Teens, Money, Payment Cards and Financial Services in the U.S.

Teens, Money, Payment Cards and Financial Services in the U.S.

Teenagers are highly motivated by money and the myriad products and services for which it can be exchanged, but they can also be naïve about the consequences of profligate spending and slipshod money management. Though arguably one of the most privileged and self-aware generations of modern times, these 24.8 million trendy and hyper-brand-aware adolescents age 12-17 are also among the least-educated and most underserved in terms of personal finance and money management. As a cohort they represent an $80 billion market, but teens’ immaturity and often unrealistic expectations of their own imminent wealth lead parents and educators to encourage teen saving but to doubt that other financial products—especially those that facilitate spending—are in the best interests of their kids. In this report Packaged Facts analyzes how providers of financial products and services can ethically answer parental concerns while still leveraging young people’s desire for independence and instant gratification into viable, long-term financial instruments, from basic savings and checking accounts to payment cards, money management and investment, and media-based banking.

What’s important to purveyors of financial products and services is their own long-term investment in the adults these young consumers will become. That includes finding ways not only to expand opportunities for the 16.4 million teens who currently use financial services, but to attract the 5.2 million teens who are thus far underserved (i.e., those who work or receive an allowance or money for chores but do not yet have or use financial products or services). Thus, Packaged Facts explores the world of teenagers and money—how they get it, how they feel about it, how they spend it, how they save it; how much they understand about the long-term implications of finance in their lives—and analyzes how financial marketers can parlay this knowledge into hip, exciting products. The report draws on uniquely cross-tabulated Simmons Market Research Bureau teen consumer survey data, along with secondary sources including articles appearing in marketing, business and trade publications; government resources; company literature and advertising; and extensive Internet canvassing including websites and blogs. The report presents four focus chapters:

• Teen Attitudes and Demographics. Provides a demographic profile of U.S. teens today, with emphasis on the cohort’s income sources and leisure activities;


• Teen Shopping and Spending. Examines teen spending and shopping patterns, delineating differences in taste and focus according to age and gender, and linking these data with underlying values and desires;


• Teens and Payment Cards. Analyzes teen use of payment cards (ATM, gift, credit, debit) and bank accounts (savings and checking); and pinpoints media and technology-related opportunities in teen financial management, emphasizing Internet and cell phone usage.


• Teen Banking and Financial Services. Details educational and marketing programs in personal finance sponsored by banks and credit unions, paying close attention to the ways in which marketers are addressing potential conflicts between the concerns of parents and the financial aspirations of their kids, while also seeking to win teens over as customers for life.

Chapter 1: Executive Summary

* Introduction
o Scope of Report
o Report Methodology

* Teen Attitudes and Demographics
o Teens Understand the Power of Money
o Most Teens Want to Be Rich
o Teen Financial Market Represents Big $ Opportunity
o A Large and Culturally Diverse Group
o Figure 1-1: Share of Teen Population by Segment, Age 12-14 vs. Age 15-17, 2007 (percent of U.S. children age 12-17)
o Many Teens Have Paying Jobs
o Teens in Affluent Households More Careful About Money

* Teen Shopping and Spending
o Understanding What Teens Do with Their Money
o Teens Crave Clothing, Music, Technology
o Figure 1-2: What Teens Spend Their Money On, 2007 (percent of U.S. children age 12-17)
o Most Teen Households Have Video Game Equipment
o Teens Eat Out Often
o Spending, Savings Cues Come from Parents
o Discount Stores Top Shopping Destinations
o Teens Shop Internet for Family, Selves

* Teens and Payment Cards
o A Major Opportunity
o Figure 1-3: Percentage of Teens with Payment Cards by Type, 2007 (U.S. children age 12-17)
o Credit and Debit Cards Make Parents Nervous
o Gift Cards Make for Fun Introduction to Paying with Plastic
o Credit Card Use Becoming More Common Among High Schoolers
o Many Teens Suspicious of Credit’s Slippery Slope
o ATM Cards Provide Practice with Checking, Savings Accounts
o Debit Cards Can Build Responsible Spending Habits
o Traditional Prepaid Phone Cards Also Present Opportunities
o Teen Cards of All Types Must Offer Real Value

