Carrie Schwab Pomerantz Money-Smart Families

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.