The way your teen spends their money says a lot about how they will manage finances as an adult. If your high school or college age child goes through cash as soon as they earn it, you ought to consider teaching them how to better handle their money. Build your kid’s financial confidence now, and they’re bound to enjoy more responsible adult lives in the future.
Add your young adult to your credit card
One way to teach your kid how credit works is to make them an authorized user on your own credit card. Although the Credit Card Act of 2010 made it unlawful for credit companies to actively recruit students on college campuses, young adults are continually inundated with credit card offers, few of which are fair or smart.
Adding your young adult to your own card account may help them build credit quicker than applying for and receiving a card of their own. Sit down each month and look over the statement together. Talk about how long it would take to pay down the bill while making only minimum payments. Explain how making on-time, in full payments will improve their credit profile for the rest of their life.
If you don’t have a credit card that you want to share with your young adult, consider helping them open a bank account with a debit card attached. This will give them a chance to manage money without accruing debt. A secured credit card may accomplish much the same thing, says AARP magazine. The amount they can spend will be the same as the amount they deposit into the card account.
A checking account may seem like an obsolete thing, but the truth is many money-wise folks still send payments on paper. This is actually a good way to start your teen on a path to financial responsibility. Keeping account of expenditures and deposits helps a teen grasp the concept of cash in a tangible way.
Easy does it
Teach your kid not to overuse their card, whether it’s a debit or credit card. Explain how certain purchases are best made with cash or a check. If you yourself have gotten in over your head with credit card debt, set an example of how adults resolve such a sorry situation by consolidating card debt into a manageable monthly payment plan. Read this before having “the talk” and you’ll have plenty of reliable info to impart to your young adult or teenager.
As soon as your kid is old enough to drive, show them how to obtain their credit reports from Experian, TransUnion and Equifax. If they have no credit history, explain how this clean slate may be expanded and built upon by taking small loans and paying them off in a timely fashion.
Every kid deserves a nice home, healthful food, and a good financial education. As a parent, it’s up to you to provide these important things. Make it fun, and send your kind into the world well prepared to be smart with money.
How do you build financial confidence in your kids?