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Dabbling with Debt: Money Management for Teens

Rae Lynn has a little more money than most teens her age and a lot more sense—especially concerning finances. Rae Lynn, 14, has income from several sources, including Social Security, a weekly housecleaning gig with a friend, and summer employment in a catering business owned by a friend of her family. Her desire to take violin lessons became hands-on instruction in Money 101 when her parents directed her to use her own funds to pay for the $50 monthly fee and to purchase a violin of her own. "She also wanted a fancier case than a normal violin comes in. It seemed like the perfect way to teach her to use credit and budget for ongoing expenses," recalls her mom, Wendy Lawton.

Thanks to the music shop's no-interest lease agreement, Rae Lynn was able to receive her heart's desire. "Rae Lynn took care of making all the payments," Lawton says, noting, "The debt weighed heavily on her so she worked to pay it off early. I think she paid off the violin (and bought her new case) in about seven months."

Dollars and $ense

Rae Lynn's experience shows that teens have money and they're spending it. According to Teenage Research Unlimited of Northbrook, IL, teens spent $155 billion last year, up $2 billion from 1999. If the idea of teens spending a collective $155 billion in one year is astonishing, think how that number could soar if more teens could charge their hearts' desires with credit cards.

Some are already doing so. Of the 2,030 teens surveyed by Teenage Research Unlimited, 42 percent of kids ages 18 and 19 say they have a credit card. Meanwhile, 11 percent have access to a parent's credit card, while another 30 percent express an interest in owning one.

"I would never have given my children credit [or] debit cards," says Nanette Snipes, who notes her children were born and raised during the recession of the 1970s. "They needed to learn how to handle cash. They needed to see that when cash disappeared, there was nothing left and no way to replenish it unless they worked another week."

The more a teen knows about the realities of money as a limited resource the better, agrees Carla Dupree, CPA. "Young people need to know some real basics like the difference between gross and net salary, paying taxes and filing tax returns, and the importance of allocating money for tithing, saving, and regular and special purchases." Dupree contends that when youngsters pay for their own monthly expenses, like book, CD, or video clubs, they better understand the entire purchase/bill/payment process.

The bottom line? Education is key to helping kids steer clear of the debt dilemma. Attorney Brette McWhorter Sember, author of Repair Your Own Credit and Deal With Debt notes, "Children can begin to understand about money from the time they are preschoolers." Discussions, she says, should center around "how you use it and how you get it," as well as the importance of saving and working part-time.

When it comes to finances, Stephanie Gates emphatically notes, "I don't play with my money." That's just one of the lessons she learned in a college course that allowed students to simulate stock investing. "I lost my shirt," she explained, "because of an unexpected trucking strike." That in-class lesson helped her to avoid real-life financial problems.

She was fortunate. Many teens don't receive financial information at home or at school. The 2001 Parents, Youth & Money Survey found that only 21 percent of students ages 16 to 22 have taken a money-related class. Yet, 61 percent of parent respondents to the survey said they believe parents and schools should share responsibility for teaching children about finances.

At 20, Claude Henderson says he wishes he'd received more training in handling his money. "I never got a bank card until I was 18, and I went to the bank and did everything myself." Noting that he's currently "struggling with budgeting, but getting better," Henderson advises, "Sooner is better than later with this issue."

Money Mentoring

Other than perhaps discussing the importance of tithing and giving, most youth workers haven't tackled the issues of financial accountability with their group. Yet, it begs our attention for several reasons.

First, effective money management is good stewardship. Better learned earlier than later in life, such stewardship paves the way for future financial well being. Left unchecked, money issues cause problems, bankruptcy being the worst. A million Americans filed for bankruptcy each year during the last decade. If predictions hold true and economic conditions continue to decline, chances are good that some of your kids will face debt dilemmas in the future.

Second, with the downturn in the economy and consumer confidence waning, families are beginning to address serious budget issues. Perhaps this will make your group members more open to sharing their experiences, expectations, and fears. You can provide a beacon of hope in these instances.

"There definitely is hope after debt," says McWhorter. "The first step is understanding your debt and facing it. Many people simply won't. Once you have done that, you can organize your debt and decide how to reduce it. It's also possible to get credit again even after a debt disaster, such as bankruptcy."

