Teen Debt, Teen Credit Card Debt

Credit card debt among teens seem to be the number one reason for teen debt. According to Robert Manning, the number of incoming college freshmen with credit cards tripled between 1999 and 2002.

Nellie Mae reported that those freshmen carried an average of $1,585 in credit card debt.

Although it is difficult to know exactly how many teens have credit cards, because laws require that anyone under the age of 18 have a parent co-signer, it is apparent that more and more teens are succumbing to credit cards and the debt that so often goes along with them.

Teen Debt Statistics

The following statistics are according to Networks Financial Institute at Indiana State University.

• Based on a 2004 national survey of high school seniors, as a group, America's teens scored a failing grade in basic financial literacy knowledge.
• Teens are active consumers and spent $175 billion in 2003. Of the teens surveyed, 21% had their own credit card or access to their parents' credit card, and 16% had their own ATM cards.
• 10% of the teenagers ages 12 to 19 had their own credit card and 38% believe credit card use should be limited only to adults.
• American children, teens and young adults (ages 8 to 21), earned about $211 billion in 2003. This was down from $231 billion in 2002. When surveyed, this group was spending at a rate of about $172 billion per year and was saving at a rate of $39 billion per year.
• 71% of teens reported learning about money management for teens from parents, and 35% say they had learned about the topic in school.
• Only 26% of parents with children 5 or older felt well prepared to teach their kids about basic personal finance.
• Fewer than 50% of the respondents felt they were a good role model to teach their children money management.
• Spending vs. saving was talked about in 57% of homes. Less than 40% of parents said they talked about loans and debt, credit cards, and their own family finances with their kids. Even less talked with their children about how to invest money.
• 76 % of parents surveyed said their high school student did not have a budget.
• More than 70% of parents say they have spoken with their teens about credit and using credit cards wisely. Less than 44% of the teenagers say their parents have talked to them about credit cards.
• Just over half of the parents surveyed agreed that their child is of the mentality that "money grows on trees."
• 88 % of parents feel it's important to monitor their teen's spending and guide their money use.
• More than 83 % of high school and middle school students expect their parents to join them on back- to-school shopping trips, but almost all say their parents did not take the time to discuss back-to-school finances with them.

5 Ways to Prevent Teen Debt

1. Teens need training. Without a clear understanding of basic financial principles, teens are some of the most vulnerable to taking on unnecessary debt.
2. Parental involvement is one way to help prevent teens from falling on their face with teen debt. Parents can help set limits and can also help by involving their teens in their own personal and family finances.
3. Discourage credit card use. While credit cards can be very handy and convenient, it does not take much to start down that slippery slope of teen credit card debt. Avoiding credit cards altogether may be the best option for some.
4. Using a teen budget is a great way to help set goals and to monitor progress of those goals.
5. Be cautious when taking on debt. Only take on debt when absolutely necessary. Everyone's situation will be different, but consider only taking on debt for such purchases as education, automobile, and a home mortgage.

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