Credit card debt and young people

Young people and credit cards can be a dangerous combination. The ability to buy the latest clothes, mobile telephones and other perceived peer group essentials, can lead, in a lot of cases, to credit cards becoming maxed out quickly. Where several cards are being used, some being store cards, and only the minimum monthly payment being made, the seeds of a financial disaster are already growing and well on the way to causing big trouble. And this can be further complicated if one card is being used to fund a payment on another.

It is easy to take money for granted - we handle it everyday - but not everyone fully understand how it works, and how the payment of interest for monies borrowed, can so easily scramble one's finances.

Not all young people overspend on their credit cards, but many do, and parents often want to help adult children with debt. Initially you should sit down and discuss the problem with them, list out all the card debts - how much is owed and at what interest rates - and then talk budgeting with them. It is essential to get across the need to spend no more than is being earned and to stop using the cards, at least for the time being. And wherever possible, prune out the store cards, as they tend to have the highest interest rates.

Personally, I think it is better for young adults to get themselves out of debt rather than have a parent bail them out. Why? Because the chances are that if young people understand the value of money and how hard it is to work for what you want, they'll appreciate the need for financial prudence in the future and be less financially reckless. No pain no gain, as they say.

If you want to give help repaying debt for your children, then help them get organised and budgeted. Read our page on credit and store cards and whatever action you get them to take, review their situation regularly. Every week I would suggest.