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Published August 13, 2008 06:34 pm - Right now, teens across America are packing up the contents of their bedrooms and preparing to move into dorms as college freshman. As they box up their clothes and possessions, there is one thing that most young people don’t think about bringing: debt. Mat Anderson: Help teens learn to live debt-free Right now, teens across America are packing up the contents of their bedrooms and preparing to move into dorms as college freshman. As they box up their clothes and possessions, there is one thing that most young people don’t think about bringing: debt.
According to school loan provider Nellie Mae, the average college freshman brings $1,585 of credit card debt to college. As they progress through their college years, many teens live beyond their means and rack up even more debt. Mounting financial difficulties lead an estimated 7 to 10 percent of college students to drop out, so they can work and pay off their bills. Many students who remain in college graduate with student loans and crippling debt. Their credit score is in disarray and their ability to enter grad school, get the job of their choice or find housing is jeopardized. In light of this reality, it is important for parents to determine how teens get into financial trouble, and work to prevent it. One of the greatest causes of teens’ financial irresponsibility comes from their natural tendency to procrastinate. Unfortunately, the consequences of putting off credit-card payments can far outweigh the consequences of not studying for a test. Other causes of teen money troubles are cultural. In the past, Americans struggled to keep up with the Joneses. Teens today try to keep up with the Hiltons. In this celebrity-saturated world, young people are no longer wanting what they see kids at school wearing — they want what celebrities are wearing, driving, eating, etc. In order to live beyond their means, teens make use of credit cards that are offered to them at every turn. For many teens, the phrase, “Would you like to save 10 percent today by applying for a credit card,” is the beginning of big financial problems. These financial lessons are often learned the hard way. Many teens don’t learn about credit scores until theirs is ruined, and they don’t see how a T-shirt here, a latte there, and a few late-night pizza orders add up until they receive their statement in the mail. It’s never too late to teach your teen to be financially responsible. Whether you live a virtually debt-free lifestyle or you’ve made some financial mistakes in the past, the experience of parents is valuable to teens. Take the time before your teen gets a credit card, or even a checking account, to explain how things such as credit cards, loans, credit scores and interest rates work. Also, help your teen define wants and needs. Show him that to get something that he really wants, it is important to sacrifice, save and work hard. Apart from being a wise way to approach purchases, this practice will also build character. Another vital part of building financial literacy is to teach teens how to budget. Help teens plan for where each dollar of their money will be spent and encourage them to save a portion of their earnings for emergencies. Finally, set a good example. By following your own advice and demonstrating financial restraint and responsible spending, your teen will be able to look to you as a guide through the confusing world of fine print, interest rates and credit scores. This will not only ensure that your teen gets off on the right foot financially, but will also help ensure her future. 
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