You would have to be living under a proverbial rock to not have a sense of all of the uncertainty in the economy right now. From pandemic to endemic, Ukraine War to decimated supply chain, the entire world is just looking for some ordinary time. Unfortunately, that is not likely to happen anytime soon. Although economists are divided on whether or not the world is headed toward a recession, there is definitely uncertainty about what the future holds. And you are definitely not the only one who is noticing: your kids are too. As the father of a 14-year-old teen, as well as two other young adults, I know the importance of preparing your family for the continued roller coaster ride of the economy.
No Crystal Ball
Unfortunately, economists do not have a crystal ball, and can’t say for certain what the economic future holds. If you are a betting person, odds are that things will get wilder before they calm down. “Historically the economy has always been going up and down,” said Yiming Ma, an assistant professor at Columbia University. “It’s something that just happens, it’s a bit like catching a cold.” She says it is more a question of when not if. And if you knew you were bound to get a cold, you would take precautions and make preparations for dealing with it, as well as teach your kids how to handle it. It is important for consumers to understand what they could encounter in order to best prepare.
What We Do Know
Although the economic world is uncertain at best, there are some negative downturns that have come to light, and it is important that you inform your children without scaring them. According to a report at the Deloitte Economist Network, “Inflation rose to 9% in June from 8.6% in May, demonstrating that inflation has likely yet to peak. This unabated surge in inflation is likely deteriorating consumers’ purchasing power, with real weekly earnings down 5.6% since end-2020 despite a 6.6% rise in nominal earnings.” With the cost of staples such as gas and food, consumers are spending less on big purchases to offset this. Also, discretionary spending, from quick trips to buy a fancy coffee, to more substantial trips or treats, is also on the downward trend. Unfortunately, these are probably the trips that are going to hurt your kids the most.
In addition to spending trends, Americans are also worried about their savings. The cost of living has caused Americans to worry about their savings at a rate which has nearly doubled since March 2021. Currently about 61% of American households are worried about their savings.
The Deloitte report also states that “Although the overall percentage of those concerned about upcoming payments has remained relatively stable, the figure is gradually rising for lower-income consumers. That is hardly surprising, given that inflation tends to hit low-income individuals harder than others.”
According to the Conference Board, “Consumer confidence fell for a third consecutive month in July,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.” In light of all of the bad news, it is time that consumers made some moves to prepare for the precarious future, and to teach their children how to do this as well.
So just like the motto of the Boy Scouts to “Be Prepared,” it is a good idea to set your teen up for what is bound to be a wild ride in the next few months. Experts recommend a few tangible things you can do to recession-proof your teen.
Set A Budget
Now is the time to teach your teen to take a closer look at the way they spend their money. Although no one really likes to be locked into a certain way of spending, (especially young people!) with such uncertain times ahead it is a good idea to plan ahead. “By understanding what money you are getting and what you are spending, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corporation’s Money Smart, a financial education program. This is important so that you don’t overspend, especially if inflation gets worse or things get harder.
This is definitely not a good time for your teen to max out their credit cards, and credit cards in general can be a hard lesson to learn for young people. With interest rates growing and an uncertain market, hold on to as much money as you can and avoid any discretionary spending that you can.” Job security tends to be worse when a recession comes, it’s not a great time to accumulate debt,” said Ma. This can be a hard conversation to have with your teen who wants to spend money from their summer job, or doesn’t see a problem with credit, but you need to!
Save What You Can
As the old saying goes, it is a good idea to save for a rainy day, and this is an invaluable lesson for your kids. If you don’t know how exactly to help your teen get started, take the help of a program like America Saves, which is a non-profit campaign by the Consumer Federation of America. They can help you understand how you can get your bills paid, meet your needs, and still have money leftover to save. Make sure to check on your savings account and shop around for a better deal if possible, and keep an eye on monthly fees or other hidden charges.
Switch It Up at the Grocery Store
Sometimes people get stuck in a rot, for example in grocery shopping, and they are not finding the best deals but merely doing what they have always done. According to the United Nations, world food prices have risen by 50 percent. Teach your children to look for the best deals, and not just do what is convenient. As the price of groceries has risen, experts recommend doing some research about where the best prices are. “A lot of stores have price matching, so if you show them that a competitor is selling the same product at a lower rate, they’ll match that,” Kia Mccallister-Young, director of America Saves said.
The roller coaster ride is still going on, and will be for the foreseeable future, so you should do your best to live within your budget and to make sure that you have enough resources left when the bumpy ride comes to a final stop. Teaching your kids to do the same and helping them understand the way the economy works will reap dividends long into the future.
I like to spend my time giving back with organizations that focus on mentoring aspiring entrepreneurs. I have supported after school programs that focus on entrepreneurial and global initiatives in local primary schools. I recently extended my mentoring to include students at Case Western Reserve University.