American teenagers may spend a lot of time on their smartphones but when it comes to getting paid and spending their money, they prefer cash.
According to a new survey by Junior Achievement USA and data-marking firm Alliance Data, 75% of the teens polled have made purchases in cash and 80% of those who receive money from parents or caregivers get it in the form of cash. The survey, conducted by Wakefield Research between in July, polled 1,000 teenagers between the ages of 13 and 18.
Certified financial planner Ivory Johnson isn’t surprised by the popularity of cash.
For one, cash isn’t traceable, he said. A credit card or mobile app, on the other hand, allows parents to see their kids’ spending.
That’s one reason he doesn’t advise using cash as a tool to help teach your children about money. It’s also unlikely to be the way they spend as adults, said Ivory, founder of Delancey Wealth Management and a member of the CNBC Digital Financial Advisor Council.
Instead, he gives his college-aged son an allowance in the form of a credit card with a spending limit. This way, he knows how much money he has to spend every month.
“You are starting to build habits,” he said.
“If you get them in the habit of using a credit card when there is a limit, when they are adults they won’t go crazy because they are accustomed to having a limit.”
According to the survey, nearly 23% used their parent or caregiver’s credit card for online purchases. Additionally, 48% of teens said they use online or mobile apps to manage and budget their money.
Budgeting is the first thing kids should learn — and using a credit card could help, said Junior Achievement USA CEO Jack Kosakowski.
“When you are spending money in a manner where you get monthly statements, that makes [budgeting] a little bit easier,” he said.
However, parents need to play a role and remember that their kids look to them for guidance, he added.
In fact, in a recent Invest In You Savings Survey, over a third of respondents said their financial role model was their parent.
“If they are using tools like credit cards, I certainly would … encourage parents to be going through the statement with their kids on a monthly basis and use it as an opportunity to educate them,” he said.
As your kids grow older, Johnson suggests to start financially “weaning” your kids off of you.
Now that his son is entering his senior year of college, he’ll start getting some things in his own name — like car insurance and the credit card. By the time he graduates, everything will be in his name and he’ll be accustomed to paying bills, Ivory explained.