Teaching Teenagers Part 3

By Francisco J. Colayco, Ph.D

Proper use of credit cards

Happily for parents, most major credit card companies do not issue credit cards to someone under the age of 18 unless there is a co-signatory. However, many teens today use credit cards, and your teen may ask you for one sooner or later. You might want to agree to give your teen a credit card for emergencies and to lessen the cash they need to bring with them. You should discuss the following before agreeing:

Agree on what the credit card is to be used for, e.g. emergencies, school supplies, clothing, etc.
Agree on the credit card limit that will be requested from the credit card company. This should be low to prevent serious problems with credit card debt.
Review the credit card agreement, and agree on how the bill will be paid,.
Make sure that, together you go through pages of my book “Making Your Money Work. Pera Mo, Palaguin Mo 2!” to show what will happen if a bill is not paid and the hidden costs of using credit.

Lesson 5: Saving for the future

Children usually save up to buy a favorite toy. But as teens, they can be taught to start saving for useful projects that would help further their education such as a new computer and longer-term, for their college tuition. Parents can encourage their teens to:

Write their savings goals. Studies have shown that written goals have better chances of being reached.
Make sure that the written goal shows that there is some money left over for fun. Teens need to have fun or they will also lose interest in these exercises.
If you can afford, offer to match every peso they save with say 50 centavos or even an equal amount of pesos of your own money.
If you have not done so, make sure they have opened their own savings account.
Show your Teen that they can already invest in a Mutual Fund or in Unit Investment Trust Funds (UITFs) being offered by major banks. These investments require as little as Five Thousand Pesos (PhP5,000) to get started and just One Thousand Pesos (PhP1,000) for any subsequent additional amounts. Visit any of the reputable Mutual Fund companies and/or to an investment officer of any of the major universal banks so that they can explain the mechanics and concepts of such investment instruments..
Do not forget to motivate your teens by providing some kind of incentives if and when they are able to save. For example, you could give them extra bonus savings from your own pocket for every peso they are actually able to save.

Remember to take time to understand your teen's earnings and spending patterns. It is the only way you can give them proper financial advice.