Hey there! It's Talk About Money Tuesday, my favorite day of the week!๐ค
When we think about financial literacy, we often focus on things like budgeting, saving, investing, or credit scores. In this week's newsletter, I'd like to shine the spotlight on an often overlooked money skill: knowing what you're agreeing to when you sign your name.
Opening a bank account, taking out student loans, signing a lease, accepting a job offer, financing a car โ all of these are financial milestones that involve signing documents that create legal and financial obligations.
Young people often sign agreements quickly and digitally (RIP to cursive signatures written with ballpoint pens). They may also sign without fully understanding the terms.
That's why teaching kids and teens to slow down and ask questions when a contract is before them is a powerful extension of financial literacy.
So here's to treating signing as a skill, not just a step. It's not just a formality. It's a commitment that can shape someone's finances for years.
Money Stat
70%
That's the share of consumers who admitted they have signed contracts without knowing what was in them, according to a survey by Adobe. This is a striking statistic since contracts typically include some sort of financial obligation.
If most adults are signing without reading, it's no surprise that they're caught off guard later by pesky fees, penalties, or restrictions. In fact, Adobe found that two-thirds of consumers surveyed said they discovered some unexpected details, and 15% said what they discovered was "horrifying."
When consumers were asked how reading a contract makes them feel, negative emotions โ and emojis โ won the day. Forty-four percent chose ๐ค and nearly one in four chose ๐คข.
All I can say about that is ๐ฎ
Money in the News
โ
The news: Some patients were encouraged to sign up for medical credit cards during appointments without a clear explanation of what they thought was just a simple payment plan. Then later, they got blindsided by high interest rates and hidden fees.
What it means for young people: This article shows them that not all "easy" payment options are risk-free. Credit cards and payment plans can carry hidden terms, which means it's critical for them to learn how to read contracts carefully and ask questions before signing.
Tips for parents & mentors: Review a sample credit card agreement together โ or your own โ with your teen or college student. Look for the interest rate, fees, due dates, and penalties. Show them that the important details are in the fine print.
Also, teach them how to ask questions before signing by practicing simple scripts like, "What happens if I miss a payment?" or "Is there a fee?" Even teaching them to say something as simple as "I don't understand what this paragraph means" can open the door for them to get information that leads to a smart financial decision.
Get in the Zone
โ
โ
Money skill: How to perform a five-point scan of a contract
Why it matters: Young people don't need a law degree to understand agreements, although there are definitely times when having a lawyer review a document is a must. But they do need a simple framework that lets them break a document down into key parts that are easy to understand.
Instead of feeling overwhelmed by language, they can learn to look for patterns and ask smart questions. Soon, reviewing agreements will become less scary and more routine for them.
Try this: Use a cell phone plan or a streaming service agreement to help your teen or college student practice asking five important questions about any document.
1๏ธโฃ What am I agreeing to do?
2๏ธโฃ What does it cost now (and later?)
3๏ธโฃ What happens if I don't pay or if I cancel?
4๏ธโฃ How long am I locked in to this agreement?
5๏ธโฃ How do I get out of this agreement?
This habit helps reduce impulse decisions and gives young people some space to just think before they commit. It also makes them more likely to notice red flags like hidden fees, long commitments, or steep penalties. Before you know it, they'll be experts at recognizing risk before it becomes regret.
The Language of Money
โ
Lots of financial agreements use words that sound complicated, but they're actually not. Understanding documents starts with knowing the meaning of the words linked to agreements that need a signature.
Try reviewing the youth-friendly definitions below with your teen or college student to help them feel more confident about contracts.
๐ Binding: Official, which means you're legally locked in once you sign
๐ Contract: A written promise or agreement between people or companies
๐ฅ Co-signer: Someone who agrees to pay what you owe if you don't
โ ๏ธ Default: When you stop making payments you promised to make
๐ Fine print: The easy-to-miss details in a contract that can cost you money
๐ธ Penalty: Extra money you have to pay for breaking the agreement
๐ Term: The amount of time the agreement lasts
Looking for more youth-friendly personal finance terms to share with kids and teens? โโDownload my Language of Money freebie. โ
Loose Change
โ
๐ A girl asked her dad to sign a document declaring that he loved her. Then she resorted to a bit of forgery to get what she really wanted from him
๐๏ธ A state official approved a $32 million budget request. He said he "probably didn't even thumb through" the document before signing it.
๐งฐ Lowe's asked a man to sign a release form to get a refund for a garage door he bought. He read the fine print and refused to sign.
Thanks for reading! If you know someone who cares about youth financial literacy, share this newsletter with them. And if this newsletter was forwarded to you, please subscribe โhereโ.
'Til next time,
Audrey
โFounder &
Certified Financial Education Instructorโ
The FinLit Zone
โ
โ
600 1st Ave, Ste 330 PMB 92768, Seattle, WA 98104-2246
โUnsubscribe ยท Preferencesโ
โ
โ