2007-09-28 / Columnists

Notes On Consumer Affairs

By Assemblywoman Audrey Pheffer

AUDREY PHEFFER AUDREY PHEFFER Many teens use the summer months for their first jobs, be they full or parttome. In many cases, those jobs become part-time jobs when school begins, because they provide teens with a sense of freedom and of doing some useful work.

The first summer your teen works is an excellent time to open a bank account; if they do not already have one. A savings account is a good first bank account, as they do not come with checks or a debit card, making it harder to spend an entire paycheck quickly. Teens that learn to save early are more likely to keep saving throughout life, and are less likely to end up in serious debt later. Older teens can branch out to a checking account, especially if they have bills to pay. Building a relationship with a bank is important if they plan on buying a house or car in the future. Many banks offer incentives for long-term account holders.

Keeping track of spending is also important. Budgeting is ideal, but many teens view budgeting as something older adults do. In lieu of budgeting, parents can make sure that teens understand that buying a cup of coffee every morning and lunch every day adds up. Emphasize how much money can be saved by bringing lunch instead of buying it, or getting up earlier to drink coffee at home, instead of buying it at work or school. Two or three dollars saved a day represents money that could be better used for other expenses, such as college tuition, or placed in a savings account.

The teenage years are an ideal time to begin investing in a Roth IRA or mutual funds, as these investments will have ample time to grow in value before your teen hits retirement age. Mutual funds are safer than stocks, though using a little money to experiment in stocks can be educational. Certificates of Deposit, or CDs, are also a good choice to introduce teens to investing. While investing early in life can be rewarding, it is important to follow the advice of financial experts and emphasize that some money should always be maintained in a savings account in case of emergency.

Lastly, it is important to teach your teen basic respect for money. Many people do not pay much attention to their finances until they are in need of money. Those who plan ahead, invest, and save wisely will be ready for whatever comes along. Debt is never an acceptable way to finance a lifestyle. Too many credit card issuers target teenagers and college students with credit card offers, counting on a lack of financial literacy. Credit cards are a way of spending money you don't have, but will need to pay back with interest later. Many teens do not realize that it is all too easy to get into debt fast. Teach your teen to always read the fine print and never enter into any credit agreement they do not fully understand.

Building good habits now can serve teenagers well the rest of their lives. When your teen heads off to college and branches out on their own you cannot be with them all the time, but you can be assured that they will take your lessons along wherever they go.

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