scouts to “Be Prepared,” it is a good idea to set your teen up for dealing with what is bound to be a wild ride in the next few months. Experts recommend a few tangible things you can do to recession-proof your teen.
Now is the time to teach your teen to take a closer look at the way they spend their money. Although no one really likes to be locked into a certain way of spending, (especially young people!) with such uncertain times ahead it is a good idea to plan. “By understanding what money you are getting and what you are spending, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corporation’s Money Smart, a financial education program. This is important so that you don’t overspend, especially if inflation gets worse or things get harder.
Cut Out Credit
This is definitely not a good time for your teen to max out their credit cards, and credit cards in general can be a hard lesson to learn for young people. With interest rates growing and an uncertain market, hold on to as much money as you can and avoid any discretionary spending that you can." Job security tends to be worse when a recession comes, it's not a great time to accumulate debt," said Ma. This can be a hard conversation to have with your teen who wants to spend money from their summer job, or doesn’t see a problem with credit, but you need to!
Ration Your Cash
As the old saying goes, it is a good idea to save for a rainy day, and this is an invaluable lesson for your kids. If you don’t know how exactly to help your teen get started, take the help of a program like America Saves, which is a non-profit campaign by the Consumer Federation of America. Not only can they help you understand how you can get your bills paid, meet your needs, and still have money leftover to save, they can also set young people up for a lifetime of good money management. Make sure to check on your savings account and shop around for a better deal if possible, and keep an eye on monthly fees or other hidden charges.
Protect Your Provisions
Sometimes people get stuck in a rut, for example in grocery shopping, and they are not finding the best deals but merely doing what they have always done. According to the United Nations, world food prices have risen by 50 percent. Teach your children to look for the best deals, and not just do what is convenient. As the price of groceries has risen, experts recommend doing some research about where the best prices are. “A lot of stores have price matching, so if you show them that a competitor is selling the same product at a lower rate, they’ll match that,” Kia Mccallister-Young, director of America Saves said.
The horizon is foggy but you can teach your children how to weather the storm by following the simple tips above. This will set them up for a lifetime of success. Even the experts don’t know where the current will take us, but with a few simple moves you and your teen will be more secure in your moorings.