Regardless of your family’s socioeconomic status or the current balance in your checking account, the recent (and continual) national and global financial instability can be unsettling, at best. At worst, it has been a life-changer for many families, leading to increased multi-generational living situations and even homelessness. Many financial analysts point to widespread personal indebtedness and over-extended finances as a major factor in what triggered the housing bust and which led to other economic tragedies.
Regardless of your financial situation or your past mistakes, your teen needs your direction in this increasingly unstable and confusing world of money. Before we look at some keys to financial stability, we’ll look at some common traps you’ll want to teach your teen to avoid.
The Price of Indebtedness
Like candy waved in front of the faces of greedy children, the offer of a loan — especially for zero down — can be attractive to young people ready to make their debut into the world. That’s why teens need to be instructed about the nature of a loan and perhaps given real-life “story problems” in which the power of compound interest is levied against them.
I’m sure I’m not the only one with friends who are paying hundreds of dollars in interest each month on educational loans taken out for degrees they earned over a decade ago and which they aren’t even presently using. Some end up working second or third jobs, rarely seeing their spouses or children, just to keep up with minimum payments. The effects of debt can be crippling.
Motivation of Lenders
Lenders are in business to make money: Their goal is not to loan money at no cost, but to charge interest. That’s why they’ll often offer higher limits on credit cards than the customer knows can be repaid — the very issue that contributed to so many homeowners defaulting on their mortgages.
Even though we’re not talking about a mobster that will come after you, threatening to break your arm if you don’t pay up, Proverbs 22:7 still rings true: “The rich ruleth over the poor, and the borrower is servant to the lender.” Financial freedom is certainly preferable to servitude.
Appealing to those whose greed eclipses their good judgment, all kinds of scams claim money of those who want to believe the promise of easy money. From pyramid schemes to casinos, lotteries, and sweepstakes, the hope of making money by doing little-to-no work is embedded in the heart of greed.
Sure, sometimes people do make out in such situations, but as a general rule, wealth is the result of slow-but-steady hard work and wise financial choices (Proverbs 10:4). Often, those whose main goal is to accrue wealth can be tempted with worse than unwise choices: They can be easily tempted to steal and otherwise cheat others when opportunities arise (Proverbs 28:20).
Avoiding unnecessary loans or scams is only part of the picture. In Part 2 of this series, we’ll look at ways to establish responsible financial habits.