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Charge it!
“What’s in your wallet?” asks credit card giant Capital One in its most recent advertising campaign.
Perhaps to the dismay of a few parents, for many high school seniors, the answer is “credit cards!”
According to a study by Jumpstart Coalition for Personal Financial Literacy, by the time children are seniors in high school, nearly one in three use credit cards. By college, the percentage increases to 83 percent of all students, and they carry roughly $2,300 worth of debt on those cards.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 instituted sweeping changes to personal bankruptcy laws, making declaring bankruptcy and discharging debt more difficult, especially for credit-card holders.
Coinstar Inc., a corporation offering coin counting, prepaid products such as credit cards, and gift cards and payroll services, noted the fastest-growing demographic declaring personal bankruptcy is people ages 20-24.
Carl George, CPA and chairman of the American Institute of Certified Public Accountant’s National CPA Financial Literacy Commission, urges parents to teach their children at an early age about fiscal responsibility.
“An allowance is often a child’s first brush with financial independence,” said George. “With allowance money in hand, your child can begin saving and budgeting for the things he or she wants.”
An informal poll of 10 Tahlequah High School juniors and seniors showed that area students may be a bit more finance-savvy than the national average. Only two of the 10 interviewed have a credit card.
“I have a Visa,” said Allison Osborne, THS senior. “I’ve had it for about two years now, and it has my name on it. The bill goes to my parents, but I have a job and use money from it to pay the bill.”
Allison still receives an allowance from her parents, who require her to keep up a certain amount of housework in the deal.
Kathryne Cousins, THS junior, doesn’t have a credit card, but has a debit card with a Visa logo. The card allows her to make purchases just like with a credit card, but there’s no interest involved. The “charges” are debited back to her personal bank account. If the account has no money in it, Cousins cannot make the purchase.
“I still get an allowance, as well as having a part-time job at the Tahlequah Public Schools Board of Education office,” said Kathryne. “But I also pay for my own car, insurance, gas - everything. Budgeting and finance were taught to us by our parents at a very early age.”
Kathryne would love to have a credit card, but she doesn’t quite trust herself to refrain from impulse purchases.
“I know I’d get in trouble with it [credit card],” she said. “Too many times, I use money I’ve saved for a specific thing to purchase something I see in a store.”
Kathryne admits to going through a few tough times after making poor financial decisions.
“I’ve spent my money without thinking a few times,” she said. “Then I’d end up having to work extra hours or go without things in order to pay for that error in judgment.”
According to Capital One, only 44 percent of teens said their parents taught them about basic money management.
Pat Molloy, secretary at Tahlequah High School and mother of two grown children, tried to teach her children about proper money management.
“We sat down with both of our kids and made them make out a monthly budget,” said Molloy. “We waited until they had their own part-time jobs. [Son] Andy was a junior, and thought it was kind of silly. He made a lot of mistakes in the beginning, but seems to be doing really well now.”
Molloy’s son didn’t get his first credit card until he went to college.
“Then he it used to buy things at Love’s and Taco Bell,” said Molloy. “Back when we were younger, you couldn’t even use credit cards at the grocery store. They were strictly for department store purchases or gasoline or things like that.”
Molloy’s daughter, Kim, went to college out of state, which required better budgeting than some kids.
“She moved and was on her own,” said Molloy. “I guess she never wanted to have to call home asking for money, so she’s done really well with her finances.”
THS senior T.J. Spears doesn’t have a credit card, but has a bank account. He’s also an employee for Bank of Cherokee County, as is his mother.
“Sometimes my balance gets pretty low,” said T.J. “But I don’t need a credit card.”
Although T.J. is still in high school, he lives out on his own and is responsible for his own living expenses.
“Now, I don’t have to pay rent, because the house is on my family’s land,” said T.J. “But I am responsible for all the utilities and upkeep.”
THS twins Brian and Brent Bardell, don’t receive an allowance.
“We always just asked for money and my mom gave it to us,” said Brian. “Our parents didn’t teach us about budgets! Shoot, how can they teach us to manage money when they can’t manage their own?”
Despite their perception of their parents lack of financial education, the Bardell boys must have picked up some pointers somewhere: They own their own lawn care business.
“We had money in savings that we used to buy equipment,” said Brett. “We paid that back to our savings. This year, we’re going to buy some new things, but our grandpa is going to help.”
“Yeah, grandpa is our bank,” said Brian.
George recommends five basic steps when educating a child about basic money management:
• Teach your child to handle an allowance.
• Open a bank account.
• Set savings and financial goals.
• Teach your child to become a smart consumer.
• Have them do additional research.
Learn more
The CPA profession recently launched a special Budget Buzz program, which is being distributed to more than 650,000 fourth-graders across the nation in their Weekly Reader magazine, as part of the accounting organization’s national “360 Degrees of Financial Literacy” campaign. To find out more about how to educate a child about smart money management, visit www.360financialliteracy.org/Life+Stages/Childhood.
