Raising Entrepreneurs

Welcome back!

Companies are always on the lookout for new customers, and they know that the younger they can get a consumer, the more likely they are to keep them for a long time. Particularly worrying for parents these days is the way cell phone and credit card providers are targeting teens.

Even debit cards can cause problems – my fourteen-year-old saves half of her earnings religiously into a high interest account. Once she had a debit card, though, and was being paid by direct deposit, she found that she had overspent her budget without realising, and didn’t have the full amount left that she had meant to transfer into her savings account.

Cell phones just chew through money, a few cents here and a few cents there for text messages or listening to voicemails, and suddenly the bill is enormous, or the prepaid card runs out long before the end of the month.

Credit cards are the worst of all, because it is so easy to build up a debt that you can’t repay all at once, and the interest rates on those things are so high it’s amazing they are legal. Once you get behind, you just get further and further behind.

Load up a high school or college kid with a cell phone and a credit card or two, and you can undermine the foundations of their financial life completely.

Student loans are bad enough, but many kids just shrug and add a bit of credit card debt on top, figuring “in for a penny, in for a pound”. We live in an instant gratification society.

Credit cards have become a fact of life on college campuses. With a reported $13 billion in discretionary income, college students represent a huge market for credit card companies (Kara, Kaynak, & Kucukemiroglu, 1994). Students often receive incentives, such as t-shirts or mugs, to apply for cards, and requirements, such as previous credit history, are often waived (Kara et al, 1994). Due in large part to these marketing efforts, a recent study reported that approximately 70 percent of college students possess at least one credit card–a number much higher than previously thought (Manning, 1999), while another study reported that 93 percent of college seniors have acquired at least one card (Markovich & DeVaney, 1997).

With companies lining up to seduce our kids into debt, the only protection we can offer them is a good, solid financial education, and a grounding in good money habits.

Images by PT, The Consumerist and B Francina.