Helping Teens Avoid Red Ink

Credit card debt is a fact of life for many Americans. Overdue payments are up, and bankruptcies are frequently tied to overused credit cards. The numbers are unsettling: The average American household now carries well over $7,000 in credit-card debt, up from $2,985 in 1990.

Looking ahead, credit-card usage is likely to grow as more commerce shifts online. Can the next generation of card-holders be more disciplined and more savvy than the current one?

Perhaps so. Last year, Visa, American Express, and other companies started issuing cards that allow youngsters in their early teens to get the feel of plopping down a card for purchases.

These are not actual credit cards. They're more like the permit given young drivers, to be used only in the company of a parent. Mom or dad has to transfer an amount of money from their accounts to the trainee card. Kids can't spend more than that amount, set appropriately low, until more is put in. This could be the start of a bad spending habit - or it could be the beginning of responsible personal finance. To their credit, some companies, like Visa, tie the issuing of the cards to some instruction and testing about good money habits.

Such education needs expanding. And, in fact, increasing numbers of colleges are offering incoming students courses on personal financial management. More than 70 percent of college students have at least one credit card, and some have been forced to leave school in order to pay off mounting personal debts. On the positive side, 59 percent of student card-holders pay their bill in full each month, compared to 40 percent of the general public.

High schools, too, are offering personal finance instruction. Sometimes local banks get involved in sponsoring the courses. More than 20 states require such instruction in high school.

True, parents remain the front-line source of financial as well as other kinds of wisdom. But few would object to their kids getting some detailed early learning about financial matters - including the use and misuse of credit and strategies for saving. They probably wish they'd had the same opportunity.

(c) Copyright 2001. The Christian Science Monitor