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How to Talk to Your Teen About Money

How to Talk to Your Teen About Money

By Hon. John C. Ninfo

June 04, 2008

Did you know that your children’s credit scores may be more important to their future than their academic transcripts? Or that 68 percent of high school and college students say they have never had a meaningful conversation with their parents about personal finances?

What’s your reaction to an Indiana University administrator candidly admitting that they lose more students to credit cards than to academic failure? Or a Rochester Institute of Technology professor estimating that as many as 10 percent of college students will drop out of college because of credit problems?

The Problem

On a recent flight to the West Coast, I sat next to a woman on her way to see her son to discuss his finances. She was still unsure whether she and her husband should bail him out of his credit card debt and put him on a repayment plan, or let him “learn the hard way” by dropping out of college to get his finances under control and then finish his education.

Believe me, this is a conversation that you don’t want to have with your child.

Most college students are easy prey for the creative credit card offers and free gifts that they will be bombarded with from the moment they walk onto campus.

The problem is that too many young people are financially illiterate. They are hungry consumers getting their first tastes of financial independence and can think of a million reasons to do and buy things they can’t afford. Young people are too quick to be influenced by the peer pressure of other students who are using credit cards and taking advantage of these offers.

Greg was a 19-year-old sophomore at a prestigious university. In a little more than a year, he had lost more than $7,500 playing online poker.

A class president and the son of a minister, he became so desperate over his gambling debts, financed with credit cards, that he robbed a bank.

Greg was one of approximately 1.6 million college students who gambled online last year. Will your child accept a credit card solicitation when they go to college so that they can gamble online?

Unfortunately, it is the naive use of easy-to-obtain credit cards and its impact on their credit reports that has resulted in so many college graduates being turned down for jobs, car loans, apartments, graduate student loans—and even being forced to file for bankruptcy.

In a world where all of this is happening, it’s time to get serious about making sure your future college student learns some of the basic lessons, tactics and techniques of personal finance.

Start With the Basics

Don’t assume that your teen’s school has taught her anything about personal finance. Open a checking and savings account with her now, and make sure the bank has a branch near her college.

Teach her to put a portion of her income (part-time jobs, allowance or gifts) into the savings account for an emergency fund (say $500), and to save for some of the things she may want for herself (an iPod or tickets to a concert).

Too many Americans have forgotten about the need for savings and the value of delayed gratification. Teach your child both of these lessons and why they are important.

Teach her to fill out the check register when she writes a check, and show her how to balance the account. Discuss the difference between needs, wants and wishes.


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