* Teen Banking and Financial Services
o Proof of Integrity Is Marketers’ First, Most Difficult Goal
o Teens Like to Save, and Many Say They’re Good At It
o Parents Worry About Teens’ Immature Money Management
o Education and Savings First: Money Management, Spending Later
o NexTier Bank Hosts Junior Banking Board
o Merrill Lynch Shows “Investing Pays Off”
o Schwab, Others Jump on Education Bandwagon
o Next Step: Tailor Checking to Teens
o ATMs on Campus Increase Brand Awareness, Convenience
o Cell Phones Are Future Wave in Account Management

Chapter 2: Teen Attitudes and Demographics

* Introduction
o Scope of Report
o Teens Understand the Power of Money
o Most Teens Want to Be Rich
o Figure 2-1: Teen Demographics for Agreement with Statement: “I Want to Be Rich,” 2007 (percent of U.S. children age 12-17)
o Teen Financial Market Represents Big $ Opportunity
o Teens Know Less About Finances Than They Think They Do
o Shaky Financial Knowledge Makes Teen Credit Risky
o Table 2-1: Teen Demographics for Agreement with Statement: “I Want to Be Rich,” 2007 (percent, number and index of U.S. children age 12-17)
o Table 2-2: Overview of Teen Income Sources and Use of Financial Products and Services, 2007 (percent and number of U.S. children age 12-17)
o Table 2-3: Population of Potential, Current and Underserved Teen Markets for Financial Services, 2007 (number of U.S. children age 12-17 in thousands)

* Teen Demographics
o Teens by the Numbers
o Figure 2-2: Share of Teen Population by Segment, Age 12-14 vs. Age 15-17, 2007 (percent of U.S. children age 12-17)
o Total Teen Population = 24.8 Million
o Today’s Teens the Most Diverse in History
o Figure 2-3: Teens by Race and Ethnicity, 2007 (percent of U.S. children age 12-17)
o Attitudes Toward Wealth Differ Among Ethnicities
o Asian Teens Aspire to High Incomes
o U.S. Teen Population Shrinking
o Despite Mature Outlook, Teens Depend on Parents for Living
o Rural, Small Urban Areas Home to Majority of Teens
o Most Teens Live in Two-Adult Households
o Sports, Theme Parks Top Leisure Activities
o Electronic, Print Media Capture Big Teen Interest
o Media, Tech Make Teens Happy
o Money, Mom Make Teens Happy, Too
o Parents Shield Kids from Physical Hazards, Financial Realities
o Teen Income Facilitates Connection Between Work and Reward
o Many Teens Have Paying Jobs
o Drivers’ Licenses Expand Employment Opportunities; Non-Hispanic Whites Dominate Job Market
o Four in Ten Teens Live in Households with Income of $75,000 or More
o Teens in Affluent Households More Careful About Money
o Higher Household Income May Increase Familiarity with Finances
o Table 2-4: Population by Ethnicity of Potential, Current, and Underserved Teen Markets for Financial Services, 2007 (number of U.S. children age 12-17 in thousands)
o Table 2-5: Teen Demographics, 2007 (percent and number of U.S. children age 12-17)
o Table 2-6: Population Trends in the 14- to 17-Year-Old Age Group, 1980-2015 (number and percent)
o Table 2-7: Projected Growth in Teens Population by Age Group, 2006 vs. 2011 (in thousands)
o Table 2-8: Percentage of Population by Size of Metropolitan Area: Teens vs. Adults
o Table 2-9: Living Arrangements of 12- to 17-Year-Olds, 2006 (number and percent)
o Table 2-10a: Living Arrangements of 12- to 17-Year-Olds by Race and Hispanic Origin: Non-Hispanic White and Asian, 2006 (number and percent)
o Table 2-10b: Living Arrangements of 12- to 17-Year-Olds by Race and Hispanic Origin: Black and Hispanic, 2006 (number and percent)
o Table 2-11: Teen Participation in Selected Leisure Activities: Boys vs. Girls (percent and number of U.S. children age 12-17)
o Table 2-12: Percentage of Teens Receiving Income from Selected Sources: By Age Group, 12-14 vs. 15-17 (U.S. children age 12-17)
o Table 2-13: Percentage of Teens Who Receive an Allowance or Money for Chores: By Age Group and Gender, 2007 (U.S. children age 12-17)
o Table 2-14: Teen Demographics for Receiving an Allowance or Money for Chores, 2007 (percent, number and index of U.S. children age 12-17)
o Table 2-15: Teen Demographics for Working, 2007 (percent, number and index of U.S. children age 12-17)
o Table 2-16: Percent of High School Students Employed During Either School Year or Summer
o Table 2-17: Distribution of Teen Population by Household Income Bracket (percent and number of U.S. children age 12-17)
o Table 2-18: Financial Profile of Teen Population by Household Income Bracket: Under $75,000 vs. $75,000 or more (percent of U.S. children age 12-17)

