We’ve all heard that lessons in financial literacy need to be taught when kids are young. For parents of teens, it can be a struggle to teach them the ins and outs of financial accountability, while still allowing them their autonomy.
According to the Jumpstart Coalition for Personal Financial Literacy, a non-profit group that teaches basic financial know-how to students of all ages, teens starting college or university bring an average $1,585 in credit card debt with them.
That’s because one out of three high schoolers use a credit card and by first year of post-secondary life, 54 per cent of all first year students do.
Robert Manning, author of Credit Card Nation, adds that young adults under the age of 25 are the most rapidly growing group of bankruptcy filers.
Do your children a favour and help nip in the bud this buy-now-pay-later habit, before it becomes a burden far too great for any minimum-wage earning teen to bear.
Show your kids how to establish a budget by helping them understand how much they earn in a month, what their expenses are, to set money aside (at least 10 per cent of their earnings) into a savings account, and that buying with cash is the best way to keep track of their spending.
If their expenses outweigh their income, show them where costs can be trimmed and ensure that they review their budget periodically.
If your student needs a credit card, emphasize that it should only be used in an emergency and that it must be paid off in full each month. If they can’t do that, stress that they should put the credit card away until the debt is completely paid. Should their credit card debt become a chronic problem, encourage your teen to get rid of the card altogether.
For the younger set, parents are advised to start young with lessons about the folly in impulse buying, ways to earn money by doing household chores for a start, and how to plan and save for future purchases that really matter to them. Also teach your young consumers how to be wise shoppers who compare prices and look for sales.
Jennifer Birch – Realtor