Tell Them How to Be Wise Credit Consumers
Every year, the average American will receive seven credit card offers. United States consumers use over a billion cards to rack up over a trillion dollars in credit card debt. Your kids are growing up in the age of credit, when knowing how to manage credit card debt is as important as being able to balance a checkbook.
Unfortunately, many kids may not have the skills they need to make good financial choices. Today's college graduates carry credit card debts that are double those of a generation ago. When you're teaching your kids how to handle money, give them a competitive edge with a few pointers about credit management.
Credit reports and credit monitoring
Teach your kids the basics about credit monitoring. Fill out a request for your credit score with their help. Explain the three national credit reporting agencies (TransUnion, Equifax and Experian), and walk them through the information in your credit report.
All about credit scores
Most soon-to-be college students are in the dark about credit scores. Shine a little light on the situation with a clear explanation of how credit scores work. Explain how credit scores will affect their ability to get a mortgage or buy a car. Be sure to mention that credit scores are used by landlords, insurance companies, and even potential employers.
Credit mistakes are teaching moments
You set the example for how your kids will deal with credit card debt. If you're struggling with your own credit management issues, work with a financial advisor to resolve your credit problems. This process is valuable for your kids to see because you can show them how to deal with less-than-ideal credit situations — a lesson they can certainly use.
Evaluating credit offers
Credit card companies love college campuses. Where else can they market to crowds of kids away from home for the first time? A typical college freshman gets tons of credit card offers. Before your kids pack up for school, you need to teach them how to evaluate credit card offers. Explain interest rates, finance charges, late payment fees, and annual fees. The most important thing you can teach them is simple: Read the fine print.
The care and feeding of a credit card
Cover the nuts-and-bolts of managing a credit card. Kids can be guilty of thinking that a credit card is free money. Make sure they understand that how they use their credit cards today will affect them for a long, long time in their future life. Show them how the interest rate factors into payment. Also cover minimum balance payments, credit card safety, and repayment plans.
Once your kids begin the college years, they'll have to face managing credit cards sooner or later. You can make a difference in your children's future lives by teaching them to be wise credit consumers. Give your children the basics of good credit management today. They'll thank you for it... eventually.
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