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Carrie Schwab Pomerantz Money-Smart Families

Carrie Schwab Pomerantz, Money-Smart Families

Kids' Money Expectations and the Gender Gap

by Carrie Schwab Pomerantz

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Posted on Tuesday, April 24, 2007, 12:00AM

Today's teenagers, like generations before them, are looking forward to financial independence. But are they really prepared, intellectually, for the responsibilities of adult life? And how do boys and girls differ when it comes to thinking about their financial futures?

These were some of the issues addressed by a recent Schwab survey on teens and money. The results were a bit surprising -- and instructive, for teens and, in particular, for their parents.

Mixed Findings

According to the teens polled, the next generation of American workers is very confident about its collective ability to earn a good living and to address the financial responsibilities of adulthood.

On the one hand, that's reassuring; it would've been disconcerting to discover pessimism on the part of teens about their income-earning potential as adults or their ability to deal with personal finance issues when they enter the world of careers and salaries, mortgages and debt, and investing and planning for retirement.

But on the other hand, the findings also suggest that this generation may be too confident, even naively so, about their future. Teens have what seems to me an overly rosy view of their future earning potential. And I was quite surprised by some of the differences between the sexes when they consider how they're going to fare when they enter the workforce.

I've always felt that parents are the most vital source of information about personal finance for their children; after all, "Money Management 101" isn't offered in very many schools' curricula. But the results of this year's survey have convinced me of three things: first, that the gender gap is (sadly) alive and well; second, that too few parents are making the effort to educate their children about topics like budgeting, using credit wisely, and investing; and finally (here's the good news), that kids are eager to learn -- and they want to learn from their parents.

Different Genders, Different Visions

My generation was brought up to believe that women could have any job we wanted, but we entered the workforce knowing that the gender gap -- the much-discussed disparity between the incomes of men and women -- was real. Nevertheless, I was shocked by how much of a gender gap exists in the expectations of today's teenagers.

For instance, about 81 percent of the boys surveyed believe they'll earn "plenty of money" when they take their place in the workforce, but for girls, the figure is significantly lower at 65 percent. And when asked to estimate their annual salary as adults, boys, on average, believe they'll make $173,000 a year while girls expect an average of $114,200. That's a substantial difference.

I confess that I'd hoped girls would see themselves on a more equitable footing with the boys, especially given the fact that girls appear to be the more industrious gender, according to the results of this survey. Forty-five percent of the girls report that they currently have a job or work occasionally compared to just 29 percent of the boys.

This budding work ethic will certainly serve girls well when they enter the workforce as women. But why do girls have lower expectations than boys about their earning potential?

Managing Expectations

I don't have a great answer, and I realize that the gender gap is a huge cultural and societal issue that can't be solely addressed by parents. But I also believe that parents need to be aware of their kids' expectations, particularly since two-thirds of teens (both boys and girls) agree that men tend to earn more than women.

And while this may be true today, we need to remind our girls that there's no reason to automatically assume they'll make less money than their male counterparts (for similar jobs, hours, and responsibilities, of course). It's just possible that expecting less could translate into accepting less or being less assertive about negotiating salary requirements or raises.

At the same time, there's something a bit startling about these inflated income expectations; you should remind children of both sexes to be a bit more realistic about what they can hope to earn in their chosen careers. After all, according to the U.S. Census Bureau, just 5 percent of the American population earns more than $100,000, and based on Bureau of Labor Statistics data the average national wage is approximately $40,000.

Your kids could be in for some unpleasant surprises when they enter the workforce. I'm not talking about crushing their dreams, but setting more reasonable expectations will help them understand the need for prudence and planning when it comes to their financial lives.

A Lack of Preparation

I can't speculate about the sources of kids' optimism, but it extends beyond expectations about future income-earning potential. In fact, the survey found that nearly two-thirds (62 percent) of American teens believe they're prepared to handle adult financial responsibilities after high school.

Here again, the teens' confidence may be slightly misplaced. Most teens actually don't have a firm grasp of the basics of personal and consumer finance, let alone more sophisticated topics. Just 41 percent consider themselves knowledgeable about budgeting. Only 34 percent know the mechanics of paying bills. And a mere 26 percent understand how credit card interest and fees work, which is particularly alarming given the prevalence of the credit card as an important financial tool.