Chapter 3: Teen Shopping and Spending

* Understanding What Teens Do with Their Money
* Teens Crave Clothing, Music, Technology
* Figure 3-1: What Teens Spend Their Money On, 2007 (percent of U.S. children age 12-17)
* Teen Girls Outspend Boys in Most Categories
* Teen Boys Spend More on Video Games
* Most Teen Households Have Video Game Equipment
* Video Game Passion Wanes with Age
* Teens Eat Out Often
* Fast Food Attracts Vast Majority of Teens
* McDonald’s Captures Majority of Teens
* Many Teens Know Value of a Dollar
* Spending, Savings Cues Come from Parents
* Irresponsible Spending Habits Begin at Home
* Parents Tend to Indulge Teens’ Whims, Regardless of Income Bracket
* Figure 3-2: Selected Financial Opinions of Teen Population by Household Income Bracket: Under $75,000 vs. $75,000 or More (percent of U.S. children age 12-17)
* Limited Access to Credit, Checking Reins In Spending
* Discount Stores Top Shopping Destinations
* Figure 3-3: Percentage of Teens Who Shopped in Department/Discount Stores in Last Three Months: By Age Group and Gender, 2007 (U.S. children age 12-17)
* Big-Box Retail Offers Entertainment Plus Value
* Lookee-loos Don’t Always Buy
* Figure 3-4: Percentage of Teens Who Purchased in Department/Discount Stores in Last Four Weeks: By Age Group and Gender, 2007 (U.S. children age 12-17)
* Wal-Mart Reigns as King of Discounts, Diversion
* Target Lures More Girls Than Boys
* Target’s Flashy Wii Gift Card May Woo Electronics Buffs
* Girlie Electronics Flash the Pink
* Cell Phones, Internet: For Spending On and Spending With
* Talk, Text, Cameras Create Instantaneous Word-of-Mouth
* Texting, Games, Downloadable Ringtones Define Teen Segment Slivers
* Marketing Through Cell Phones Requires Constant Research
* Teens Shop Internet for Family, Selves
* Even Children, Tweens Help Parents Purchase Online
* Over One-Third Order by Mail, Phone
* Shopping Malls Provide Interactive, Social Experience
* Girls Especially Attuned to Mall Experience
* Luxury Spending Increases Despite Economic Downturn
* Celebrities, Movie Stars Inspire Fashion Aspirations
* “Fast Fashion” Accessories Help Teens Afford a Piece of the Dream
* Rewards, Brand Tie-Ins Can Make Financial Services Relevant
* Table 3-1: Teen Shopping Attitudes: By Gender 2007 (percent of U.S. children age 12-17)
* Table 3-2: What Teens Spend Money On: By Gender, 2007 (U.S. children age 12-17)
* Table 3-3: Teen Shopping and Spending Overview: By Age Group and Gender, 2007 (percent of U.S. children age 12-17)
* Table 3-4: Teen Household Ownership of Video Game Players: By Age Group and Gender, 2007 (percent of U.S. children age 12-17)
* Table 3-5: Teen Attitudes About Video Games By Age Group and Gender, 2007 (percent of U.S. children age 12-17)
* Table 3-6: Percentage of Teens Going to Family Restaurants and Steak Houses: By Age Group and Gender (U.S. children age 12-17)
* Table 3-7: Percentage of Teens Who Agree with Selected Statements About Eating Out: By Age Group and Gender (U.S. children age 12-17)
* Table 3-8: Percentage of Teens Going to Fast-Food and Drive-In Restaurants by Age Group, Gender and Name of Restaurant Chain (percent of U.S. children age 12-17)
* Table 3-9: Teens as Retail Shoppers: By Gender, 2007 (percent of U.S. children age 12-17)
* Table 3-10: Overview of Teen Financial Attitudes and Opinions, 2007 (percent of U.S. children age 12-17)
* Table 3-11: Teen Demographics for Agreement with Statement: “I Tend to Spend Money Without Thinking,” 2007 (percent, number and index of U.S. children age 12-17)
* Table 3-12: Selected Financial Vehicles for Teen Spending, 2007 (percent and number of U.S. children age 12-17)
* Table 3-13: Teens Use of Cell Phones: By Gender, 2007 (percent of U.S. children age 12-17)
* Table 3-14: Teens as Internet Shoppers: By Gender 2007 (percent of U.S. children age 12-17)
* Table 3-15: Teens as Internet/Mail/Phone Order Purchasers: By Gender, 2007 (percent of U.S. children age 12-17)

