by Edward Raymond

Created on: February 23, 2007   Last Updated: April 13, 2007

How can young adults avoid the issues of debt? They can learn from the examples of their elders both the good as well as the bad. They could question their relatives and their peers. They could also read the following:

1) Keep income higher than monthly payments. Cell phones, magazine subscriptions, hobbies, clothes shopping, insurance, car payments, and gas are all quick ways to see any cash gained be quickly lost. This can be accomplished by setting a budget and deciding where priorities are. Ask the hard questions. Is it really worth it to go over minutes every month? Is being popular as or more important than buying gas to get to the mall in the first place?

2) Ask parents for a secured credit card. This method provides a hard limit to minimize over spending, provides a 'purchase log' to track monthly spending, and can serve as emergency funds if it is not maxed out. By tracking purchases in the monthly statement, one could identify the top sources of income depletion and take steps to limit their impact in future payments. The statement can also be used to solicit useful strategies from parents or other relatives.

3) Consider a job. If the young person is in high school an after school or weekend job should not be out of the question. Parents can seldom keep up with their own bills in today's economy. Young people who have access to a job can learn a work ethic, begin to contemplate what they want to do after school, and will have the extra spending money that they crave. They will also gain a sense of self accomplishment from being able to earn for themselves.

4) While this ties into the first point, avoid making large purchases that would force more than 30% to be financed. The only purchase that could be worth that much financing is a house that actually can 'gain' value. In financing or buying on credit, interest must be paid unless the bill is paid in full. Dragging out payments while paying interest is self defeating because more is paid than the original purchase price and accumulated debt leads to a depressing state of more accumulation of debt.

5) Invest excess funds. Look into a savings account and liquid certificates of deposit. While both of these instruments do not boast a high interest rate, the ability to keep adding to them and watch them accrue or gain interest will be a financial moral booster. By labeling certificates of deposit (CD's) with the name of the goal it is intended to help purchase, one can keep focussed on seeing the goal through. As the 'car' CD reaches the magic number to be able to make that down payment approaches, the feeling of accomplishment will make the sacrifices to save up seem non-existent.

6) Invest in education. This is one area where parents and children can and should work very close together. Open a CD early and put money into it regularly. As the young person grows into helping with this responsibility, he or she should also be obligated to add to this account whether it be $5, $25, $50, or more a month. This invested savings will substantially help to put off the accumulated debts that college will invariably incur. By having a sizable down payment on the tuition bill, the young person is better able to launch a post college career with little or no financial burden and have a higher earning potential because of the earned (and payed for) degree.

That is the single greatest course right there. Young people have more opportunities now than ever before. Unfortunately, they also have even more levels of status where having the right gadget is equally or more important than having the right clothes or car. Peer pressure is a financial disease in need of the cure of responsible thought.

Learn more about this author, Edward Raymond.
Click here to send this author comments or questions.