Children Getting Hooked On Credit
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 "Are Your Children Getting Hooked On Credit?"

Part of new "Money Skills Kit" For parents, grandparents and educators!

Written By Paul S. Richard Executive Director of the non-profit Institute
of Consumer Financial Education, (ICFE) San Diego, CA

San Diego, CA. A 'red flag' for parents who are thinking about securing a credit card for their underage children is being waved by the nonprofit Institute of Consumer Financial Education (ICFE), based in San Diego, CA. "This alert is for parents and grandparents because the credit card issuers have a new target and it is your children and grandchildren," says ICFE executive director, Paul S. Richard.

"Don't get your children (or grandchildren) hooked on credit!", says the ICFE. If young people want credit, let them get it on their own AFTER they have a regular, full-time income. Credit cards placed in the hands of young people, living at home, but not yet working and earning a regular income is unwise. It is similar to a parent getting a part-time job and giving that paycheck to their children.

Co-signing for a credit card for your children (who could otherwise not obtain credit on their own) sends several, negative messages to your children, on top of the main message of the credit card which is: "SPEND!" The messages your own children or grandchildren might be hearing are:

1) "It is OK to buy things on credit you otherwise couldn't afford."
2) "It is OK to spend when you have no regular income."
3) "It is OK to be in debt for spending money you don't have."
4) "It is OK to overpay for things through credit buying and paying interest."
5) "It is OK to pay interest instead of earning interest on savings."
6) "It is not necessary to save in advance for things you want to buy."
7) "It is OK to go into debt, even for things that do NOT retain their value."
8) "Occasional impulse spending is OK."
9) "Credit is necessary for a college student to make it through college."
10) "Don't worry, if you overspend and get into trouble, I'll bail you out. After all,
I did co-sign and I do have to protect my good credit record, don't I?"

Parents who make credit based spending opportunities available to their youngsters before they can obtain it on their own, risk setting their children on the road to a lifetime of debt and possible financial disaster. Few young people have developed that all important financial self-discipline. Credit based spending can be as addicting to young people as nicotine, cocaine or alcohol," said Mr. Richard, who was bankrupt at age 25, because of early credit abuse.

Most issuers of credit minimize the dangers, however, probably because credit based spending usually doesn't do that much immediate fiscal or physical harm that other indulgences might. Contrary to issuers claims, co-signing for credit seldom builds credit in your child's name. It does, however, insure that you will cover all payments your children are unable to make. If they have to have a piece of plastic, insist they put up a deposit and make it a debit card.

"Young people need to be indoctrinated towards savings and accumulation before they are introduced to credit based spending", Richard insists. "If saving money is important to parents it will also be important to their children. If credit based spending, however, is the norm for parents, it will become the same for their youngsters if they are exposed to credit before they become employed full-time or complete their college education," Richard noted.

Parents are also too quick to bail their children out of financial scrapes. This results in fewer young people having to experience negative consequences from their extravagance. Instead, advises the ICFE, if your child unwisely spends their entire allowance money this week instead of saving for that important concert next week, that they wanted to attend, parents should not give additional money for the concert. Let that young person learn the consequences associated with their spending decisions. In this case, no concert.

The ICFE advises parents to remind youngsters: "When it comes to saving money, most people in America will stop at nothing!" Next, help them get started in the regular savings habit by encouraging them to save a dollar a-day (including weekends) and all their pocket change. Why? Because "Everyday spending decisions, especially credit based spending decisions, can have a far more negative impact on your financial future than any investment decisions you will likely ever make." These decisions include how often: to eat out, go to the convenience stores, or how much to spend on clothes, etc.

The nonprofit Institute of Consumer Financial Education (ICFE), based in San Diego, CA., makes available a "Money Skills Kit" especially for parents and grandparents which was designed to help adults teach young people about money and values. The "Money Skills Kit" includes a reprint of the article "18 Ways to teach your children or grandchildren the value of money," The 10 Commandments of Personal Finance For Young People in 2001" and a report titled "Allowances? Work? Or Both?"

The "Money Skills Kit" is available free on the Internet at the ICFE's Web site: Those parents, grandparents, teachers and consumer educators and interested others without Internet access may receive a copy by return mail by sending $1 and a self-addressed, stamped envelope (with 34 cents postage) to: ICFE "Money Skills Kit", PO Box 34070 San Diego, CA 92163-4070.

For more information contact Paul S. Richard ICFE Executive Director at 619-239-1401.

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