Third, as the holiday season rapidly approaches, perhaps now may be the opportune time to bring up money matters with your youth group. Or, you may tuck it away for a New Year's talk designed to help your teens plan better for 2002. Whenever you approach the subject, you're likely to spark a healthy debate.

You may also find out that more of your students struggle with cash-flow issues than you thought. Others may be like Louise Dumont's son, Alan, who has a big heart and an even bigger problem managing money. The two are often related. Once he ran up a $500 phone bill in one month to keep in contact with a troubled friend who couldn't afford to call him. Alan never considered where he would get the money to foot the bill. He's had other spurts of generosity that left him financially strapped and in need of help himself. "Alan has a very big heart and uses most of his ‘mistake' money to help others," explains Dumont. "Unfortunately he then often has to depend on ‘help' because he doesn't really have the money to give in the first place. We have stopped bailing him out." The reason? Dumont recognizes that, unlike her other two sons, Alan struggles with money matters that need to be addressed now to ensure he won't have financial problems in the future.

"Although Alan has been diagnosed with attention deficit disorder," she says, "he has a genius IQ [so] his difficulty in curbing his spending is not because he isn't bright enough to understand, or because he doesn't care what he does with someone else's money. He just always comes up with some ‘reason' why his case is an exception to our rules."

A Helping Hand

Talking to a teen about money may seem a no-win situation. Many are clueless, and don't mind staying that way as long as their needs and wants are met. That's not news to you, right? And talking about money can be touchy, but it shouldn't be a taboo issue. In fact, you can provide a key influence in an area of spiritual development that a kid's parents may not be willing, able, or ready to tackle.

Some ways you can help include the following:

1. Set a godly example. When it comes to money, group members will watch you closely to see whether you practice what you preach. They'll especially watch how you spend your money and whether you always use credit for your purchases. Should a teen seem impressed by your credit card, use that as a springboard for mini-talks about the responsibilities of credit card ownership.

2. Help them live within boundaries. On recreational trips or entertainment nights, set a maximum amount that each student is allowed to bring. Some will balk, but it'll serve two purposes: you'll help teens budget for their entertainment, and you'll help ensure no rich kid/poor kid attitudes crop up. Another option is to limit the amount of money each teen may spend when participating in group-sponsored gift exchanges for holidays or birthdays.

3. Provide giving opportunities. Many groups participate in mission trips or outreaches to the needy. You can help your teens develop creative opportunities to give that don't necessitate spending money. These include used clothing and canned food drives. Your group can also raise funds to give by sponsoring drama or music programs, tithing 10 percent and donating up to 90 percent to the outreach.

4. Stick to your group's financial goals and objectives. If you're sponsoring an event, stick to the allocated budget and attempt to come under budget whenever possible. Your teens will learn that it's possible to stick to a specified spending plan.

5. Discourage borrowing. Teens will be teens and swap money back and forth. And you may not want to be that involved. But if you notice any that are always bumming for money, it may be a signal that they have a difficult time budgeting their money.

6. Provide resources. Invite a financial planner, CPA, money management expert, or other professional to speak to your group on money basics. Look within your congregation (including among your teens' parents) or within your community for individuals who are willing to speak to your group at no cost. Also ask around for print and online resources that you can provide your teens.

7. Promote saving as a short and long-term objective. One option here is to participate in the American Bankers Association's annual "Teach Children to Save Day," held in the spring. This is a program in which local bankers talk about savings accounts and help kids establish them. Find out how your group can participate and obtain parental consent for that participation. It's likely that parents will have to sign for underage teens to open accounts, so plan accordingly.

8. Consider fun money-related activities. While debt is not child's play, playing board games can heighten your group's understanding of money issues. Old mainstays like Monopoly are always popular. An option is to check out Larry Burkett's site for some neat games that teach stewardship. Let your teens foot the bill for these games by planning/saving for the purchase.

The Payoff

Proverbs 22:6 encourages us to "train a child in the way he should go, and when he is old he will not turn from it." That Scripture is as true for money management as it is for biblical instruction. The more training teens have, the greater their abilities to get back on track should a financial problem arise.

Youth workers can provide needed inspiration, instruction, and resources in money matters. In the long-term, kids will likely value these as much as they do other parts of youth group participation.