Why Your Teen Needs to Find out about Credit Now – Credit Sesame

Financial education must start at a young age. Don’t wait until your son or daughter is ready to go away to school to teach basic principles of debt, money management and credit. He should curently have a strong grasp on those concepts before he packs his bags. And by all means, don’t let your teen head off to college having a charge card in hand, not knowing how to handle it. Your teen needs to find out about credit now.

We all have to know about good credit

A great credit rating is, within this country, the main strategies by which we achieve certain financial goals. You don’t have to depend on your credit rating for major purchases, however the only other choice is in order to save up and pay cash. Although it is feasible to purchase a home that way, most of us would rather get in 30 years previously borrowed money.

The distinction between a great credit rating along with a poor or average credit score are visible in the money that’s in your wallet. You might be able to buy a car with a credit score of 620, however the rate of interest you pay will be through the roof compared to the rate provided to the client whose score is 790. For those with poor or average credit, financing is just more costly. They pay more – in monthly payments and overall cost – for the privilege of using other peoples’ money to buy what they need.

Why teens may not know

Your child probably learned basic math skills in elementary school, like how you can count her change after making a purchase. Later, though, attention shifted to shapes and algebraic formulas. Typical American education includes little about our credit scores and credit histories, although those items have critical importance to us all whenever we become adults. It’s as much as parents to help teens learn.

Why your child needs to know

Understanding how charge cards work will help your son or daughter steer clear of the trap of credit card.

Understanding credit, in general, will open the door to higher interest rates and approved applications for giant ticket items when the time is appropriate.

Understanding how to monitor his credit could help your teen avoid becoming the victim of fraud.

What to teach your teen

With a firm grasp on a few basics, your child will be well on her method to responsible financial management, an outstanding credit rating and great financing opportunities. The main topics you need to address are:

• What is really a credit score?
• How does credit affect me?
• How do I keep tabs on my credit?
• How do I protect my credit?

Teaching your child about credit

• Explain that credit means debt. Debt means money that you will owe someone before you repay it.
• Help your son or daughter learn how to save for what she would like, especially big ticket items like mobile phones or iPods
• Help your son or daughter set a typical for automatic saving, like one-third of his allowance or 1 / 2 of all birthday gifts
• Go slowly, but at some point introduce the ways to build a great credit score, like using a credit card sparingly and paying it off each month. Begin with a secured card within the child’s name, using his or her own savings to secure the credit card.
• Explain the right and wrong causes of using charge cards. Right = convenience; wrong = to purchase something you can’t afford.
• Explain the cost of interest at different rates, and also the benefits and drawbacks of paying an annual fee
• Help your son or daughter learn to monitor his credit
• Don’t co-sign. Enable your child build credit the old fashioned way.
• Don’t bail your child. If she's into a financial jam, help her look for free or low-cost the help of the National Foundation for Consumer credit counseling or the Consumer Credit Counseling Service.

Click for tips from the Institute of Consumer Financial Education.

The bottom line is the more your son or daughter understands about credit, the much more likely she’ll become a grownup who is able to maintain excellent financial health. The earlier you begin teaching, the more your son or daughter will internalize the concepts, and also the stronger the foundation of data is going to be.

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