Parents need to have ‘money talk’ with kids July 27th, 2009
FINANCES | Encourage youngsters to earn money, save for things they really want
Teens spend $125 billion a year, according to a study from Piper Jaffray, a research firm.
But 20 percent of couples have never spoken with their kids ages 4-18 about handling money responsibly, says a new survey by TrueCredit.
Twenty-eight percent of parents have added their child as an authorized credit card user, the report revealed. With the average credit card debt for college students at $2,748, (according to a report by student-loan provider Nellie Mae), parents may want to reconsider that.
Seventy-one percent of parents said they require their children to use allowance money for their own purchases.
“Before turning kids loose with their allowances, parents should take the critical first step of teaching kids how to budget and prioritize their spending and saving,” said Lucy Duni, vice president of consumer education at TrueCredit.com, the consumer branch of TransUnion, a credit reporting firm.
“Educating our children about financial basics early on can help them make informed decisions down the road,” she said.
To avoid raising a new generation of over-spenders with hefty debt loads, experts at TrueCredit.com recommend that parents have the “money talk” with kids before giving them financial freedom.
To encourage parents to educate their kids about managing money, TrueCredit.com makes the following tips:
Start small. For young children, use routine errands (like going to the grocery store) to teach them lessons about budgeting.
Weekly allowances. Encourage children to save a portion of their allowance each week by calculating how much they could save in a month or a year. Opening a savings account for older children can educate them about making deposits and withdrawals, along with the benefits of saving money as they watch their bank account grow with accumulated interest.
Wants vs. needs. Encouraging kids to earn money and save for something they really want is a smart way to teach healthy spending habits and delayed gratification. Help your child keep track of their savings with a chart or offer them incentives. For example, for every $20 they save, you could add $2 more.
Teaching teens. Set guidelines for their use of a prepaid credit card or a parent’s card and explain how credit works. Sit down with your teen each month and go over the credit card bill and receipts to show them how fast their charges can add up.
College days. Teach your kids about responsible credit card use, the dangers of debt and the importance of paying bills on time before they go to college. Encourage them to order their credit reports, as many don’t realize the impact of their spending and payment habits until they see the effect on their credit score firsthand.
Bill Cunniff
© Copyright 2009 Digital Chicago, Inc.