Chapter 4: Teens and Payment Cards

* Cards Present a Major Opportunity
* Figure 4-1: Percentage of Teens with Payment Cards by Type, 2007 (U.S. children age 12-17)
* Credit and Debit Cards Make Parents Nervous
* Cards Can Help Teens Prepare for Adult World
* Figure 4-2: Percentage of Teens Who Agree with the Statement:
* “Credit Cards Make Shopping Easier”: By Age Group and Gender, 2007 (U.S. children age 12-17)
* Gift Cards Make for Fun Introduction to Paying with Plastic
* Links to Teen Interests, Cool Brands Boost Monetary Value
* American Idol Gift Card Plays Up Celebrity Tie-Ins
* Credit Card Companies Leverage Multiple Use, “Open Loop” Gift Cards
* AmEx Gift Cards “Especially For” Teens
* Teen Gift Cards Build Brand Awareness, Trust for Later Credit Card Use
* Credit Card Use Becoming More Common Among High Schoolers
* Questionable Financial Discipline Belies Cultural Savvy
* Most Teens Want to Avoid Debt
* Figure 4-3: Percentage of Teens Who Agree with the Statement “I Don’t Like the Idea of Being in Debt,” 2007 (U.S. children age 12-17)
* Many Teens Suspicious of Credit’s Slippery Slope
* Figure 4-4: Percentage of Teens Who Agree with the Statement “Credit Cards Are Just Another Way of Getting Into Debt,” 2007 (U.S. children age 12-17)
* Higher Household Income Correlates with Credit Wariness
* Figure 4-5: Indexes by Household Income for Agreement with the Statement “Credit Cards Are Just Another Way of Getting Into Debt,” 2007 (U.S. children age 12-17)
* Cards Help Bridge Lean Times; Most Teens Pay Off Balances Monthly
* Occasional Disconnect Between What’s Affordable, What’s Not
* One-in-Five Teens Agree that Credit Cards Enable Otherwise Unaffordable Purchases
* Figure 4-6: Percentage of Teens Who Agree with the Statement “With Credit Cards, You Can Buy Things You Normally Couldn’t Afford,” 2007 (percent of U.S. children age 12-17)
* Boys, Younger Teens, Hispanics Most Likely to Believe in Credit’s Power to Grasp the Unattainable
* Figure 4-7: Selected High-Index Teen Demographics for Agreement with Statement: “With Credit Cards, You Can Buy Things You Couldn’t Normally Afford,” 2007 (U.S. children age 12-17)
* “Minimum Payments” Can Dash Delusions of Solvency
* Average College Undergrad Debt Shrinking Slowly Despite Increased Card Use
* Financial Discipline Helps Keep Debt In Line
* Parents, Teens and Financial Services Must Work Together
* ATM Cards Provide Practice with Checking, Savings Accounts
* Teens Underrepresented in ATM Card Channel
* Teens with Jobs, Bank Accounts Likely to Have ATM Cards
* Figure 4-8: Selected High-Index Teen Demographics for ATM Card Ownership, 2007 (U.S. children age 12-17)
* Debit Cards Can Build Responsible Spending Habits
* Debit Cards Provide Opportunities for Teen-Oriented Tie-Ins, Rewards
* Cell Phones Users Particularly Open to Card Use
* Boost Mobile Closes Loop Between Phones and Finance
* Rebates, Sweepstakes Sweeten Boost Deal
* Traditional Prepaid Phone Cards Also Present Opportunities
* Lower-Income Teens Still Use Traditional Calling Cards
