Come the last stage of adolescence, trial independence (ages 18-23), young people become credit worthy - at least in the eyes of banks, credit card companies, and merchants who see the potential for unsupervised spending in these attractive young customers.
Through the mail, through the media, at the counter, or on the college campus mall, these vendors approach this virgin market with offers most young people find hard to refuse. We live in a credit-spending system of our own creation that trains people to live on imaginary money - spending funds they don't actually have.
Most parents have grown up in an economy in which credit has only become simpler to get, trickier to understand, and harder to pay back over the years. Thus they have a lot of personal experience to share with their unsuspecting son or daughter about how easy it is to get into debt and hard it can be to get out.
Parents should explain how the age-old principle of usury still applies: "time is money." The more time that lapses between the borrowing (the loan or credit) and the paying back, the more expensive that borrowing becomes as more interest is charged for the lending.
Because of interest, credit can significantly increase the cost of what you buy (even doubling the cost of a car, for example.) It also increases the young person's cost of living when payments start becoming due.
Some parents can even remember when paying cash was the way to go, putting by money in envelopes for categories of anticipated expenses ahead. Or, if charging expenses, not accumulating debt but paying obligations off in timely way in order to avoid interest, building up a good credit rating in the process. Times change.
When young people start college, somewhere in that freshman orientation period will be the opportunity for credit card companies, banks, and even the college (by affinity) to promote special deals and rewards to get these fresh-faced consumers tied into the credit card system as quickly and firmly as possible.
In a cash economy the spending question is how much can you afford now; in the credit economy the spending question is how much can you afford to put off until later. It is much easier to keep track of current spending than it is to keep in mind the mounting obligations that are being deferred.
In trial independence young people are invited to join the culture of consumer debt in a host of seductive ways. Easy credit causes most young people to start living beyond their means. Gifts, free offers, discounts, delayed payment schedules, and token rewards are used by all manner of retailers entice them in.
Since most young people do not get educated about how to manage spending in an easy credit system before departing their parents care, many must learn these lessons after the painful fact of charging their way into unmanageable debt. Now they discover how late payments can be costly, and nonpayment can be most costly of all, particularly when pursuit by creditors begins.
After the fact, many young people in the last stage of adolescence discover six harsh realities of credit card living.
1)If you charge now, you contract to pay later.
2)If you contract to pay later you will increase your cost of living.
3)If you pay too late, you will pay interest (and even a late fee.)
4)If you only pay interest, you will never pay off the charges.
5)If you keep charging, the interest obligation will continue to grow.
6)If you don't pay the interest, the credit card companies will proceed against you.
Young people discover how credit card companies can unilaterally affect their credit rating, raise their interest rates, lower their credit limits, and assess special fees whenever they want. For parents, helping their son or daughter get financially reorganized may involve arranging refinancing, consolidating debt, and negotiating repayment.
"What we wanted him to understand when he came home, " explained the parent, "was how it's easy to get behind, how there is an obligation to repay, and how not to get in this credit fix again. Coming home didn't mean we were going to shelter him from his obligations or provide financial rescue. Just a safe place from which he could get a job and start to repay what he owed. He had bought into a two-year health club membership he couldn't keep up, so one of the first things we did with him was to negotiate an end to that."
One way for parents to explain the challenge of easy credit to their son or daughter is as the management imaginary money. Years ago, a gifted salesman captured the essence of the easy credit message with this well-crafted advertisement: "It doesn't cost money, just a little bit a month." The power of that slogan, like many others in the marketplace, was to emphasize how easy purchasing was, because you didn't need money to buy, only credit charges, which will be easy to pay off afterwards.
By such persuasion that pervades our culture, young people are encouraged to commit two errors of believing in imaginary money: to imagine living beyond their means is okay, and then to imagine how easy repayment will be.
In the extreme they can get into something-for-nothing thinking, treating credit as "free" money, at least at in the impulsive moment, which is where many last stage adolescents still focus their attention when their need for immediate gratification rules.
Another name for this act of imagination that easy credit inspires is wishful thinking or denial -- wanting to believe what isn't so. Hence, when it comes to credit, parents really need to offer that timeworn, but valuable piece of advice: "Don't believe everything that you think." Or put another way; "Think about what you choose to believe (and what others want you to believe.)"
They need to encourage realistic thinking by explaining how credit really works, the temptations it offers, and the traps it can set. Sometimes, parents will train their adolescent while in high school to believe in the magic of plastic by giving the young person one of their credit cards to use for routine expenses like car gas, eating out, entertainment, shopping, school and personal health expenses. The magic the young person learns is that the card can be swiped for purchases without the charges becoming evident because the bill goes to the parents, which they pay, thus contributing to the illusion that credit cards provide free money.
As for the young person who becomes debt ridden and appeals to parents for relief, for experience to instruct they should not discharge the young person's obligations.
In most cases I have seen, excessive credit indebtedness during trial independence arises from short-term thinking. The young person only considers the immediate benefits of borrowing, not the burden that comes with having to pay it back, or the problems nonpayment can cause.
So the job of parents is to help the young person understand the whole story of easy credit, from what feels like free money up front to the expensive obligation that follows -- a bad bargain made when short term pleasure results in long term pressure.
Thus one parent advised her twenty-two-year-old: "Be careful how much you mortgage your future to pay for your present. Doing without now, even though it means not keeping up with high spending friends, can save you from a lot of grief later on."
Next week's entry: Adolescence and parental influence.