Credit Cards and Youth

obi_positive · #1 (**permalink**) 07-07-2005, 11:41 PM

The topic of credit card debt came up around the water cooler yesterday, and it seems that everyone in the office started their credit card debt in their early 20's.

I know that creditors begin hitting kids pretty hard when they start college. The lure of a $20 minimum balance and not grasping the concept of interest seems to hook many of them.

I had a roommate in college who went crazy with credit, then left town when he couldn't pay. The creditors harassed me about him, and I was stuck paying the full rent. Lessons learned: 1. Don't get a credit card. 2. Don't get a roommate with a credit card. 3. Hang up on ex-roommate's creditors.

My kids are very young, but I'd like to be prepared to teach them about money. What lessons are the parents of teens and 20-somethings teaching their children?

CRFSaver · #2 (**permalink**) 07-08-2005, 07:24 AM

Thats half the problems. How can mom and dad teach their kids about fiscal responsibility when they themselves have 30k in credit card debt. How can they teach their children to wait and say no when they buy a new car every two years and have to have that new dining room set they use 3 times a year. I was lucky in that I had a family that taught me the evils of abusing your credit card (somehow my sister didnt learn). I went off to college with a credit card that had a 500 dollar maximum balance. It served me quite well in those years.

When I got out of college, my credit card served me quite well in buying my first suit and other work clothes that I didnt have the money for. But again, I didnt abuse that card. I have never taken a solicitation from a credit card mailing. I grew up in a family with a father who refused to pay for dinner with a credit card. It finally took us persuading him instead of carrying 350 in cash around for that special dinner our family would have once in a while, put it on the card and pay it off.

The best way to teach is by example. And that starts with mom and dad. Do as I say not as I do never seems to work so well. Second is pounding away at them the importance of paying your bills on time. You would be shocked the number of people who have the money, and just plain forget to pay the bill on a consistent basis. Oops. Third, do the math. SHow them how long it will take them to pay that debt. Show them teh interest they are paying. And scare them into, if you ever want a new car when you get out of college, you can't do it with 15k in CC debt.

That is my two cents.

jmjj215 · #3 (**permalink**) 07-08-2005, 07:36 AM

I agree with CRF, as usual.

The key is to teach them by example. You should talk about money with them. Talk about the strategies you as parents use. Give them books to read (and maybe even incentive to write a book report about it). It's up to the parents.

In spite of the best efforts by parents, children will still make their own mistakes and have their own learning experiences - which is simply part of life. If this is the case, you can just help them along where they need it by providing advice and counsel.

34saving · #4 (**permalink**) 07-08-2005, 08:05 AM

Totally agree about parents setting the example! Suze thinks so too if you're interested.

http://biz.yahoo.com/pfg/e37children/

CRFSaver · #5 (**permalink**) 07-08-2005, 08:05 AM

I agree. Children need to make their own mistakes. You can give them all the advice in the world. Try and instill in them values. But when it is all said and done, they need to live their lives and handle the consequences. Sometimes we learn the most from our mistakes.

I can't help but laugh at myself given the fact I have no children!

PennyPincher · #6 (**permalink**) 07-08-2005, 09:14 AM

Although I don't have children, I have always been interested in teaching about money and the effects that parents and their spending/saving habits have on children.

I'm trying to locate a recent article I read about kids and allowances. It discussed how we should drop the word 'allowance', and start calling it a 'salary'. One that is EARNED by jobs, and that is subject to housing expenses, and that must cover necessities. (I read so many I have no idea where it was from..maybe here!) Anyhow, here is another pretty good one:

http://moneycentral.msn.com/content/...ids/P75981.asp

The main points in this one are that weekly allowances for discretionary purchases may not be best.

Larger, more spread out allowances that must include some basics (like clothing, etc) have the ability to teach more lessons. Afterall, what percentage of OUR incomes really go toward such "fun" items?!?!?! I wish!

Kids might not enjoy learning about finances at school...if we even had that available to any significant degree, but they are very motivated to learn about things that affect them directly. If a child gets an allowance bi-weekly or monthly, all of a sudden they will be encouraged (forced) to learn about budgeting. And perhaps savings as well.

jmjj215 · #7 (**permalink**) 07-08-2005, 10:28 AM

Quote:

I can't help but laugh at myself given the fact I have no children!

I think you could've had the passive reader of this forum fooled! (But I still remember that you're going after a trust-fund babe).

