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Teaching teens to safely use money online

Thieves can drain your bank accounts, use your personal information and steal your identity. Though there is no foolproof way to avoid being a victim, there are many precautions you and your teens can take to reduce the risk.

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Teen on the computer
Teach your teens about phishing scams and other ways that their finances can be in danger on the internet.

Warn teens about phishing

With phishing scams, thieves pretend to be financial institutions or other companies and send spam emails or social network messages to get you to reveal your Social Security number, back account numbers, credit card numbers and other personal information. Teens should know that they should never click on links in email or messages. It’s always best to type the URL into the address bar yourself (rather than click a link or copy and paste) to ensure you reach the real website. Dummy or copycat websites with similar web addresses to the real deal are set up to lure you to click and fill in your account number, password and other vitals.

Teach teens about shopping safely

Teens (and everyone else) should follow these simple rules when shopping online to avoid identity theft and card fraud.

To reach a secure site, always type https:// instead of http:// before the URL. Secure websites also have a small lock symbol in the lower right corner of the webpage. Remember to type in the website address yourself instead of clicking on it from any email.

Choose credit over debit: We don’t often suggest using a credit card over a debit card, but you should when shopping online. When shopping with a credit card, your liability for fraudulent charges is a maximum of $50 as long as you report the fraud within 30 or 60 days (depending on the card’s policy). However, when you use a debit card and your account is compromised, the thieves can drain out your account before you even know it. Therefore, it’s best to use a credit card when shopping online and pay it off monthly.

Don’t shop from public computers: Teens should know never to shop from public computers — at work, a library, public cafe or anywhere else. You never know if a keystroke logger or other malware may be infecting the computer. So shop at home and keep your antivirus/antimalware protection updated.

Don’t store personal information: When checking out of a retail site, most give you the option of storing your personal information for future purposes. Don’t do it. If there is a data breach, your information — including credit card number — could be at risk.

Keep cell phones safe

These days, cell phones are just like mini computers. The same precautions you take to keep your money safe online should be used on your smartphone too. Teens should only download apps from the official marketplace or from well-known and reputable sites.

Teens and money management

You also should teach your teens about controlling their own financial destinies. According to a PNC Bank report, the average young adult amasses $45,000 in debt by the age of 29.

“This generation of 20-somethings was raised during an economically-thriving period,” says financial expert Mark Hansen, author of Success 101 for Teens. “Undisciplined spending habits, student and car loans, and a tough job market have stymied their financial growth. Perhaps the worst culprit is financial ignorance, but we can count this as a lesson for future 20-somethings.”

Here are some of Hansen’s suggestions for teens to prepare for a solid financial future.

Save for dreams with the three-envelope method: Use the first envelope for your day-to-day expenses: gas or lunch money. Pause before blowing this money at the movie theater or a fast-food restaurant! The second envelope is for short-term goals, which might be clothing or a new laptop. The third envelope is for long-term goals — such as a car, college or a “future millionaire club” fund.

Set and follow through on goals: First, figure out what your current finances are, and then determine what they will be in the future — one year out, then two years out, then four years later, etc. How will you get to your one- or two-year goal? You need a plan, and most of the time that means either earning more money, spending less or a combination of the two. Finally, you have to stick to your plan for it to work.

Understand interest rates: Interest is a fee paid for using someone else’s money. Simple interest is straightforward: 5 percent accrued in your bank account with $100 yields $5 in interest at the end of the year. Compound interest, however, means ever-increasing amounts. This is crucial to understanding debt you may take on from lenders. Know what you are borrowing, and the terms thereof. Just as your money can work for you in a bank account, money borrowed can work against you if it is not paid back in a timely manner.

More about money and finances

Tips for keeping your retirement plan on track
10 Signs that you may be a victim of identity theft
What’s on your credit report?

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