It’s no secret that today’s young generations have money issues. The root cause is not because they are irresponsible but rather because they lack a stable education system that produces real-life guides on how to manage their credit. We have created easy to follow steps in which you, as a parent, can help your kids build excellent credit using student cards.
Perhaps you are wondering about the importance of this task. Well, from lower interest rates to secured loans, there are many benefits that come with having good credit. Always keep in mind that lenders rarely give loans to people with low FICO scores, so if you want to secure your kid’s future, help them build their score. Also, keep in mind that they might face career setbacks, rejection by property management companies, and so on if they have a poor score.
If you are a parent with a grown-up kid or someone joining college soon, take it upon yourself to teach them about credit. This will not only help them, but it will help you as well in the long run. If you don’t know how to do this, here are the steps and tips on how to get started.
Get Rid Of Financial Taboos
Forget the old notion that you should not talk about money with your kids and start early. If anything, this is the right time to start talking about the basics of money. Start small and consider introducing more complex subjects such as investing, stocks, and credit cards as they grow older.
Financial advisors insist that teaching your kids topics about overspending, irresponsible credit use, and other credit pitfalls as early as possible is important. This will help them grow up with the right mindset and attitude about using credit cards responsibly.
Always Teach Your Kids Money Basics
Get into the habit of talking to your kids about the importance of having a good credit score and always live by example. This will give your kids a great foundation for sound money management. To help you, there are also free to low-cost financial resources to make use of, such as Mint.
You probably know you know your kids’ personality traits better than anyone else, so let this be the guide to help you teach them. While some kids are born natural savers, others are more inclined to spending and shopping. As such, pay attention to their traits and teach them accordingly.
Teach Them Credit Cards Basics
Being an irresponsible credit card user is as bad of a habit as any other; it is a behavior that will eat you up and leave you in debt. Of course, you would never want to find any of your kids in this position. Before you add your kids as authorized users or even help them open up their own credit card accounts, be sure to take them through the fine print explaining every detail as clearly as you can.
Even if it means going line by line, be sure to do it. This will prepare them mentally and help them understand what they are getting into.
Teach Them The Building Blocks Of Credit
With this, you might consider getting your credit report and take your kids through each module, step by step as you explain where you are performing well and where you need improvement. Then, compare the two different scoring modules, VantageScore 3.0 and the FICO score. Break down how each system works and teach your kids how they can maintain healthy scores.
Give Them Real Life Examples Of Consequences
If you have personally had your fair share of bad credit, share your experience with your kids. Though it might be embarrassing to open up to your kids about how you once went bankrupt because of your bad choices, it will help your kids in the future. However, as you do so, accompany it with words of encouragement and advice.
It’s never too early to start talking about credit cards or help your kids build good credit. It’s your responsibility, after all, to educate your kids on all matters of finances. This might be a tough subject, but starting slowly with natural topics can make your work a whole lot easier.