As for slightly more advanced financial know-how, the level of knowledge is even scantier. Just 14 percent of the teens say they understand how income taxes work, and only 13 percent of them know what a 401(k) plan is.

A Desire to Learn

The message to me is unmistakable: Today's kids, boys and girls, don't have a solid grounding in financial realities. They need to know more about personal and consumer finance. The good news is that they want to know more.

Nearly 9 in 10 (89 percent), for example, say they want to learn how to make their money grow, and almost two-thirds (65 percent) believe that learning about money management is interesting. Further, more than half of them (60 percent) say that learning about money management is one of their top priorities. But they're not getting these lessons from their parents: just 28 percent report that their parents or guardians are giving them actual experience with "budgeting, spending, and saving."

The call to action couldn't be more obvious: It's up to you to educate your kids about money. Open savings accounts for them, and encourage them to save. Teach them about the need to pay off credit card bills monthly and the real dangers of credit card overuse (credit cards are cash substitutes, not income extenders). Help them plan for future purchases -- as I like to call it, "the pleasures of delayed gratification." Include them in your own financial chores, from the simple act of paying your bills to more sophisticated tasks like managing your 401(k) plan. Consider getting them involved in the financial markets, perhaps with small custodial accounts or by allowing them to "look over your shoulder" when you're managing your money.

And, of course, encourage them to ask questions. You'll be giving them a solid financial foundation: a core of knowledge, confidence, and wisdom that will serve them well as they continue on their journey to independence.

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51 Comments

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  • Yahoo! Finance User - Sunday, February 10, 2008, 4:33PM ET  Report Abuse

    • Overall: 3/5

    The gap difference in expected income between males and females should not come as a surprise. Generally speaking, the average female teenagers look up to spoiled brats such as Paris Hilton and watch shows like The Real House Wives of Orange County. These types of shows do nothing that would help them compete with males for jobs later in life. The only message they can really learn from them is to marry someone rich and hope that they're husbands are not smart enough to get a prenuptial agreement.

  • Yahoo! Finance User - Friday, February 8, 2008, 3:36AM ET  Report Abuse

    • Overall: 5/5

    Carrie Schwab's writings for Yahoo! Finance were to last for a short time only last year. That is why a new article hasn't posted for so long. I found her articles to be excellent and full of sage advice for parents bringing up money-sensible children.

  • Yahoo! Finance User - Tuesday, January 29, 2008, 8:58AM ET  Report Abuse

    • Overall: 1/5

    I heard that she died, but it is ok, because her columns were worthless anyway!

  • RobertK - Thursday, January 24, 2008, 5:43PM ET  Report Abuse

    • Overall: 3/5

    The problem is that teacher and advisers don't want to tell student anything that might discourage them from being all they can be. So when Johnny says he wants to be social worker and thinks social workers are rich, teachers or advisers don't correct them. This is probably also a product of the fact that people in the teaching field are becoming more and more liberal minded. To a liberal, salary means absolutely nothing, so they also don't feel it is even important enough to bring up. My nephew wants to be a video game designer and he thinks it will pay millions. I sent him to a website hosted by a company that hires video game designers saying they only start at around $20,000 a year and he decided they must just be lying. He is getting ready to take out $70,000 in loans just to get through an overpriced 2 year program for this major and is sure it is a good investment. None of his advisers or teachers have given him the slightest indication that this might be a problem.

  • Yahoo! Finance User - Sunday, December 30, 2007, 11:43AM ET  Report Abuse

    • Overall: 1/5

    Who gave this feminazi a job?

  • Yahoo! Finance User - Tuesday, November 27, 2007, 12:56PM ET  Report Abuse

    • Overall: 5/5

    get rid of PT and RK.