* Black, Hispanic Teens Use Calling Cards
* Figure 4-9: Selected High-Index Teen Demographics for Having a Telephone Prepaid Calling Card/Credit Card, 2007 (U.S. children age 12-17)
* Prepaid Credit, Debit Cards a Growing Teen Market
* Online Purchasing Just One Advantage Among Many
* Figure 4-10: Selected High-Index Teen Demographics for Using Credit Cards for Internet, Catalog, Mail or Phone Order Purchases, 2007 (U.S. children age 12-17)
* Prepaid Cards Reassure Parents, Keep Spending in Check
* Visa Buxx Cultivates Future Credit Business
* Parents Set Spending Limits, Reload Card at Will
* Tricky Balance Between Parental Concerns, Teen Enthusiasm
* Customized Design, Low Fees Up Coolness Factor
* MasterCard’s Prepaid Allow Card Competes with Visa Buxx
* Education, Responsibility Heavily Stressed
* Allow Card Works on Usual Prepaid Principles
* MYplash MasterCard “Rocks the Plastic”
* Hip Lifestyle, Cool Brands, Great Music—And It’s Already Paid For!
* Emphasis on Teen Independence, with a Nod to Paying Parents
* Hello Kitty Card May Have Gone Too Far
* High Fees Also Criticized
* Conventional Credit Card Might Have Fared Better
* Low-Limit Credit Cards Ease Transition Into Adulthood
* Building Good Credit History Justifies Early Restraint
* Teen Cards of All Types Must Offer Real Value
* Table 4-1: Teen Use of Selected Payment Cards, 2007 (percent and number of U.S. children age 12-17)
* Table 4-2: Percentage of Teens Agreeing with Selected Statements About Credit Cards: By Age Group and Gender, 2007 (U.S. children age 12-17)
* Table 4-3: Percentage of Teens Ageeing with Selected Statements About Payment Cards and Finances: Any Agree, Agree a Lot, Agree a Little, 2007 (percent of U.S. children age 12-17)
* Table 4-4: Teen Demographics for Agreement with Statement: “Credit Cards Make Shopping Easier,” 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-5: Teen Demographics for Agreement with Statement: “I Don’t Like the Idea of Being in Debt,” 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-6: Teen Demographics for Agreement with Statement: “Credit Cards Are Just Another Way of Getting Into Debt,” 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-7: Teen Demographics for Agreement with Statement: “With Credit Cards, You Can Buy Things You Normally Couldn’t Afford,” 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-8: Teen Ownership of Bank Accounts by Type: By Age Group and Gender (percent of U.S. children age 12-17)
* Table 4-9: Teen Demographics for Having ATM Cards, 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-10: Ownership of and Monthly Charges on Cellular and Wireless Phones: Teens with an Income vs. Teens with ATM or Credit Cards, 2007 (percent and index of U.S. children age 12-17)
* Table 4-11: Teen Demographics for Having a Telephone Prepaid Calling Card/Credit Card, 2007 (percent, number and index of U.S. children age 12-17)
* Table 4-12: Teen Demographics for Using Credit Cards for Internet, Catalog, Mail or Phone Order Purchases, 2007 (percent, number and index of U.S. children age 12-17)

