Australian Financial Solutions

Educate Teenagers and Help Them Avoid Debt

August 2, 2010

The level of debt amongst teenagers is alarming governments. The dangers of not teaching teenagers how to cope with money can lead to unmanageable debts. Most teenagers are vulnerable to debt because they lack a clear understanding of debt management and how credit works. The wide availability of credit and mobile phone debt are the main contributors to those debts.

Parents often expect their children to make the leap from a childhood savings account to managing a credit card. Learning the difference between “good debt” and “bad debt” is crucial to wealth building and debt management. Building a line of credit is vital in today’s society. However, accumulating credit card debt, paying bills late or avoiding paying bills altogether can negatively affect your children’s credit score as well as their future. It is paramount for parents to help teens understand the value in having a good credit score. If necessary, show them your credit reports so they see what type of information the reports contain.

Here are some basic tips to help your teenage children be debt free:

• Move gradually to a credit card account: help your children manage cash through their own checking accounts before adding a debit card and later, a credit card.
• Set limits: a good way for your children to be debt free is to limit their use of credit (use lay-by as an alternative to credit, use prepaid cards for mobile phones etc.)
• Encourage them to maintain good payment habits: putting together a budget, making their payments on time, making more than the minimum payment, keeping the balance low
• Help them identify savings goals and encourage them to save regularly to achieve them.

Financial habits are taught, not assumed. Many adults that have spending problems or excessive credit card debt may never have learned how to handle money. The habits that are taught as a teenager and cultivated as an adult can have life changing implications for your teenager. Australian Financial Solutions provides financial solutions to people in debt. Contact Australian Financial Solutions today to obtain a free and confidential financial assessment.

Filed under: Debt, Uncategorized

Tags: debt management