Young Adults and Credit
If there's one thing that every young man or young woman entering adulthood needs to learn, it's the value of "good credit". More often than not a parent will hand their teenager the keys to a brand new car before they hand over a credit card. But now children are "experimenting" with credit - we all know how dangerous that sounds. If teens and young adults aren't properly educated in the ins and outs of the world of money and credit, then you might as well put a beer in their hand, along with those shiny car keys and send them on their way to the party.
In 2004, kids aged 12-17 spent more than $100 billion. The average teen has been reported to spend more than $250 each month. Teenagers need to know that acting irresponsibly with credit can lead to a lifetime of debt much like "experimenting" with things like alcohol, when mixed with driving, can lead to a world of trouble. Credit is not something to experiment with.
Young adults need to learn responsibility, likewise with credit cards, they must learn to spend responsibly. Some suggest starting them out young. At 16, you might want to get your son or daughter a credit card with a low limit - like $500 or so. This will help your teen learn to budget and learn the dangers of reckless spending. This controls their environment in such a way that it provides a safe venue for them to learn. This is not something your kids will learn in high school - you have to teach them.
Todays youth needs to know how to use credit cards with care. Credit cards have interest rates that are higher than almost any other type of loan. They should understand that a $1,000 purchase will carry with it an interest rate. The minimum payment on that purchase will be somewhere in the realm of $15 each month until it's paid off. The question here is how many months will they be responsible for these payments? They should have the skills from their math class to solve this equation. Help them utilize those skills. Teach them to factor this problem in their heads every time they make a purchase, substituting the appropriate numbers for each prospective purchase. They must remember to factor that in every time they open the wallet or purse to charge a purchase.
Furthermore, they have to understand the dangers of missing payments. This will put blemishes on their credit score. This can make it difficult to one day get a loan on a house, or to get a car or that apartment they've been talking about in the East Village. Paint that picture for them - explain that acting irresponsibly with credit or "experimenting" in an unsafe manner, can lead to a situation where they have to live for quite some time... that will get them budgeting their money in no time!