Chapter 5: Teen Banking and Financial Services

* Proof of Integrity Is Marketers’ First, Most Difficult Goal
* Teens Like to Save, and Many Say They’re Good At It
* Figure 5-1: Overview of Teen Attitudes on Saving, 2007 (percent of U.S. children age 12-17)
* Parents Worry About Teens’ Immature Money Management
* Those Who “Spend Without Thinking” of Particular Concern
* Teens Underserved in Educational Banking Services
* Financial Services Marketers Walk a Fine Line
* Education and Savings First: Money Management, Spending Later
* Despite High Hopes, High Schoolers Often Unprepared for College Finances
* Banks Can Reach Parents Through Teens
* Opening Kids’ Accounts Gives Parents Unaccustomed Face Time with Personal Bankers
* Banks Can Take Up Schools’ Educational Slack
* Bank-Sponsored Financial Literacy Programs Popular
* NexTier Bank Hosts Junior Banking Board
* Fifth Third Bancorp Gets “Young Bankers” On Board
* Fifth-Grade Finance a Win-Win Situation
* Wells Fargo Takes Education On the Road and On the ‘Net
* Interactive “Fun of Money” Tour Raises Financial Awareness
* Wells Fargo Also Offers “Teen Access” Services
* Parental Involvement, Hands-On Experience Are Key
* “Hands On” Online Education Available for All Age Groups
* Young Americans Bank: The Only Kids-Only Institution
* Even the Youngest Customers Can Take Out Loans
* Partnering with Educators, Nonprofits and Community Advocates Can Boost Banks’ Visibility
* Most Banks Outsource Educational Curricula
* Delaware’s Annual “Summit for Students” Attracts Hundreds
* National Endowment for Financial Education Reaches Out with Financial Planning Curriculum
* Partnerships, Online Access Increase Reach
* Investment Firms Actively Teaching Teens
* Merrill Lynch Shows “Investing Pays Off”
* Public Service Programs Target Wide Audience
* Sesame Workshop Encourages Pre-schoolers to Save
* Schwab, Others Jump on Education Bandwagon
* Financial Management 101: Start with Savings, The Least Controversial Financial Service
* Figure 5-2: Selected High-Index Teen Demographics for Agreement with Statement: “I Am Good at Saving Money,” 2007 (U.S. children age 12-17)
* Rewards, Gifts, Cool Stuff Are Further Incentives to Save
* Banks Get Creative in Encouraging Teens to Save
* Next Step: Tailor Checking to Teens
* Banks Make Checking Attractive with Gift Cards, iPods
* ATMs on Campus Increase Brand Awareness, Convenience
* Figure 5-3: Selected High-Index Teen Demographics for Having ATM Cards, 2007 (U.S. children age 12-17)
* PAYjr Links Internet Obsession with Allowance Allocation to Teach Smart Financial Habits
* Parents Outsource Nagging with Online Chore Assignments
* Early Adopters Say So Far, So Good
* Detractors Mostly Haven’t Tried System Themselves
* PAYjr Savings, Debit Cards Increase Range of Services
* Cell Phones Are Future Wave in Account Management
* An ATM in Your Pocket
* Obopay Leads Push into Youth-Oriented Cell Phone Banking
* Smart Adaptation of PayPal Model
* Teen-Centered, But with Parental Controls
* Transactions Require Both Parties to Have Obopay Account
* Customer Retention Starts Early: Banks Reach Out to Teens Before They Become Teens
* Looney Tunes Savings Club for Kiddie Capitalists
* Kid Zone Accounts Start Small, Build Fast
* Marketing Teen Financial Services into the Future: Move Fast
* Alignment with Teen-Centered Brands Builds Relevance
* Customized Cards, Internet, Cell Phone Pique Teen Interest
* Teens Should Discover You on Their Own
* Back Up Come-Ons with Integrity, Service, Education
* Relevant Websites
* Table 5-1: Overview of Teen Attitudes on Saving, 2007 (percent of U.S. children age 12-17)
* Table 5-2: Teen Ownership of Bank Accounts by Type: By Age Group and Gender (percent of U.S. children age 12-17)
* Table 5-3: Teen Demographics for Agreement with Statement: “I Am Good at Saving Money,” 2007 (percent, number, index of U.S. children age 12-17)
* Table 5-4: Teen Demographics for Having ATM Cards, 2007 (percent, number, index of U.S. children age 12-17)