Cash or Credit: Managing Money
Today's teens have more money than any other generation. This money can be a blessing or a curse. It all depends on how you as a parent teach your son to use his money. Abuse of money can be very dangerous, particularly for a teen, because it will follow him his whole life.
Alert
Teens spent more than $53 billion dollars more in 2004 than they did in 1997. This amounts to about $175 billion, according to Teen Research Unlimited. Your teen needs to figure out how to spend his share wisely.
Teach money management early and often. By the time he is a teen, your son should have a good working knowledge of the meaning of most money management terms, such as credit, savings, interest, and the like.
Allowance is one method you can use to teach your son about money. While it is important for him to have money to allocate as he wishes, it is really the education behind the money that counts. Rather than simply handing over some money to your son at regular intervals, you need to teach him what to do once you let go of the cash.
About 30 percent of teens have a checking account. This teaches them to balance a checkbook, though your son also needs to understand the concept of a savings account. The majority of financial planners advise that a set portion of every single paycheck needs to go to savings, even when times are tough. This is one lesson that will stay with him his whole life.
As many as 11 percent of thirteen- to fourteen-year-olds carry a credit card, according to a recent Junior Achievement poll. While this may help your son in an emergency situation or prevent him from losing his lunch money, there are other ramifications of credit cards for teens. You should define the term “emergency” for your son. An emergency is not when the team wins a game and everyone wants pizza.
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Credit is of growing importance. Many employers are now checking job applicants' credit ratings before they hire new employees. This makes protecting your credit even more important than ever.
If your teen has a credit card, he may not understand he is borrowing against future money. Make sure he knows about the credit card's grace period, late payments, and over-limit fees. He needs to understand that what he spends today will come back to him when the bill arrives in the mail. While many teens do pay their bills in full when their credit card statement comes, about 18 percent do not. This practice can set him up for a potentially overwhelming problem in the future. It is important to explain credit scores to your son.
Discuss interest rates, additional credit card fees, and credit limits, and teach your son to weigh the touted benefits with the potential money drains. Let him know how and where to check his credit report.
