The Shocking Truth About Teens and Credit Cards

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And Why Teens are the Number 1 Target for Lenders

If you think getting your teenager a credit card will teach them how to be responsible with money – you’re far from the truth. Credit cards are a great way to create irresponsible spending habits early on in an adult’s life. And financial institutions are now targeting teenagers for this very reason.

The scary truth is that over 80% of graduating seniors have credit card debt before they even have a source of income! Media has so cleverly placed it in the minds of our teenagers that to be an adult requires three things: a driver’s license, mobile phone, and a credit card.

Allowing your teenager to take out a credit card before they can learn to manage their money responsibly is a recipe for disaster. The simple truth is that trying to teach your teenager financial responsibility by giving them a credit card, is akin to letting them sleep with a loaded gun under their pillow to teach them gun responsibility.

The only correct response to “Mum can I have a credit card?” is “No”. Followed by a discussion about the harmful effects of using credit instead of saving to buy the things you want. Unfortunately, teenagers with credit cards are all too common and peer pressure, as well as media influences, will be hard to combat over the long term.

In some cases taking out a joint credit card with your teenager is a viable halfway point. You’ll be able to see exactly what they are spending money on and guide them to making wise decisions.
College Party or Credit Party?

If you’ve visited a college in the last few years you’ll be familiar with the excessive confrontation of advertising for student credit cards. Recently two Oklahoma students committed suicide over their credit card debt, leaving the latest bill on their bed as they hung themselves in their room.

So many students get caught in the credit card trap that college dropouts are on the rise. Not because students aren’t making the grades, but because they need to service an out of control credit debt. One student, Alice, dropped out of college because she had to get a job to make the repayments on her $12,000 credit card debt.

She had been coaxed into taking out multiple credit cards in college to get a free T-Shirt, and had decided never to use the cards unless there was an emergency – but there was an emergency every other week.

When she dropped out of college to get a job, she not only had to make repayments on her credit cards, but also on her $25,000 student loan too. Now because she hadn’t finished her degree she was on minimum wage, and really struggling to pay back her debt.

The crazy truth is that a full 1 in 5 people who file for bankruptcy every year are college students. That means that 20% of college graduates started their lives out as financial failures.

Don’t let this become your child. Head to our website now to learn more about teaching your teenagers to manage their money, then check out Fran Christie’s debut book “101 Money Tips for Kids and Parents” here.

Your Money Personality

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…What is yours?

Do you constantly struggle to get ahead and pay the next lot of bills? Or maybe you’re someone that always has money in the bank for whenever you need it. When it comes to money there are four types of personalities that people either have or don’t have.

Depending on how you’ve been brought up and what habits you’ve learned along the way, determines just how well you’ll be able to handle your finances

Some of us were lucky enough to have learned good money management skills when we were younger and they’ve helped us stay afloat even in the toughest of times.

So what money personality profile do you fit?

The Hoarder

Hoarders hold onto every last penny that comes into their possession. What’s most important to them is security – and money makes them feel secure in themselves and their future. But no matter how much money a hoarder puts away, they’ll always hoard more.
There’s a constant fear of making one wrong move and losing it all – so they make buying decisions very slowly. Hoarders have a few common behaviours that make them stand out from other money personalities such as:

  • Sneaking snack foods and drinks into movie cinemas or stage shows
  • Regularly reviewing your bank account to see how much money you’ve managed to put away
  • Always being on the look-out for the next bargain
  • Wherever possible, buying the best value (cheapest) products possible                                       Hoarders can improve their financial future by loosening the reins a little bit every now and then. They need to learn to take some risks with their money in order to grow your capital faster.

The Spender

Feeling important because you can afford to buy things is what motivates spenders to splash their cash. Spenders feel loved, validated and happy when they are buying new things for themselves or others. The biggest spenders often seek out large purchases to signify their important and wealthy status amongst their friends. Spenders are easily spotted by:

  • Excessive quantities of clothing
  • Cupboards stuffed with appliances and knick knacks
  • Big showy gifts for friends at parties
  • Large houses and new cars
  • Multiple credit cards

Spenders need to set boundaries for how much they spend. Having a clear budget and sticking to it will help them manage their money better.