  • Yahoo! Finance User - Friday, November 16, 2007, 11:24AM ET  Report Abuse

    • Overall: 2/5

    Why does the difference in earning expectations between the males and females in this survey have to be about "gender gap"? Why cant it just be that the girls have a better grasp on reality then the boys in this survey? I have to agree with a previous comment, to interpret such information in the way that the author did, shows a specific bias in her perspectives. Though I certainly understand that optomism is essential to success, but she was talking about the "work force" which I have yet to see anything that resembles my perspective of success in the work force. But I will agree with the author that there is no financial education for children today. Though I found it quite funny that the author considers there to be a level of financial sophistication in managing your 401K. I woud say that sophistication comes into play when dealing with investments that make a good return. Maybe somthing 100% ROI or more. Anyway, E for effort. :-)

  • Yahoo! Finance User - Wednesday, November 14, 2007, 11:31AM ET  Report Abuse

    • Overall: 5/5

    Excellent Article. I am a 36 year old male and learned on my own at an early age how to be responsible with money and how to save. From newspaper routes when I was 10 until my first real job at 16, I have always worked, even through college. I now have two young girls under age six and have already begun teaching them about savings accounts and about their 529 plans. I do not want my children to fall into the financial trap that catches so many other children nowadays. I can see in my own neighborhood where some of the poor financial problems arise. My next-door neighbor has four boys at her house ranging from age 17 to 23. Not one of them works, but they do have time to skateboard in the driveway and play drums in the garage all day long. My other neighbor a few doors down has two teenage girls in high school, and they are both working part-time jobs. Guess which neighbor's financial guidance I have more respect for?

  • Yahoo! Finance User - Thursday, October 18, 2007, 9:16PM ET  Report Abuse

    • Overall: 1/5

    "Women are the more industrious gender according to your survey" That statement is false and shows that you look at things from a militant feminist viewpoint to even print such garbage !!!!

  • Love2Fly - Saturday, October 13, 2007, 4:12PM ET  Report Abuse

    • Overall: 3/5

    I don't know if there is or isn't a gender, frankly I'm tired of all the whining. I do agree kids have to be taught at an early age. I stand pretty good financially (savings, 401K, IRA, CD's, and Stock Options) with a yearly income of less than 6 figures; However, my parents did not teach me a whole lot about finance. I learned about 401K, IRA and Stock Options years after I started my first job, I think you should prepare your kids beforehand and teach about most benefits out in the corporate world.

  • Andrew - Saturday, October 13, 2007, 1:20PM ET  Report Abuse

    • Overall: 1/5

    Well of course there's a gender gap between girls and boys expectations of the furure.They're constantly being told, by the liberal, feminist media that men earn more money for the same work. I'm sorry, but It simply isn't the truth. Apples are being compared to oranges, every time. But kids don't know that.

  • Yahoo! Finance User - Wednesday, October 10, 2007, 11:23PM ET  Report Abuse

    • Overall: 3/5

    I don't think generation Y has a gender gap. The gap right now is only caused by previous generations because a lot of things were limited to females. The expectations of the girls and boys are not relevant to want men and women are making in reality. Sometimes we have to compare apples to apples. If more men are engineers and more females are accountants, then of course there is gender gap, engineers have a higher salary than accountants. I remember reading some of comments and someone said that women did the same thing as men but had less salary, I think it is just an extraordinary case. That will happen no matter if someone is male or female. If majority of the women had less pay than male doing the same work, then probably business people are very stupid because they could just hire all females to reduce cost and maintain the same level of production. As a business major, I don't think business people are that stupid, not know how do minimize cost and maximize profit. And the primary goal of doing business is making profit.

  • Yahoo! Finance User - Wednesday, September 19, 2007, 4:30PM ET  Report Abuse

    • Overall: 5/5

    I've missed your articles in the past. I'll have to look for more from you as this was excellent. I like your style and you point of reference. Judging by your picture I looks like your about the same age as me. I like your smile. You have go that look on your face like so many woman I have met have when I drop my drawers and show them the big guy.

  • theoldman - Friday, August 31, 2007, 2:41PM ET  Report Abuse

    • Overall: 2/5

    Yes, there does seem to be a gender gap in your article. 1) The girls seem more realistic in their income expectations, rather than having lower expectations. The boys' $173,000/year expectation was just plain fantastical, and: 2) Roughly 55% more girls than boys have jobs (your numbers of 45% vs. 29%). Does this speak to a discrimination against boys in the job market ? Why are teenage girls being hired at a 3/2 ratio more than boys? You only mention the so called fact that, "girls appear more industrious". It was only 50 years ago when the opposite was called a fact. I sense neither is true on average, but that is only my opinion. On the Gender Gap, i rate you zero stars. It's the rest of the article illuminating the sad lack of financial knowledge of both genders that bring you up to 2 stars. - oldman

  • Yahoo! Finance User - Sunday, July 8, 2007, 2:54PM ET  Report Abuse

    • Overall: 1/5

    Why have you not written anything in 2 months?

