When parents think of the last minute things they may need to teach their children before they head off to college, many may not think of the basics like: “What’s the difference between a debit and credit card?” But, as it turns out, that’s an important conversation for parents and teens to have, especially before they go out into the world for the first time.
An ING DIRECT USA bank survey recently polled 12 to 17-year-old’s and their parents about their financial habits, and a quarter of the teens didn’t understand the distinction between borrowing money from the bank or using their own when they used an ATM card.
Also, only 17% of the young adults believed that they “knew a lot” about money management. Which isn’t a large leap, because it appears that less than a third of the parents who were surveyed believed that they are good financial role models.
However, with the recession and its effect on household finances, many parents feel inadequate to teach their children about money. Also, many parents falsely believed that their teens were learning about financial management in school.
However, with many teens working their first summer jobs, experts believe that now is the time to sit them down and explain the realities of what that paycheck means. In fact, it’s not a bad idea for parents to open up their own checkbooks to explain the reality of money coming in – and money going out for utilities, groceries, insurance, a mortgage or rent payment and the all of the other bills that can take a chunk out of a paycheck.
It’s also a good idea for kids and teens to learn what FICA means, before they get that first paycheck. To many a young person, the difference between X number of hours worked at X amount per hour, can be confusing when they see that they’ve earned less than expected.
It’s important for parents to take some time to go over the tricky subject of finances, before kids head off to college with a credit or debit card.