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Last week I mounted my soapbox once again and made a pitch that parents not give their kids credit cards too early. Instead, I urged them to help children learn to manage money one step at a time -- first with cash, then with a checking account and a debit card, and only then with a credit card.
I'm also convinced that if parents are open with their children, discussing finances, answering their questions and filling critical gaps in their knowledge, the kids will be more likely to manage money successfully.
And, yes, parents, your kids will listen to you. A recent study by researchers at Penn State University found that parents are the leading source of information and advice for college students regarding credit-card use -- and the more information parents provide, the less credit-card debt their college-age students incur.
Maybe that's why, in the latest survey by college lender Nellie Mae, fewer undergraduates were carrying credit cards -- 76% versus a peak of 83% in 2001 -- and outstanding balances averaged $2,169, down from $2,748 in 2000. (I hope my advice played a small role in that shift.)
You can have a big impact by giving your kids simple bits of wisdom -- such as the fact that paying with a credit card is like taking out a loan on which they'll have to pay interest.
Another trick: Let them use the calculator at Kiplinger.com to see how long it takes to pay off credit-card debt. To wit: If you owe $2,000 on a card charging 18%, and you pay $50 a month, it will take you more than five years to pay off the balance.
Keep your discussions light and informal, and maintain your sense of humor -- a rule I've learned from my efforts to practice my preaching with my own children.
Heeding Mom's advice, my son John waited until he was a college senior, with several years of experience managing money on his own, before applying for a credit card. No worries, John assured me in an e-mail. He would inaugurate his card by making travel arrangements for a graduate-school interview.
Plus, he wrote, "I'll look for good prices so I can use most of my $4,000 credit line to buy a new motor scooter to ride to class!" Kids have a sense of humor, too.
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