Question -- Your recent book excerpt on how to teach financial responsibility to children of different ages, from preschoolers to teens, was very interesting and relevant.
I am particularly concerned about the prevalence of certain experiences that college students are encountering when it comes to managing credit. For example, extra charges, such as over-the-limit penalties and balance transfer fees, can have a major effect on the interest rate customers actually pay.But these fees may come in the form of fine print that even experienced credit card users may not pay attention to. They seem particularly unfair to less experienced young adults.
Parents should spell out reminders about credit card realities and the need to read the fine print, and above all, the need for a steady job (at least) before one engages in routine charging.
Answer -- I'm on record as saying that high school students don't need credit cards at all, and that even college students should be using them only in the most limited circumstances.
But your letter gives me an opportunity to let a talented teenager speak out on this topic. Lincoln Mayer, a student at Sidwell Friends School in Washington, was one of three winners of an essay contest sponsored by Capital One, in which entrants were asked to design an educational program to teach young adults how to manage their finances.
Mayer proposed a weekly one-hour class for high school juniors that would cover everything from balancing a checkbook to allocating assets.
Most important, wrote Mayer, would be the unit on credit and loans, in which he suggested that students watch videos of popular TV shows to see how personal finance is depicted -- and to dispel myths that are created.
In one episode of "The Simpsons," for example, fourth-grader Bart gets a credit card in his dog's name and charges thousands of dollars worth of purchases. When he can't pay the bill, the only financial consequence for him is that the merchandise is repossessed.
But in Mayer's class, "students would then research the real consequences of such actions to discover that possible penalties include tarnished credit and charges of credit fraud."
The best way to avoid the problems you cite is to engage kids in talking about credit, both at home and at school. A tip of my pen to Lincoln Mayer for coming up with an effective way to get the message across.
Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, DC 20006. Or send the good doctor an e-mail message (and any other questions for this column) to jbodnar@kiplinger.com.