How To Teach Kids About Credit Cards

There's a new study out that offers an eye-popping view of how teenagers view money and debt. Conducted by the brokerage firm Charles Schwab, the "Teens & Money 2007" survey reports that:
  • Most teens (51%) agree that it is easier to buy things with a credit card than cash.
  • Given the choice, almost one in three (29 percent) teens would prefer buying things with a credit card than cash. This represents a 61% increase over last year (18%).
  • Almost three in ten teens (29%) are already in debt.

  • Only one in three teens (30%) believe that their parents/guardians are concerned with making sure they are learning the basics of smart money management.
  • Few teens say they have learned how to use a credit card responsibly (24%).
  • Teens are motivated by their parents' behavior, with one in four teens (25%) saying their parents/guardians are more likely to use a credit card than cash.

    Their casual attitude towards carrying debt might be fostered by games that use credit cards for fun. Personal finance author, radio host and Early Show contributor Dave Ramsey feels that games and other gifts can send your kids some of the wrong messages about money.

    While most of us grew up playing Life and Monopoly - in fact, who didn't practice making change while being the Monopoly banker? - these days even popular childhood characters are carrying plastic - Dora the Explorer, for instance, and Barbie.

    "It's out of control," said Ramsey. "McDonald's did a focus group study for adults that says when you use a credit card at McDonald's, you spend 47% more than you do if you're using cash." Among the Christmas toys released this year: "a new McDonald's
    cash register teaching kids to use plastic.

    "As a parent, you go it's a McDonald's thing, Barbie, we're not mad at Barbie or Dora.
    But we don't stop and think, what message are we giving these kids?"

    The game of Life is branded by Visa. And the new Monopoly version has a credit card payment system, as well. "We're teaching kids the mentality of life takes Visa," Ramsey said. "This is how you enjoy your life. If I want to look like Barbie, or have an adventure like Dora, I need a credit card . . . I'm not Chicken Little. Debit cards are okay. But this is ridiculous, when you brand something to teach a kid, 'this is how to live your life.'"

    Ramsey offered some suggestions for parents grappling with what to buy their children for the holidays:

  • If you're going out to buy your gifts, be aware of the toy's message.
  • Make a list with prices ("Sit down and have a talk about what Santa can
  • Figure out a way for your kids and you as a family to give something during the holidays ("Let's remember the reason for the season is not receiving. It's giving.")