In the process of writing my new book on how to improve our credit scores, I came across of alarming facts that many times is overlooked; teenagers in financial crisis. Not many would think of this since they are just teenagers and just starting their lives. Many of them are in high school or college some do not have a job other than a summer job. So how can they be in financial trouble?
However, the average college student is stuck with about $3,200 in credit card debt before they finish their college life. Today’s college graduates carry a heavy debt burden of $23,000 in student debt along with an average of $4,200 in credit card debt by the time they graduate. Many financial gurus suggest that teenagers should not have credit cards at all. Their argument is that they are not prepared to handle the responsibilities that carrying a credit card entails. Others believe that they should be given credit cards as early as possible, since it is a fact of life.
I think that the solution lies in the middle. I propose financial education. Teenagers should be exposed to the reality of credit cards. Trying to protect them from financial crisis by not talking about the subject and pretend that it does not exist is not the solution. The financial education must start at home and early. We as parents must be the first ones to properly educate our children about finance, budgeting, credit and investing. These are critical tools of survival in our society.
On Father's Day, I invite all father's to make it their task to educate the youth on financial matters. Lets prevent that our children become another number in the teenager financial crisis.
Showing posts with label Teenage Finance. Show all posts
Showing posts with label Teenage Finance. Show all posts
June 19, 2011
August 22, 2009
Teaching Teens About Money Management
Most of the times parents complain about their teenagers and their expenditure habits. As “difficult” it may seem to you, it is important to teach them early about money and money management. Having a constant allowance, source of income and their savings account can teach them about the importance of savings, how to manage their resources, and to make financial decisions about their expenditures, since they will see the impact of their decision on their account.
In addition to teaching them about saving, it is important to educate them about the difference between good and bad debt. In today’s environment, teenagers are exposed to credit card marketing enticing them to register for a credit card. It is important for them to learn early about the use of credit cards and the impact of the bad use of them.
Kids these days are becoming more and more aware of their family's source of income and financial status. They apply these money-spending principles when they venture out on their own. Thus, it becomes more of a parent’s responsibility to start “training” their teenage kids to use their money wisely.
Here are five tips on how to teach your teenagers about money management:
1. Lead by example - This in my opinion is the most important step. With your lifestyle, the children will see how you spend your money. If they see you allotting a certain amount for a specific household need, they will eventually do the same when they get to earn their own keep.
2. Open a savings account – Help your teen open a savings account. It is important that the account is in THEIR name. This will give them an instant financial responsibility. Many banks offer starting accounts, many geared to minors, where there are no monthly fees. The idea here is to get them motivated about the saving process. When they receive their statements and see their balance, they will be able to see the impact of their decisions. As they see their account growing, it may motivate them to continue saving.
3. Teach them how to manage their money – Show them how; do not make the decisions for them. Sit down and explain to them how to manage their own account, and the rewards that they get from saving. Help them review their savings account statement, so they can see how much money was deposited into the account and how much money was spent and where. This will help a teenager later in life with the management of a checking account.
4. Construct a “spending plan” – I suggest that you do not call it a budget, unfortunately many people feel that a budget is restricting their lives. The idea is to make it fun, educational, and for the teenager to gain a sense of responsibility. Instead call it a spending plan, this can be fun for the teenager to think of the ways they can wisely spend their savings.This will help them feel better about saving money since they will have a target to work toward.
5. Develop a “saving plan” – Now that you have helped your teenager to develop a series of goals on how they could wisely spend their money, you need to show them how much money they need to save monthly to achieve their goals. This is a learning experience for the teenager since it may be their first savings account.
Teens can learn at an early age about money management. If you implement the plan above you will provide your teenager a lesson in life that will prevent future financial failures and something that they won’t learn in any textbook in high school. It is important for them to understand purchase decisions, and the management of the money they earn. It will teach them that they do not have to waste money on expensive stuff that they don’t really need. You will help your teenager to grow up being a responsible adult at least money wise.
In addition to teaching them about saving, it is important to educate them about the difference between good and bad debt. In today’s environment, teenagers are exposed to credit card marketing enticing them to register for a credit card. It is important for them to learn early about the use of credit cards and the impact of the bad use of them.
Kids these days are becoming more and more aware of their family's source of income and financial status. They apply these money-spending principles when they venture out on their own. Thus, it becomes more of a parent’s responsibility to start “training” their teenage kids to use their money wisely.
Here are five tips on how to teach your teenagers about money management:
1. Lead by example - This in my opinion is the most important step. With your lifestyle, the children will see how you spend your money. If they see you allotting a certain amount for a specific household need, they will eventually do the same when they get to earn their own keep.
2. Open a savings account – Help your teen open a savings account. It is important that the account is in THEIR name. This will give them an instant financial responsibility. Many banks offer starting accounts, many geared to minors, where there are no monthly fees. The idea here is to get them motivated about the saving process. When they receive their statements and see their balance, they will be able to see the impact of their decisions. As they see their account growing, it may motivate them to continue saving.
3. Teach them how to manage their money – Show them how; do not make the decisions for them. Sit down and explain to them how to manage their own account, and the rewards that they get from saving. Help them review their savings account statement, so they can see how much money was deposited into the account and how much money was spent and where. This will help a teenager later in life with the management of a checking account.
4. Construct a “spending plan” – I suggest that you do not call it a budget, unfortunately many people feel that a budget is restricting their lives. The idea is to make it fun, educational, and for the teenager to gain a sense of responsibility. Instead call it a spending plan, this can be fun for the teenager to think of the ways they can wisely spend their savings.This will help them feel better about saving money since they will have a target to work toward.
5. Develop a “saving plan” – Now that you have helped your teenager to develop a series of goals on how they could wisely spend their money, you need to show them how much money they need to save monthly to achieve their goals. This is a learning experience for the teenager since it may be their first savings account.
Teens can learn at an early age about money management. If you implement the plan above you will provide your teenager a lesson in life that will prevent future financial failures and something that they won’t learn in any textbook in high school. It is important for them to understand purchase decisions, and the management of the money they earn. It will teach them that they do not have to waste money on expensive stuff that they don’t really need. You will help your teenager to grow up being a responsible adult at least money wise.
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