How can parents help their kids stay out of debt?
USA TODAY just released a report that Generation Y has more credit card debt than ever and very little savings … Yikes!! The report found:
- Only 58% pay monthly bills on time.
- Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt.
- On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000.
- Millennials are graduating from college with an average of $23,200 in student debt. That is a 24% increase from 2004.
- 25% of Gen Y members say they are spending more than last year, compared with 18% of all adults
What can we as PARENTS do to help our kids right the ship – so we don’t have to help them pay it all back?!
What can PARENTS do to help their kids stay out of debt in the first place?
Meet Neil Ellington, a frequent and favorite source to reporters on credit card and money management issues. He is EVP at one of the country’s largest nonprofit debt counseling groups, CESI Debt Solutions. He raised a Generation Y son who is debt free. And he leads a team of counselors that are helping 75,000 Americans become debt free by pay back all their credit card debt right now. So, he knows a thing or two about how to manage credit. What lessons did he teach his kids that parents today can use?
- Make Saving Money Fun – “We made games out of saving money, like a sticker chart for every saving goal met. And we also matched his funds every so often, so he started warming up to the idea of saving instead of spending”
- Needs and Wants Are NOT the Same Thing – “This starts with mom and dad! Every time our child uttered ‘Can you buy this for me?’, we asked him to put it in the need or want category. That eventually forced him to realize what was important enough to spend cash on.”
- Credit is NOT Free Money -“When he got older, we would lend him money for larger items, but charged interest as he paid it back. We even made a contract agreeing to the terms of the loan and laid out how much he would pay for the item when interest is figured in.”
- Work for What You Earn –”A 10 year old is more than capable of understanding the difference between your earning potential with a high-school diploma as opposed to a college degree. We didn’t just give him money without him earning it through good grades or chores.”
- Make Budgets – They are Necessary Part of Life – “I explained to him, even at 5 and 6 years old, that our family had a budget and giving them simple age-appropriate details. As he got older, I included him in the process of looking at our spending in budget categories that involve them (such as groceries or entertainment). Kids will make surprising choices when they are equipped with the information to participate in the budget process. For instance, I talked to my kids about our grocery bill being higher than the amount I had budgeted for a few months and asked them what they thought we could do to cut it back. I was amazed at the ideas they came up with.”
- Lead By Example – “Research has shown that most adults do not use a budget. One of the primary reasons they give for not using one is that they either don’t know how or think it’s too complicated. I wonder how different this statistic would be if these adults were shown how to budget from an early age.”
** Neil strongly advocates against bank consolidation loans, filing for bankruptcy and using debt settlement companies!! He believes that both parties should win – consumers should be debt free and credit card companies should be paid what they are owed.