Minor’s Major Debt

Credit card companies have got these teens seeing red!

Amanda is a graduate student from George Brown College. She was enrolled in a three-year program at the school with big dreams of graduating college and getting the job of her dreams a day after her commencement. Wake up call Amanda! So here Amanda stands, with an ordinary retail job paying less then $18,000 annual salary and those big dreams slowly diminishing. Ready for the kicker? Amanda has also built up over $23,000 in both student loans and credit card debt.

 Okay, rewind! Lets go back to the beginning. How did Amanda get herself into this mess? Well that vacation to Cuba during spring break might have helped. Or all those sales she had to shop at because well, it’s a shame to let a great sale go to waste. She has a closet full of clothes, a fantastic tan, and a mountain of debt to show for it.

But that isn’t the immediate problems. We must dig deeper to get to the root of student debt problems. Is it the easy accessibility to get a hold on a visa? Is it the lack of knowledge teens have about credit, interest rates, late fees and minimum payments? Maybe is because credit cards feel like funny money and we are lured to believe that we can spend now, and pay back later? Well frankly, all of the above are true and there are more underlying factors as to why student debt has become one of the factors as to why college students are dropping out.

Ready to read some scary statistics? In a book by Robert Manning published in December 26^th 2001 titled Credit Card Nation: The Consequences of America’s Addiction to Credit, he states that nearly 7-10% of college students will drop out of school because of credit problems. Manning also states that 80% graduating college seniors have already accumulated credit card debt. According to certain statistics, 19% of people who filed for bankruptcy last year were college students. And in recent history, two college students in Oklahoma gave up on credit card debt and committed suicide with the bills lying on the bed beside them.

So who is to blame for all these statistics? Credit Card companies? Ignorant parents who do not teach their children about the repercussions of debt? It is actually a mix of everything.

Credit card companies pounce of college prey like a hungry wolf looking for fresh meat. For anyone who has ever been to a college or university orientation week, you would know what its like to be bombarded by all the credit card company booths that stand there trying to lure you in with a free t-shirt or other paraphernalia. People would be shocked at the aggressive and senseless marketing of credit cards to people who don’t even have jobs. You convince yourself that you will only keep the visa for “emergencies or gas” but the spending becomes deeper and deeper. We need to be honest with ourselves. A lot of us have a hard time handing a paper in on time, let alone paying a bill.

Another driving factor of teen debt is the inflation of prices in the entertainment and clothing industry. The cost of clothing and entertainment alone are so high that many hardworking employee’s and students find it hard to afford. Teens often feel pressured to keep up with the latest trends and spend the money to enjoy the luxury of being young.  Having a card makes teens feel a little more independent from their parents and enables them the opportunity to purchase things their parents wouldn’t normally purchase for them. Online shopping has become a huge hit in the teen market. Not only does the visa feel like funny money, but also the idea of not having to stand in front of a cashier almost takes the guilt away.

And then there is always the topic of parental control. It can be argued that parents are the main reason for debt to incur on their children. Teens these days are being raised to believe that debt is inevitable rather than something to be avoided and parents forget the importance of teaching the value of a dollar.

So now what? Poor Amanda is stuck with an enormous amount of debt and feeling a little helpless. Well there is always help and always a way to get out of a sticky mess. The following is what I like to call a “financial I.Q booster.”

1.     Always have savings for emergencies. Don’t rely on credit cards.

2.     Create a realistic budget so you know what you have to spend and DO NOT spend more then you have.

3.     Use cash or debit as much as possible.

4.     Pay cash for items under $10 or things you eat/drink.

5.     Only have ONE credit card and avoid interest or annual fees.

6.     Stop charging if you find yourself in debt and try paying off as much as possible every month.

Teens need to take responsibility for their debt and begin to make proper financial decisions. The more aware we become of how credit works, paying on time, interest rates and late fees then the less teens will fall into the statistics. Lastly, for teens who feel consumed by their debt there are non-profit companies such as Credit Canada that provides a counseling service in Toronto who attempt to address the gay by running seminars at colleges/universities.

And this is a final message to parents because I believe that they are at the root of this debt crisis: you don’t teach you son the responsibility of holding a gun by letting him sleep with a loaded automatic weapon with the safety on. You also do not give a 16 year old a beer to teach them how to handle their alcohol. So why let them have any form of credit without any idea of how it really works? Young teens are the driving force behind family spending decisions and it’s about time parents take control.