The Avoider

See no evil, hear no evil. That’s the approach of the avoider when it comes to managing their money. They have no idea how much is in their bank account and avoid talking about money with friends or family. Here’s how to spot an avoider:

  • They avoid discussing money
  • Piles of bills waiting to be paid
  • Rarely checks bills or invoices for errors
  • Pays bills late

If you avoid making decisions about money, you’ll need to change how you think about it. Start taking courses on how to manage your money and map out a budget so you know how much you should be spending each month.

The Money Monk

Money is the root of all evil – that’s what the money monk thinks. It’s a strong belief that is usually reinforced through religious faiths or political convictions. Here’s how a money monk behaves:

  • Shy away from raises
  • Avoid dealing with finances because you think it interferes with your moral values
  • Regularly donate extra cash to charities
  • Perform volunteer work frequently
  • Always give small change to the homeless and street performers

Money doesn’t have to be bad, after all, you use it to put a roof over your head and feed your family. To reduce the interference of money on your moral values create as many automatic processes to manage your money for you.

For ideas on how to save your money as a family, or ideas to earn some extra cash, check out           Fran Christie’s debut book “101 Money Tips for Kids and Parents” here.

Delayed Gratification

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Is a Key to Financial Success

Teaching children about delayed gratification is one of the pillars of lifelong financial success. People that can delay gratification are more successful in their chosen careers, relationships, finances and all areas of life.

The Stanford marshmallow experiment was a series of studies on delayed gratification in the late 1960s and early 1970s led by psychologist Walter Mischel, then a professor at Stanford University.

In these studies, a child was offered a choice between one small reward (a marshmallow) provided immediately or two small rewards (i.e., two marshmallows) if they waited for a short period, approximately 15 minutes, during which the tester left the room and then returned.

In follow-up studies, the researchers found that children who were able to wait longer for the preferred rewards tended to have better life outcomes, as measured by SAT scores, educational attainment, body mass index (BMI), and other life measures.

Should You Spend or Save Today?

Making this decision is the crux of delayed gratification. Should we buy what we want today, or hold off and buy it in a few months or years time? Well, there is no easy answer.
However, if you hold off from spending your cash today, you’ll be able to buy a bigger or better version next year. Of course, there are times when you really need to buy today and waiting until next year will be silly.

An example of this is when your car breaks down and you need it to get to work. Not getting a new car could mean losing your job and income. Compare this to buying a new car, because you think your current car is out-dated.

You’d be better off saving your money and waiting until you really need to make the purchase instead of splurging your cash today. Teaching children the importance of delaying certain purchases can be very powerful later in life.

How to Teach Delayed Gratification

Here are our tips to guide your lessons:

Tip #1 – Know What to Value

Learning the difference between a want and a must have, is the most important lesson in learning which purchases we should delay and which we shouldn’t.

Tip #2 – Clear Goals

Knowing where we want to get to and what we want to achieve will help direct where we spend our money. Having clear goals is a constant reminder to think carefully before spending our cash.

Tip #3 – Create a Plan

Having a budget in place that shows you what you need to earn and how much you’ll need to save to achieve your goals, can be very motivating.

Tip #4 – Define Your Priorities

Knowing what is important to you and what you want to achieve will help you prioritize your buying decisions and stick to your budgeting plan.

Tip #5 – Reward Yourself

Always delaying things you want can be very taxing, so sometimes it’s ok to have a day off and reward yourself for all your hard work. Just make sure you don’t go overboard, otherwise, all your hard work will be lost.

If you want to find out more about teaching your children about delayed gratification and money management, then check out Fran Christie’s debut book “101 Money Tips for Kids and Parents” here.

The Lost Art of Saving

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Why we spend more than we earn

Putting money aside for a rainy day is a thing of the past, but it wasn’t always so. As of April 2007 we officially entered an era of negative savings (-1.4% PA) – yes in our modern day, we actually spend more than we earn!

Back in 1982 the amount of money we each put away every pay check hit an all-time high of 18.5%. And for decades before that generation after generation have been saving an average of 10% – so what happened?

Well you could blame taxes, it’s true that the average tax rate has increased in recent years. If you lived and worked in 1973 you would expect to pay 18.43% of your income in taxes each year. But by 1999 you’d be forking out 23.9% from the same pay check.

