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MILWAUKEE--(BUSINESS WIRE)--Unlike their parents, a majority of young Americans say they plan to save for items on their wish list instead of paying with plastic, according to a new poll by financial literacy Web site http://www.themint.org.
In the survey, visitors to the site were asked what they would do if they spotted a great item at the mall that they couldn’t afford. More than half of respondents aged 29 or younger (54 percent) said they would put aside money each month until they had the full amount to buy the item. An even greater majority of kids aged 17 or younger (57 percent) agreed, saying they would save. In comparison, only 42 percent of adults aged 30 and above said they would save in advance.
“Kids today could become the most money smart generation since the 1940s,” said Meridee Maynard, financial literacy expert and senior vice president, Northwestern Mutual. “April is Financial Literacy Month, and like no other time in recent history, kids and parents alike recognize the importance of managing money. We learn money habits during childhood, and in these challenging economic times, kids are learning why saving can be sweeter and safer than paying with plastic.”
History shows that challenging times can affect personal saving behavior. In the early 1940s, during the Great Depression and World War II, the U.S. personal saving rate soared above 25 percent*. From 2005 to early 2008, that rate hovered between zero and one percent, and even became negative for one quarter (Americans spent more than they earned). But in mid-2008, the savings rate spiked, jumping to over three percent by year-end. And in January 2009, the savings rate jumped to five percent, the highest rate in 14 years.**
Kids More Cautious with Credit Cards
The new poll results also indicated that kids are more cautious and measured when it comes to using credit cards. Only seven percent of people aged 29 or younger said they would use a credit card to purchase an item that they couldn’t afford. Of those 17 or younger, six percent indicated they would pay with plastic. In contrast, 13 percent of adults aged 30 and above said they would “charge it” and figure out a way to pay off the debt at a later date.
“If the current generation of young people pays close attention to the downsides of debt, the lessons learned from this recession could provide dividends for a lifetime,” said Maynard. “Low savings rates and high debt helped contribute to the financial challenges we’re seeing today. This financial environment offers engaging opportunities to teach kids about how money works and how to manage it wisely.”
Testing IQ to Avoid the Credit Card Trap
Kids can test their borrowing brainpower by taking the Credit Card IQ quiz on themint.org. Seven questions help to identify their knowledge of credit, and areas for improvement.
Maynard has five credit card tips for parents to share with their children:
1. Pay in full, on time, every month. Always pay off the balance monthly and avoid charging more than you can pay off monthly. Late penalties are costly, and some companies increase the interest rate after one or two payments are overdue.
2. Be aware of rates and fees. Credit card companies often offer low introductory rates to attract new customers. These rates typically last for only a few months and then jump as high as 20 percent. Also be aware of extra fees associated with pre-paid cards, such as activation, maintenance and late fees.
3. Don’t exceed your credit limit. This helps avoid penalties and ensures that you will have credit available in the event of a true emergency.
4. Protect your history. As soon as you start using a card, the payments – whether paid on time, late or not at all – become part of your credit history, which can affect your ability to rent an apartment, get a job, or buy a car or a house. Bad marks stay on a cardholder’s credit record even if the bill is paid later, so make sure to keep it clean.
5. Review your statements. Immediately inform the credit card company of any errors on the monthly statement.
For more information about credit card tips for kids, visit: http://www.themint.org/kids/owing.html.
About Themint.org Poll
From January through March 2009, visitors to the financial literacy Web site themint.org were invited to answer two questions related to investing. A combined total of more than 1,600 respondents nationwide provided insight into their borrowing beliefs. The results were then analyzed based on several demographic factors, including the age, gender and location of respondents.
This poll marks the fifth in an ongoing series of polls by themint.org, with the aim of bringing continued awareness to financial literacy issues. Poll results are archived on the site and can be viewed at http://www.themint.org/polls.
Launched in 1997, themint.org is a collaboration between the Northwestern Mutual Foundation, the charitable arm of Northwestern Mutual, and the National Council on Economic Education (NCEE). The site provides fun activities, games, challenges, quizzes and tests for students and teens, helpful tips for parents, and entertaining programs and lesson plans for teachers to promote financial literacy.
About Northwestern Mutual
The Northwestern Mutual Life Insurance Company – Milwaukee, WI (Northwestern Mutual) has helped clients achieve financial security for more than 150 years. Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment advisor, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investments.
Further information can be found at http://www.northwesternmutual.com.
CONTACT: Jean Towell, (800) 323-7033, firstname.lastname@example.org
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