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When It Comes to Money Matters, Most Teens Are Green


You pay for groceries with a quick slide of an ATM card. On the way home, you pay for gas the same way. Your paycheck arrives via direct deposit. Bills get paid online. If you're an average, plugged-in, card-carrying parent, chances are you use cash less and less these days.

"And that means your kids don't see you using anything green that comes out of your wallet," said Peter Finch, a Darien, Conn., father of three and editor of Smart Money magazine. "For kids, it can mean they end up being clueless about where money comes from and where it goes."

Yet by the time your son or daughter hits 18, there's a more than 60% chance that he or she will have at least one credit card and be a bona fide consumer, spending an average of $84 a week, according to Teen Research Unlimited, a research company.

The prevalence of plastic credit and a vibrant economy only make it more imperative to instill the merits of financial responsibility before your kids hit their teens, said Lois Wright Morton, a Cornell University professor and expert on consumer issues for kids.

"Once they hit college, they are going to get solicited for credit cards and have lots of opportunities to spend money without supervision," Morton said. "If our kids don't know anything about the responsibility that comes with credit, then you have a good chance of raising impulse spenders who will be involved in a revolving cycle of debt."

Morton's observations are supported by a recent Merrill Lynch survey that found about 68% of American teenagers say they have never discussed credit card use with a parent.

Still, according to Catherine J. Cummings, vice president for consumer education at MasterCard International, more than 50% of teen credit card holders manage to pay their monthly balance in full--a statistic that beats adults by 10%.

"That figure demonstrates that the majority of young people are using credit cards for the right reasons and have learned some lessons about financial responsibility," Cummings said. "It's one reason why we stress discussions about money at home. We consider it a special obligation of the industry. We really feel it can make a difference and create teens who use credit for all the right reasons."

Cummings said it's important for older teens to have at least one credit card to establish a good credit history and to have a feeling of security in situations such as car emergencies.

Yet there is a problem with inexperienced teens abusing credit and falling prey to spending temptations.

These problems might be prevented with education and experience, said Denise Voight Crawford, the Texas securities commissioner who created a financial literacy curriculum now being taught in that state's public high schools. Besides there being a growing problem of bankruptcy among young adults, Crawford noted that teens are also considered prey to online investment scams.

"The problem is that a lot of teens do not understand what's at stake," Crawford said. "These days, they get sex education and driver's education, but in a lot of cases they are not getting the financial education they truly need in school or at home."

Educating children about money while they are still very young is a good idea, agrees Gerri Detweiler, education advisor for the nonprofit Debt Counselors of America and author of "The Ultimate Credit Handbook."

Opening youngsters' eyes to the financial realities is especially important to prevent binge spending, Detweiler said.

An estimated 150,000 adults age 25 and under now declare bankruptcy each year, she noted. "That is for debt they probably began creating in their teens," she said.

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