Prepare Your Teens to Avoid Bad Credit
Posted on May 21, 2011
One of the reasons Americans have struggled so much with big debts and credit repair issues is due to the inexperience and lack of education concerning personal finances. In order for the youth of today to avoid credit nightmares tomorrow, they need to learn the basics from a young age.
Getting Help Early
Financial literacy is rarely taught in schools and for most young teens, financial responsibility lessons start at home. Parents of teens need to start educating their children about money management prior to sending them off to college. Waiting too long may mean it is too late to avoid bad credit and negative credit history marks. As teens graduate and move on to college, it is often the first time they are navigating life without mom and dad and are more prone to making credit mistakes.
What To Teach
Basic personal financial lessons can be incorporated into every day life. Starting with allowances and moving up to money management can give a child the foundation they need for staying ahead of the debt game many adults still struggle with later in life.
Here are a few of the basic credit and financial essentials kids need to learn early:
Save and Save More Often
Most Americans do not put enough cash into savings. They struggle to make ends meet and do not place a priority on savings. Teach kids to set aside a percentage of every dollar they receive or earn on their own.
Take Them to the Bank
Help a child to open a bank account to place their savings into on a regular basis. Teach them how to complete a deposit slip and add the deposits and withdrawals to an account register book.
Whether a child has a checking account or a savings account (or both), teach them how to reconcile their checkbooks against the banking statements they receive each month. Many adults still lack this basic skill and as a result spend way too much cash in overdraft fees and returned checks.
Teach Responsible Credit Card Use
While teens can not apply for a credit card on their own until the age of 21, they can be an authorized user on a parent’s account with permission. By maintaining a credit card account with an older teen parents can teach the basics of how credit works, how to read statements, and the importance of paying the balance in full each month. Credit cards are typically the biggest factor in young adults getting into debt and credit problems because kids do not fully understand that credit limits are not a source of income.
Credit Building Skills
As soon as a teen establishes a credit history, it is important they get a lesson in how credit works and why it will be important for the rest of their lives. Teaching an older child about the basics of a credit report, what it means for their financial stability, and how bad marks are earned on a credit report are all important tools every teen and young adult should learn early.
Responsible financial management is key for everyone to learn but the earlier the lessons are being taught, the more likely good habits will be formed. Kids often mimic the way their parents handle money so setting a good example in addition to teaching good credit and good financial management is critical to keeping kids out of debt in their adult lives.
- How to Deal When Your Kids Hurt Your Credit Score
- Credit Repair & Establishing a Credit History Under Age 21
- 7 Non-Credit Things You Need to Do To Repair Your Credit
- Can A Cash-Only Philosophy Help Repair Your Credit?
- How Do You Close Out Credit Card Accounts?