Search This Blog

Wednesday, October 6, 2010

Who has more spending money- A teen or an adult?



I always wondered why the teenage demographic is so important to companies in terms of brand marketing, catering of products & services, and the overall pop culture of music, movies, television and magazines toward teenagers.  Even when I a teen not too long ago, I didn't understand why advertising focused so much on me, when it seemed like adults had more money to spend than I did working in fast-food and department store jobs while going to high school.

The answer is teens generally have more discretionary spending than adults who make 4x as much in salary.

I did a little mathematical experiment comparing a 16-17 yr. old teen in high school making $8/hr and who works 25hrs/wk. with an adult at a 40hr/wk. job making $40,000.  Then I subtracted what would be reasonable expenses for both the teen and the adult.

Note: Usually a 16-17yr old teen is not expected to pay rent, utilities or contribute to the household unless the parents are financially struggling, so for this example the teen's parents are not cash strapped & do not need him/her to contribute.   I also base my figures on an adult living alone with no spouse, partner, roommate, etc, to share expenses with.    Breakdown is as follows:


Adult
Yearly Salary:                       $40,000

Expenses:
   Income Tax                    - $10,000   (@ 25% rate)
   Rent/Mortgage                -   $9,000  (@ $750/mo)
   Utilities                            -  $3,000   (@ $250/mo)
   Auto payment                  -  $3,300  (@ $275/mo)
   Auto Insurance                -  $1,440   (@ $120/mo)
   Health Insurance              -  $2,700   (@ $225/mo)
   Basic Cable TV               -   $ 600    (@ $50/mo)
   House Phone & internet   -  $1,020   (@ $85/mo)
   Cell Phone-                     -   $ 600    (@ $50/mo)
   Gasoline                          -  $2,080   (@ $40/week)
   Groceries                        -  $3,380   (@ $65/week)
Total Expenses ---- >       -  $37,120 

Salary              $40,000
Expenses        -$37,120
                        $ 2,880 in Discretionary spending ($240/mo)


Teen- 16-17yr old 
Yearly Salary:                       $10,040 (@ $8/hr- 25hrs/wk)

Expenses:
   Income Tax                     -    $  500
     ~  $10k/yr. is below poverty line, a small amount of tax usually paid
   Rent/Mortgage                -         $0 
   Utilities                            -         $0 
   Auto payment                  -         $0 
     ~  Teen's 1st car tends to be very old & bought by parent
   Auto Insurance                -      $840   (@ $70/mo)
      ~  Ins less because minors can be on parents' Ins.  plans
   Health Insurance              -         $0
      ~  Minors covered under parents' family health policy
   Basic Cable TV               -         $0   
   House Phone & internet   -         $0  
   Cell Phone-                     -     $360  (@$30/mo)
    ~   Teen's cell usually connected to a family plan; less cost per mo.)
   Gasoline                          -   $1560   (@ $30/week)
     ~  Teens tend to work closer than home; drive less
   Groceries                        -         $0 
Total Expenses ---- >       -  $3,260 

Salary              $10,040
Expenses        -$ 3,260
                        $ 6,780 in Discretionary spending ($565/mo)



In Summary:
                                       Salary           Expenses         Discretionary Income

Adult                             $40,000          $37,120           $2,880  ($240/mo)

High School Teenager   $10,040           $3,260            $6,780  ($565/mo)

~  Based on this breakdown, the teenager has more than 2x the monthly discretionary income as the adult; a difference of $325 more/mo. to spend on shopping, eating out, etc..  This is why businesses & advertisers cater to teenagers.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.