Before they can legally drink or buy a pack of cigarettes, teenagers are exposed to another danger: debt.
Many teens have their own credit card and many more take on thousands of dollars in student loans when they enter college. As a result, some young adults find themselves saddled with crippling levels of debt before they even get their first job.
“Banks love you guys because they think that you’re not going to be smart with your money and that you’re going to take the credit card and rack up all sorts of charges and pay a high interest rate,” Christine Lynch, a lawyer at the Miami office of the Securities and Exchange Commission, the federal agency charged with protecting investors, warned a group of Coral Gables High students on Monday.
Jeri Dresner, another lawyer at the SEC’s Miami office, cautioned the Coral Gables students that credit card companies often set up booths at college orientations and try to entice freshmen with gifts.
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Credit cards make buying easy, but you have to beware of the ease that the credit card affords you.
Jeri Dresner, a lawyer at the SEC’s Miami Regional Office
“Credit cards make buying easy, but you have to beware of the ease that the credit card affords you,” Dresner said. “It’s going to be simple to swipe the card and make the purchase, but the bill comes like clockwork at the end of the month and you have to be able to have the ability to pay that credit card off.”
In an effort to help teens avoid financial pitfalls, the SEC’s Miami office has started teaching South Florida high school students about the risks of credit card debt and red flags that can help them spot scams. The SEC started the presentations in early April and plans to visit at least eight high schools in Miami-Dade and Broward counties.
The message isn’t just about avoiding unscrupulous lenders, however. The SEC also wants teens to recognize the benefits of investing in stocks and saving money from an early age.
“You are in a position to make your money work now like no other time,” Lynch said at Coral Gables High, launching into a presentation on how to choose stocks and bonds and when to start saving for retirement. “This is the time, 18 to 27. The way your money can grow for you if you save at this time, you can’t make up for it later.”
You guys can all become millionaires with a little bit of discipline and starting earlier.
Christine Lynch, a lawyer at the SEC’s Miami Regional Office
“You guys can all become millionaires with a little bit of discipline and starting earlier,” she added.
Lynch explained mutual funds and recommended that if the students do choose to buy individual stocks — an investment that can carry more risk — they pick companies they are familiar with and whose products they use. She and Dresner also offered tips for sticking to a budget, like putting cash in an envelope every month for entertainment and spending only that amount. Then they talked about how to avoid scams and spot Ponzi schemes.
Unlike some older millennials who came of age during the height of the economic recession, the high schoolers aren’t wary of taking out loans or borrowing money, said Lissette Riera, a counselor at Coral Gables High. Instead, she sees the opposite problem.
“I see a spending trend already,” she said, adding that some of her students go to great lengths to pay for an iPhone or fancy clothes. “I see them already going into credit card debt.”
The students said their biggest worry right now is finding a way to pay for college.
“I’m always stressing about if I have enough money for college, if I’ll be in debt. That’s what I’m most afraid of,” said senior Diana Sori.
Although Diana had gotten similar messages about saving money in her economics class, she said it made a difference to hear it directly from the SEC.
“It gave me ideas about how I should start saving and investing,” she said. “My teacher talked about that, but to actually hear it from someone in the government, it gives you insight.”
As for investing, Diana said she plans to follow Lynch’s recommendation and buy stock in companies she’s familiar with. First on her list? Snapchat.