Finances, Debt & Credit: Guiding Your Older Kids
Our children begin learning about money almost as soon as they can talk and point. Much of this initial education begins as they ask us to buy them things (often quite vehemently) during shopping excursions to the grocery store or as they are exposed to the barrage of advertising everywhere. We either acquiesce easily in a moment of exhaustion or steel ourselves and say no with a brief explanation, hoping to have a logical conversation without enduring a temper tantrum along the way. As time passes, we’re able to give more complex answers to our children as to why we are or are not purchasing certain items. Eventually it becomes quite clear that if you want material items, you need money—and you must work for it. Parents are often the sole role models for financial responsibility, shaping some of the most important life skills for young people.
SHOWING THEM THE BASICS
While most of us have experienced the typical ups and downs with credit, being able to pass on the wisdom that comes with experience is an important part of parenting. Your older child may be at the point where they are asking for a credit card. Why? Because all their friends have them, of course! And although you may not be ready to finance a teenager with their own card, as they inch toward complete independence this is a good time to start preparing them for thinking about and developing good credit. Begin with the basics, making sure they know how to balance a checkbook first, develop a budget, and learn what is involved in keeping their eventual credit score in good standing. These skills are all quite simple to understand, but putting them into action in a positive manner and with discipline in real life are another matter altogether.
DISCUSSING PAYMENT, CREDIT REPORTS, SECURITY, AND MORE
Kids may understand that the piece of plastic they see you using to buy everything from gas to gifts is a means to getting what you need and want, but it’s safe to assume they know nothing about paying bills with interest, FICA scores, or how very important it is to be on time and not to over-extend yourself. Explain why paying with cash is often preferable over using credit. Show your kids credit card statements and explain the basic premise of monthly payments, acceptable interest rates, due dates, and late charges.
Discuss why they will want good credit (buying a car is usually the best example) and how that’s built. A great way to hit home with education on credit is (if you are comfortable) to show them how you run a credit report and then read the results. Along with this conversation, discuss security and how to prevent identity theft in terms of being careful with their social security cards and numbers and personal information, along with learning to guard passwords at ATMs and retail outlets.
APPLYING FOR THAT FIRST CREDIT CARD
Visa and MasterCard may not be ready to dole out a credit card to your 18-year-old son or daughter, whether they have already work or not. Often the best place for most to start out is a simple department store credit card with a minimal credit line. Student credit cards are also a great way to get started, again with small credit lines. Secured credit cards can be used too, operating with an initial deposit as collateral in case payments are not made. Co-signing on other cards (and loans) is an option too, but not always a great gamble for the person doing the co-signing.
As your son or daughter makes charges on their new card and then pays on it, keeping it in good standing each month, credit will develop—and best of all, your older child will begin to understand the realities of making money and paying bills.
If you or your children do go on to develop any unfortunate credit-card debt issues that are of concern or if your finances need an overhaul, an experienced attorney from Fitzgerald & Campbell, APLC can review your case and discuss all the available options with you. We are here to help you!
Call us today for a free consultation at (855) 709-5788, or email us at firstname.lastname@example.org.
Posted in: Credit Report