  • Yahoo! Finance User - Thursday, June 21, 2007, 7:09PM ET  Report Abuse

    • Overall: 1/5

    Daddy must be ashamed. He probably still spanks her. Perv.

  • BooRadley - Saturday, June 16, 2007, 11:00AM ET  Report Abuse

    • Overall: 3/5

    Good points on the income but your income is worthless if you can't budget. If teens never learn to save, a giant income could mean nothing if they go into debt. One big slump in our economy could lose a job and then what. As for the the income factor, as a man should I be upset that many, many women make more money than I? It has more to do with education, drive, and worth ethic. Family connections will also land you a good job. What about the mother factor? If women take a year's maternity leave their income will be less. Girls are more realistic and more cautious. Bill Gates and others took risks and set very high goals. Boys can also take risks that can bring down their savings and family, also.

  • Yahoo! Finance User - Saturday, June 9, 2007, 1:33AM ET  Report Abuse

    • Overall: 1/5

    BOTTOM LINE - MEN MAKE MORE BECAUSE THEY ARE WORTH MORE.

  • Yahoo! Finance User - Tuesday, June 5, 2007, 1:08PM ET  Report Abuse

    • Overall: 3/5

    article is fair enough, but could it be that girls are simply more realistic and the boys are dreaming ? .... I have one of each and must say the female is more realistic .... just my observations.

  • Yahoo! Finance User - Monday, May 14, 2007, 5:31PM ET  Report Abuse

    • Overall: 4/5

    Thanks for the article very good. My daughter at 24 wants to ask for a raise and she deserves one. She is working her butt off and she was going to ask for $2.00 an hour more when her peers are making $7.00 per hour more, she is the new kid on the block. She is doing the same work as them, I said no way she needs to ask for $6.00 per hour more and that she is worth every penny. I said then in a couple of months ask for the rest because then you can take your talents to a competitor if your current employer says no. Many young women have a lack of confidence and self worth. Young men have too much confidence but earn more becaue they have strong backs and are used for labor jobs. I would like to see classes in schools build the confidence in the young women.

  • Yahoo! Finance User - Wednesday, May 2, 2007, 2:07PM ET  Report Abuse

    • Overall: 3/5

    Informative article. Sets the stage for what I can expect as my 4-year old begins to look at money in new ways.

  • Yahoo! Finance User - Tuesday, May 1, 2007, 2:51PM ET  Report Abuse

    • Overall: 2/5

    Good idea for an article. If you were to combine it with some data about the actual direction that wages are heading it would be more enlightening. Also I would like to know about the impact of future and present stay at home mom's on the numbers and expectations. And I would like to know about how the economic classes understand their realities and expectations. Finally as a few have already noted, the projections of over $100k per year seem completely off the mark. Why do both genders have such unrealistic expectations? And on another topic how does education play a role here?

  • Bill - Sunday, April 29, 2007, 1:40AM ET  Report Abuse

    • Overall: 3/5

    Read Warren Farrell's book "Why Men Earn More"

  • Yahoo! Finance User - Saturday, April 28, 2007, 10:37PM ET  Report Abuse

    • Overall: 4/5

    The gender pay issue doesn't seem to be that the females have lower expectations (seen a negative, as in poor self esteem) as is implied in the article. It seem that the females think they're going to make WAY, WAY more than they really will, but the males think they're going to make WAY, WAY, WAY more than they really will. It seems to me that the problem is not that the females expectations are too low compared to their male peers, but that both sexes have inflated perceptions of their value in the job market, with the females being slightly (but not much) more realistic.

  • Anita - Wednesday, April 25, 2007, 6:30PM ET  Report Abuse

    • Overall: 4/5

    Oh, my. Some of the comments regarding gender are very petty and ignorant. Perhaps the current educational gap, where 60% of the college students are female, will begin to change the inequitable landscape. Beyond that, I am in money management consulting, and it is not just teenagers who do not know how to manage money...it is the vast majority of Americans. Sad, but true.