Now before you go running out in protest of increased taxes consider your spending habits too. Back in the eighties it was pretty rare to hear of families buying things on consumer credit or taking out loans to buy new cars and take holidays. In fact less than 0.06% of our family income was spent on consumer debt.

Compare that to just 20 years later in 1999 when we were spending in excess of 1.34%. Now some of you may be thinking that’s not as much as taxes! But then there’s our other liabilities such as a few credit cards, car loans and mortgage repayments.

Again we see a huge increase in our spending habits from 1982 where we were spending 0.67% of our yearly income on liabilities to 1999 when it soared past 4.9%. And don’t make the mistake of thinking our spending habits changed in the new millennium, oh no – we kept on spending more and more!

Why Save 

It’s very tempting to get caught up in our fast paced world of constant upgrades and shiny new toys. Media is strongly geared towards making us feel inferior and degrading our self-esteem so we buy more and spend more time working harder to try and pay it off.

Yet it doesn’t matter how hard you work if you’re always spending more than you earn. Instead we need to stop spending and start saving. Having money left over in the bank after every pay check, not only provides security but also starts to work for us so we don’t have to.

Savings can earn a substantial sum of money over time and their earnings compound year after year – so what you earn this year will earn you even more money next year. Debt is always saddled with high interest rates that can quickly eat up your cash reserves.

Minimising your high interest debts not only improves your cash flow but will help you save even more in the future.

Teaching Our Kids

Saving should be something we learn to do from an early age. Trying to change bad habits once we move out of home is near on impossible. It pays huge dividends to teach your kids how to manage their money wisely.

One of the best ways to encourage children to save is to start a “savings-matching program”. Put simply for every dollar your child saves over a certain period of time you’ll match it. So if they save $50 over summer break you’ll add another $50 to their savings.

This teaches children that putting money away and holding back from spending every penny can have great rewards. And if more money doesn’t motivate them, then perhaps a trip to Disney World or the Zoo will.

If you’d like to learn more about teaching your kids to save, then check out Fran Christie’s debut book “101 Money Tips for Kids and Parents” here.

Teaching Kids About Giving Back

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And Why Today’s Children are More Selfish Than Ever

It’s an all too common picture – you have a few of your children’s friends over so they can play and explore together, but one of the kids just doesn’t want to share. Everything is his – and only his!
A fight breaks out over whose toy it really is and you’re in the middle trying to settle everyone down. It’s around the age of four that children discover the existence of “me” and “mine” and a child that never learns to share will have much bigger problems further in life.

It’s not just sharing toys that I’m talking about either. Sure that’ll help your child make more friends in the playground but it’s what happens once they start managing money that matters most.

You see, a child that has trouble sharing will have trouble giving back to their community. They won’t give donations to charity and they won’t spare any of their free time for a good cause.
Why is this important you may ask? Well giving back is an integral part of building a strong and supportive community. It’s the glue that binds people together and keeps society functioning as a whole, rather than individual parts.

Developing strong ethics about giving back is easy whilst your child is younger. It’s an activity that the whole family can enjoy together too. Something that will not only benefit your children but will bind the whole family together as one unit.

Here’s how your child can give back:

  • Go to museums, galleries, and other civil organizations and give donations for their efforts. You’ll enjoy a fun day of activities and feel good about supporting your local community.
  • Volunteer your time to make something, give something or do something for an organization. You can spend an afternoon planting trees, picking up litter or knitting a blanket for the homeless.
  • Share old toys and clothes rather than throwing them away. Other people less fortunate than you can buy them or will be given them by charity stores and thrift shops.
  • Collect donations to support an organization. The donations might be for your local church or religious group, a school team or to help raise funds for cancer research.
  • Join a scouts club and become part of a vibrant team of like-minded individuals who regularly give back to their local community. Being a part of a larger team helps you build strong friendships along the way too.

The world would be a much better place if we all took some time each week to help those less fortunate than us. It doesn’t matter how high and mighty we think we are, or how much money we make – each of us can afford to spare some time or money to help others.
If you’d like to find out more about teaching your children to give back and how to manage their money, then check out Fran Christie’s debut book “101 Money Tips for Kids and Parents” here.