Answers to solve teenage debt
As graduation nears and many high school students turn 18, credit card applications flood their mailboxes, tempting the young adults with phantom-like free money.
"My son, before he left for college, he probably got between 25 to 35 applications, easily. His senior year in high school, he was getting applications every day," said April Baum, manager of Heber City US Bank.
Many teens, though, don’t know what to do with the applications. Without training, the result could be disastrous, Baum said.
"It’s easy to get credit," Baum said.
"In today’s markets, they are offering loans for anyone wanting to get one," adds Riley Risto, the vice president at Mountain West Bank in Park City. "There’s an increase in debt overall, it’s disgusting how in debt people are."
Baum said a person under 18 can’t get a credit card unless a parent cosigns. Many parents acquire the cards for emergency reasons to ensure safety for their children. Depending on what they do with it, though, credit cards can lead to good or bad financial habits later, she said.
"My opinion, as a mom, is it’s good to introduce your children early to credit, but parents have to be as responsible as the children do. It’s too easy to get caught up in the moment," Baum said.
For many teenagers, the lure of a plastic card with their name on a Visa, Mastercard, American Express or Discover account can be thrilling.
"I’m excited about it," said Brooke Miller, an 18-year-old Park City student, about getting her first independent credit card. "But," she added, "it’s only bad in the end."
The excitement teenagers sense about a credit card comes from a feeling of growing up, Baum said.
"It’s a rite of passage," Baum said. "All of a sudden, ‘I’m an adult if I carry a credit card.’"
Jordan Youngblood, a 16-year-old Park City student, agrees with Miller. She said she would also be excited about getting a credit card but that she is aware of the danger.
Youngblood said when she goes to college armed with a credit card, she would spend about $500 buying "bed stuff" and "house stuff" and then she would stop using it.
Youngblood moved to Park City three months ago and has observed a lot of her classmates’ behavior using credit cards from their parents. Many of the kids, she said, use the card without conscience as their parents pay the balance each month.
"There are a lot of spoiled kids here," Youngblood said.
Her friend, Miller, is one of Park City High’s students who is allowed to charge on her parent’s account. Miller uses it to buy food, pay for gas and clothes. Each month she spends about $100.
"I barely use it," Miller said. "There are certain things, if I buy them, that will get (my parents) mad."
Miller said a friend of hers had to cut up her card because she used it too much. Most of the teenagers in town, she said, probably are aware of credit card dangers but "they don’t care," she said.
Education about debt should be required, Baum said. When parents simply pay for the card without the child taking an active part, it may start negative habits.
"You have to learn what your tolerances are," Risto said. "You have to pay back everything in a single month and not get caught in the trap of paying minimum payments. It’s a learned behavior definitely and every individual is different. A lot of people have way more debt than they are able to pay off in their lives."
Risto likes the idea of having a teenager buy a used, starter car to build credit instead of credit cards.
"They are easy to get, and parents will ensure they will make that payment," Risto said. "Credit cards are fine, but you just have to pay them responsibly. It’s too tempting for a lot of people."
Baum makes the comparison of teaching a child to look both ways before crossing the street. If a parent does that, then they should also teach them about handling debt, she said.
"Parents should be actively involved. Some of the things we encourage, if they are going to have a card, buy a Visa Bucks Card. That can help educate the kids, and check cards are certainly appropriate," Baum said.
This will help kids to be aware of fees and making payments on time.
"They have to be aware of that. If parents are handling it all for them, it is probably not in the best interest of the child. It’s a matter of education," Baum said.
If teenagers are not well educated, they may have to learn the hard way.
"With the ease of obtaining credit these days, the lure is too great," Risto said.
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