Debt Free Destiny

Know the facts and learn how to protect your child from becoming one.

Were you aware that one out of three high school seniors uses credit cards?

With family credit card debt at an all-time high, teaching your kids about credit can prevent them from being irresponsible with their money.

Also, learning how credit card companies target teens will help keep your child from being another one of those teen credit card debt statistics.

A Few Quick Stats

1. 82% of college students carry a monthly debt of under $1,000, and over 59 percent of those students were able to pay their balance off each month.
2. 10% of college students carry a balance of over $7,800 and the average student has a debt of $3,200.

Yet as parents know, teen credit card debt statistics can be deceiving.  It may seem nice that those students are able to pay off their debt each month, but only 40 percent of those students actually do so.

That leaves 60 percent of those students that have unpaid credit card debt accumulating interest.

Set the Example

What do these teen credit card debt statistics mean for you as a parent?  It means that teaching your teen about credit cards is important to their future financial health.  Even if you have credit card debt that you struggle to manage, you may need to take the approach of Do as I say, not as I do.  So, how do you take these teen debt statistics and use them to teach your child about credit card debt?

The first thing you need to do is teach your child that credit is okay, as long as it is used responsibly.  Explain that the 40 percent of students paying off their cards each month are being responsible and building up great credit.  Show your child how good credit means that they will be able to pay less for cars, houses, and will even help them get a job one day.

Like drugs, credit cards can be cheap at first, but the cost and need grow quickly.

Start with an Allowance

No statistic will teach your child as much about credit card debt than real world experience.  You can start when your child is in elementary school with their allowance.

Teach them how to budget and save for things that they want.  Start off by allowing your child to pick out one item, and then teach them how to save a little every week out of their allowance to buy the items.

Use Debit Cards

As your child grows older, you may want to give them real world practice with debit cards.

Debit cards work with real money, so your child will have to learn how to budget and keep track of expenses.  If you child needs to borrow money from you for an item, teach him or her about interest when they have to pay you back.  Of course, your interest can go into their savings account, but it will give him or her and idea of how much interest can cost.

You can also work with a prepaid credit cardsor low-limit credit card to ease your teen into using credit responsibly.  This way you are lowering the chances of your child becoming another one of the teen credit card debt statistics.

Watch out for Predatory Credit Card Companies

Finally, teaching money management is important, as are learning about teen debt statistics, but it is creative marketing that allows teens to be so tempted by those credit card offers.

Credit card companies do a very good job of making credit seem like no big deal to most teens.  They lure teens in with big promises, but forget to tell them about the fine print.

Teach your child to read the fine print and help them understand it.  It is the fine print charges and fees that often help to create those negative teen credit card debt statistics.

Other Tips for Getting your Teens off to a Healthy Financial Start

• Cosign for a credit card early - This way they’ve got a resonsible adult on the account that can show them how the process works.  The teen can get a feel for what it’s like to get the bill every month and pay it off.
• Open a Joint Checking Account - The parent can monitor the account and help the teen learn to write checks and use a debit card.
• Teach them to Balance their Checkbook - This is one of most basic and critical parts of successful financial management.  Once this is learned and practiced - it provides a foundation for more good habits.

Keep Teaching

Knowing the teen credit card debt statistics are just the first step in teaching your child about responsible credit card use.

Using allowances and teaching your child how to budget is also important.  The more your child knows about credit cards, the easier it will be for them to avoid becoming one of those statistics.