Early childhood should be the time to start financial education. Don’t put off teaching your child the fundamentals of debt, money management, and credit until they are old enough to leave for college. Before he packs his baggage, he ought to be well aware of those ideas. And by all means, do not allow your teen to enter college with a credit card in hand and without teaching them how to use it responsibly. You must teach your teen about credit right away.
We should all be familiar with good credit.
In this country, having a high credit score is the key to achieving specific financial objectives. The only alternative to depending on your credit score for large purchases is to save up and pay cash. Although it could be possible to purchase a home in this manner, the majority of us would prefer to do it 30 years sooner and with borrowed funds.
The amount of money in your pocket can show the difference between a good credit score and a bad or ordinary credit score. With a credit score of 620, you might be able to purchase a car, but the interest rate you pay would be astronomically higher than the rate provided to the consumer with a score of 790. Financing is just more expensive for folks with bad or ordinary credit. They pay more for the right to use other people’s money to acquire what they need, both in terms of monthly payments and total cost.
Why teenagers could be ignorant
In elementary school, your child presumably learned fundamental math concepts like how to add up her change after making a purchase. Later, though, the focus switched to algebraic formulas and shapes. Although our credit scores and credit histories are crucial to us all as adults, they are rarely covered in the typical American schooling. Parents must assist teenagers in learning.
Why your teen should be aware
Your child will be better able to avoid the snare of revolving debt if they comprehend how credit cards operate.
When the moment is perfect, understanding credit in general will help you get better interest rates and have your applications for expensive things granted.
Your teen might avoid falling prey to scam if you teach him how to monitor his credit.
How to raise a teenager
Your kid will be well on her way to responsible money management, an excellent credit score, and excellent financing opportunities with a solid understanding of a few fundamental concepts. The key subjects you must cover are:
- A credit score: what is it?
- What impact does credit have on me?
- How can I monitor my credit?
- How can I safeguard my credit?
Your teen learning about credit
- Describe how credit equates to debt. Debt is the amount of money you will owe someone until it is paid off.
- Encourage your child to learn how to save money for her wants, particularly expensive stuff like cell phones or iPods.
Set an example for your child to automatically save, such as one-third of his allowance or 50% of his birthday presents.
- Go carefully, but eventually bring up the concepts of using a credit card sparingly and paying it off each month as ways to raise your credit score. Start with a child-named secured card that is secured with funds from the child’s personal savings.
- Identify the proper and improper uses of credit cards. Convenience is the right; purchasing something you cannot afford is the wrong.
- Describe the costs of interest at various rates and the advantages and
- Disadvantages of paying an annual charge.
- Educate your child about credit monitoring.
Not co-signing. Allow your youngster to establish credit the traditional manner.
- Don’t save your kid. If she runs into financial difficulties, support her in contacting the Consumer Credit Counseling Service or the National Foundation for Credit Counseling for free or low-cost assistance.