Are Teens Breaking the Bank?

Today's teenagers are breaking the bank. Just three items, designer athletic shoes at $160.00, a concert ticket at $45.00, and the latest computer game at $325.00, will set you back $530.00 in a heart beat.

Exactly when did spending $160.00 on a pair of tennis shoes begin to seem normal?

Give Them Another View
Parents need to help kids take a long look at making money "work" in ways other than purchasing. Instead of spending $500 on passing fancies—shoes that will wear out in a matter of months, a night's entertainment, or a video game that will be overshadowed by the next hot game—take the opportunity to teach your kids the Rule of 72.

The Cool Rule
Show your kids how they can turn $500 into $1,000. Use the Rule of 72. The rule calculates the length of time needed to double your money. You simply divide your rate of return into 72. For example, if you are earning 5% interest, divide 72 by 5. The answer tells you that your money would double in 14.4 years. At an 8% rate of return, $500 would become $1,000 in roughly 9 years. That's the power of compounding.*

Be a Financial Guide
Ask your kids what they could possibly "do without" to fund a savings plan or a bigger, more important purchase in the future. This is a concept you will have to promote. Kids are assaulted regularly by advertisers, and the pressure to have what everybody else has can be intense. Repeat your message regularly, along with the idea that sometimes you have to delay your gratification and save up for purchases.

Make Saving Fun
Your children can learn more about finance and how it applies to their lives on the Northwestern Mutual-sponsored Web site, The Mint. Learn about finances together. You will be spending quality time with your kids and teaching them a lesson needed for the rest of their lives.

Source: Smartcents, Northwestern Mutual®

*This exercise is for illustration purposes only. It does not take into consideration fees, taxes, commissions, etc. and does not represent any specific product or investment.