8 Ways To Educate Them

Instead, she said, kids may learn better from someone they know and trust who has good financial literacy. Whether that’s parents, older siblings or other friends and family who are willing to share what they know and have learned, in addition to other resources, that can be a good starting point.

A lack of financial education can also hurt teens by not preparing them to know the differences between an institution or organization that wants to educate them for their own sake and one that has an agenda.

“A lot of financial education online is put out by say credit card companies or in the world of student debt where I am, Sallie Mae, one of the for-profit student lenders, has a whole education section,” Goodman said. “They have a vested interest and they want you to take out college loans.”

She urged parents to talk to kids about where they get their information.

Additionally, since student loans might be the first loans that teens and young adults ever take out, she said it’s crucial that parents help them understand the real numbers of how much they’re borrowing and how much they’ll actually be paying back in terms of a monthly payment.

“If you borrow $100,000 dollars to go to college, unless you are in one of the higher paid fields, you are basically doomed,” Goodman said.

Teens especially need to know about the predatory nature of credit cards, the high interest they charge and how easy it is to rack up debt that can become difficult to pay off, Goodman said. She pointed out that credit card companies know that parents often bail their children out of their debts, too and they take advantage of that in their sales tactics, as well as telling teens they only need to pay the minimum required.

“There’s no tutorial on credit card sites about how they work or the fact that interest starts getting charged immediately if you don’t pay it off in full,” Goodman said.

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She added, “The forces of profitability are arrayed up against people who don’t know what they don’t know.”

Another important lesson teens need to know is, just as they can build up interest owed by carrying balances on credit cards, they can also take advantage of compound interest through saving and investing.

She shared a story of a young couple who sought her help in figuring out how to pay down $8,000 in credit card debt, which translated to about $6,000 in actual purchase and $2,000 in interest paid to the credit card company.

“Essentially everything they bought in the last year, it’s as if you looked at the price tag and you paid 24% more. And they were sort of shocked,” she said.

Instead, she said, if they had saved $2,000 in some type of interest-earning savings account, they could draw on those funds instead of paying interest to a credit card. “[Teens] need to understand the negative side of not paying in full,” she added.

Another problem that is unique to generations who have grown up using digital payment methods like Venmo, CashApp and PayPal is that “spending money is so seamless and so frictionless for this generation that it has no reality to them.”

She urged parents to teach kids to save and use cash whenever possible.

Finally, Goodman recommended the following resources to teach your teens a wide variety of financial education:

By getting your kids on the path to financial literacy, you can save them from expensive mistakes down the road.

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This article originally appeared on GOBankingRates.com: What Your Teen Doesn’t Know About Money Could Hurt Them: 8 Ways To Educate Them