Friday, September 28, 2007
For What It's Worth: Credit
Parents teach their children a lot about life, family and friendships, but what about finances? Showing them how to manage their money early could help them avoid credit problems later on. Seven's Craig Stevens explains, For What It's Worth.
WSVN -- Erin Williams: "That's definitely my favorite shoe right there."
It's no news flash that teens love to spend.
Erin Williams: "I'm 16. I'm a girl. I love to shop, but I'm just really going to try and be responsible."
What is surprising, there are some who learn to save. Erin Williams is one of them.
Erin Williams: "It definitely adds up. I've been saving for a really, really long time, since I was five, and it's my life's savings."
While it may sound funny to hear a teen talk about a life's savings, a solid financial future is no joke.
Erin Williams: "Not many 16-year-olds have a whole lot of money, so I'm getting a head start. I'm getting a leg up on all of them."
With U.S. Credit card debt fast approaching one trillion dollars, Seven's Financial Expert Allie Jablon says it's never too early to learn.
Allie Jablon, Seven's Financial Expert: "At a time when nearly half of American adults are carrying at least $10,000 in credit card debt, it's really important that we teach our teens how to manage money."
And managing money has come a long way since the piggy bank.
Allie Jablon: "The first step towards teaching our teens financial independence is helping them set up a checking and savings account."
Once your teen's checked that off, it may be time to introduce them to plastic.
Allie Jablon: "One great place to start for your teen is a debit card. A debit card will help them monitor their spending habits and their account balance."
Just be sure they keep track of their spending to avoid the dreaded overdraft fee and report a stolen card immediately.
Allie Jablon: "With a debit card, if it is reported lost or stolen within the first 48 hours you can limit your liability to about $50, usually."
If debit doesn't work for you, Allie says a prepaid card gives your teen the feel of credit, without the concerns.
Allie Jablon: "A prepaid card works much like a store gift card but can be used anywhere credit cards are taken."
But if your teen is ready to graduate on to real credit, parents have options.
Allie Jablon: "One of the safest ways to issue your teen a credit card is to make them an authorized user on your own credit card."
That allows them to benefit from your credit history, while their's is yet to be written.
Allie Jablon: "If you feel that your teen is responsible enough for their own credit card, you as the parent can set the credit limit on that card based upon how much your teen has in their checking or savings account."
It's a money message sure to help teens cash-in down the road.
Craig Stevens: "Allie says don't forget to sit down with your teen when the bill comes in each month and remind them that it is their debt, and their responsibility to pay."
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