- The Washington Times - Tuesday, February 27, 2001

Today's teens are a growing force that marketers are targeting, but parents can educate their children on spending habits.

Ric Edelman of Fairfax, a fee-based financial planner, author, lecturer and radio personality, says parents need to teach their children four basics:

• Taxes.

Teens need to understand the economic realities of life including that they don't get to keep 100 percent of what they earn.

• Spending.

They need to understand the nature of credit and debt, how credit cards and loans work and their relationship to effective personal finances.

• Saving.

Parents need to explain the importance of long-term savings and retirement savings and why it's critical to begin saving for retirement via their company's retirement plan.

"It's critical that they learn the power of compound interest to demonstrate that a very small amount of savings today is more important than a large amount later," Mr. Edelman says.

• Giving.

Teens need to learn the importance of charitable contributions to help others.

The two biggest impressions made on teens are any hands-on project and how money grows, says Janet Bodnar, executive editor at Kiplinger's Personal Finance magazine, a syndicated columnist and author.

A lot of schools play a stock-market game, which lasts about 10 weeks.

"It does seem that kids who play the game learn about the stock market, and that leads them to learn about other finances, too," she says.

Ms. Bodnar says Kiplinger's Web site has calculators that show how much money teens can have in the future if they put away small amounts of money now.

Understanding how long it takes to pay off credit-card debt is critical for teens, she says.

For example, a $1,000 credit-card debt at 14 percent interest would take 159 months to pay if the teen made just the minimum 2 percent payment each month. The interest on the $1,000 debt would be $955, according to Familymoney.com, a Web site created by the publishers of Better Homes and Gardens.

"We are interested in youth because we are finding that too many high school seniors are graduating not understanding the basic principles of earning, saving, spending and investing," says Don Blandin, president of the nonprofit American Savings Education Council in the District. "They can't balance a checkbook; they don't understand compound interest. They are likely to sign financial documents without a clue of what they are getting themselves into."

Mr. Blandin offers these suggestions for parents:

• Be willing and able to discuss family finances. Children should know what the household budget is, where the money is coming from and where it's going. They should understand the difference between needs and wants.

• Children need to know there are two ways of making money. The first is by working, and the second is by saving, investing and having the money grow through compound interest.

"Unfortunately, we have a lot of people in the lower end who never participate in the second pillar," Mr. Blandin says.

What if a parent is not a good money manager and is mired in debt? Can that parent teach his or her children about handling money?

"For you, that should be a wake-up call," Ms. Bodnar says. "Maybe I need to get my own finances in order and then I can honestly say to them, 'Kids this is the way you should do it.' "

She suggests that parents should set up an automatic savings plan or an IRA.

Mr. Edelman says, "If you are not walking the walk, send your children to those who are. There are lots of educational materials available to teach children how to handle money."

Mr. Blandin recommends visiting all the free financial education Web sites and the public library. His organization has a plethora of free materials, he adds.

Financial concepts should be taught in the classroom, adds Mr. Blandin, who is on the board of the JumpStart Coalition for Personal Financial Literacy.

This District-based nonprofit membership organization conducted a nationwide written survey in April 2000 of 12th-graders' knowledge of financial basics and found it had decreased from the 1997 survey results.

"Now only 10 percent of the students receive any personal financial information at all," says Dara Duguay, executive director. The reason for the decline, she says, is that the classes offered in school are electives.

"Don't assume your kids are going to learn this in school. You are the primary teacher," says Ms. Duguay, who encourages parents to go to the Web site (www.jumpstartcoalition.org) and order the materials. "We have a huge clearinghouse of materials over 250 curriculum materials."

The organization's Web site is searchable by grade.

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