CRFSaver · #8 (**permalink**) 07-08-2005, 10:45 AM

I am wise beyond my years!

karnic3881 · #9 (**permalink**) 07-08-2005, 02:18 PM

I am 24 years old now, and began accumulating debt when I was 19 years old. I didn't get the idea from my parents, because they are perfect role models: can afford 'bigger and better', but are happy with what they have. Have large savings, retirement, pension, etc. but don't touch it. Buy their cars in cash and keep them for years. They just do everything right (wouldn't they love to hear that, lol). I am not sure what caused me to fall into the habits I did, and I won't blame the credit card companies, or anyone but myself. Luckily, I realized I needed to change and have done so with not much effort. I only had about $7-8K in debt, (the average), and am now down to $2k, within the same year. In fact, I began fighting the battle in late February and have made good progress (in my opinion). I just needed to take a hard look at the money I was wasting and how unhappy it made me to deal with all the bills. Knowing the 'high' of eliminating debt is the key motivator for me.

BAGAGT1 · #10 (**permalink**) 07-09-2005, 05:36 PM

Quote:

Originally Posted by karnic3881

I just needed to take a hard look at the money I was wasting and how unhappy it made me to deal with all the bills. Knowing the 'high' of eliminating debt is the key motivator for me.

The 'high' of being debt free will taste even better.

BAGAGT1 · #11 (**permalink**) 07-09-2005, 05:41 PM

Much like karnic3881, my parents are very good financial role models, which in turn has helped me to be what I believe to be fairly decent with my finances.

My wife's parents (father in particular) is not very good with money, and therefore my wife was not very good with money either. It has taken quite a while to convert her over to the good side (we both still struggle with our finances from time to time) but I have convinced her of the importance of saving for the future.

karnic3881 · #12 (**permalink**) 07-09-2005, 08:37 PM

Quote:

Originally Posted by BAGAGT1

The 'high' of being debt free will taste even better.

I can't wait

jhd815 · #13 (**permalink**) 07-10-2005, 05:36 PM

I've read about a few methods that parents have used with their children.

One method is to teach them that things cost money. The way you do this is by giving your child a checking account register (which you can get from any local bank) and use this to keep track of their savings or money earned or given from an allowance (or salary).

Teach them that if they want that new video game or article of clothing or whatever that they will need to save enough first to purchase it. Then when they have the money to buy it, they must subtract that amount from their account register.

This has several effects: 1) They see how quickly they spend or accumulate money or funds; 2) They see clearly how they are spending their money; and 3) It might even get them to not spend their money but instead save it. Once they see how long it takes to save for whatever item it is that they want, they may lose interest in it or they might begin to make judgements about their needs vs. their wants.

You could also teach them about saving and interest by setting up an online savings account with ING or some other institution.

Just one idea that I've read about that sounds like a pretty good idea. I'd use it if I had children.

mom-from-missouri · #14 (**permalink**) 07-10-2005, 11:43 PM

"My kids are very young, but I'd like to be prepared to teach them about money. What lessons are the parents of teens and 20-somethings teaching their children?"

Teens and 20-somethings???? That is too late -way to late to start. Start as soon as they learn about money. I let my daughters earn money. I pay a quarter a job. Some jobs they are expected to do no matter what (no quarter for those). Jobs above that, I pay them for. Then, they have the choice of putting it in their bank, or going to the dollar store. After they get $3 in their bank each, we take that to the credit union and it goes into their account there. Having the girls each get their own account at the credit union was a lesson in itself. The teller took each one individually, explained what interest was and talked to them like adults. She gave them each a brochure and a piggy bank and quarter book. They each got a membership card which they are very proud of. To them it is a reward to deposit money. They take their card and money to the teller, and I am (forced by them) to step aside and let them do it theirselves. They also get excited to see their statement when it comes out in the mail.
Sometimes they pick the dollar store. But, more and more they are picking the bank. They don't like it if one of them gets to make a deposit and they don't. Also, it is a rule in our house that birthday money goes into the bank as well--unless they are saving up for something.
My children are young-twins are almost 7, and the other is 8. But, they are learning the value of the dollar. They also refuse to spend it on candy--once its gone, its gone. But, during the county fair, they did pool money together with their cousins and get a $2 cotton candy to split with 5 kids. They each had enough to buy their own, but didn't want to "waste" it. They also took bottles of water from home so they would not have to buy soda. (We are cheap-we get bottled water about 2 times a year, and save and refill the bottles till they wear out.)

sunnysamantha · #15 (**permalink**) 07-12-2005, 12:23 PM

Oh my life story! I know what you're saying. I was one of those college students lured into the credit cards with fancy offers. You say to yourself and your parents that it's only an emergency card, but that becomes overpowered when you're hungry after a late night out and order a pizza (silly example, but you get the point).

Education from parents and even professors could solve this problem. Obviously your peers are in the same situation. They aren't going to curb your spending, only you can, you know? I have recovered from serious credit card debt, so I know completely the mindset the youth are in. College is expensive, but credit cards alone should not be the answer.