  • Stephanie - Wednesday, April 25, 2007, 5:23PM ET  Report Abuse

    • Overall: 4/5

    Children/teens will probably have an unrealistic expectation of future income until they get their first min. wage job. Getting kids involved in money management at a young age is a good idea. My dad had my sibs and I help fill out our taxes, regularly showed us how they money set aside for college was invested and sit down at the table to help balance the checkbook when paying bills. It was an eye-opener to see what it cost to keep our family of 5 going in terms of mortgage, credit card, utility and grocery bills that has better prepared me for my post-college life (which I am now living debt free thanks to fabulous parents). As for the gender gap in pay - I'll buy that women set their careers back to raise families, are more passive and less demanding in salary/compensation negotiations, etc. but the commentor that believes women in the workforce are paid less because they are emotional, hard to work with and gossipy needs to go look in a mirror. As a woman in a male dominated field of engineering, I bust my tail to do good work and there are just as many men standing around talking about fishing as there are women talking about shopping. As for women aspiring to marry rich husbands so they can live a life of leisure -- there are those of us who are working hard so we don't have to be dependent on a husband or sugar daddy to pay our way. Television is not always a true reflection of reality (so get a clue.) I am heavily investing and saving right now so I can hopefully have the benefit of staying at home with my future children and pursue a higher degree before re-entering the workforce. Maybe I'll make less than my male peers, maybe I won't. Give your kids a dose of financial reality -- and have faith in young women. Both might surprise you.

  • Steve N - Wednesday, April 25, 2007, 4:24PM ET  Report Abuse

    • Overall: 2/5

    Please excuse me for my expressing what most people in the work force already know to be true. There is a gap or difference in pay between men and women because many women in the work force are, lets say, difficult to work with. Women tend to be more moody, have personality issues with others, display emotions, gossip and are much more of a handful for management. Of course this is a generalzation, but holds true when comparing men and women in the work force and does explain some of the disparity in pay checks.

  • Yahoo! Finance User - Wednesday, April 25, 2007, 4:02PM ET  Report Abuse

    • Overall: 5/5

    Asking kids to make an informed guess as to their income is almost pointless. They probably don't know how much their parents make, let alone accurate estimates by profession. That said, it is important to educate children on this subject when the time is appropriate, and in a way that does not harm the way they look at others. Another fantastic article, Carrie and Ben Stein are the two keepers in the Yahoo Finance stable.

  • Yahoo! Finance User - Wednesday, April 25, 2007, 3:55PM ET  Report Abuse

    • Overall: 3/5

    Since they just averaged the responses, the gender gap in the survey is meaningless. All it takes is a small percentage of boys thinking they'll make $1 million a year playing in the NBA or NFL to create a significant "gender gap". A median would be more useful.

  • Tom - Wednesday, April 25, 2007, 1:46PM ET  Report Abuse

    • Overall: 2/5

    I haven't read the study, but if the study consists of the data provided in this article, then I don't believe that we can really conclude much real information from the examples provided. The information on the gender gap was not presented as hard numbers from actual men and women in actual comparable jobs, but are what teens feel they will be making. I completely believe that there is a gender cap in pay, but the number presented do not show it, as one person pointed it, this data could simply show that women are far more realistic than men about what their salaries will be when they enter the work force. Hell, I remember thinking that I would make $1 million a year when I was in high school, that was not based on any real information but was the result of thinking that it would be really cool to make $1 million a year. Yes, this is naive, but that is part of being young and being a teenager, which questions the heart of the data provided by this survey. I completely agree with the conclusion of this article, that more emphasis needs to be placed on learning about personal financies for our young people and that the gender gap is real and needs to change, but the data presented to prove this point can be interpreted in many ways ie, just because someone says that they are good at something like budgeting, does not mean it is so. On the other hand, a person could thing that they have a subpar knowledge about investment (when compared to investment professionals that they see on TV or read about in the paper) but in fact are leaps and bounds a head of people in their peer group or even to the nation as a whole.

Showing comments 6-35 of 51<< PreviousNext >>

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April is National Financial Literacy Month

Promoting financial fitness is one of Carrie Schwab Pomerantz's passions, particularly when it comes to helping families give their kids the head start they need to thrive as adults. Visit Schwab MoneyWise for additional resources.

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