Teaching your child about credit early on is crucial for the future of their credit history.
California (OPENPRESS) January 18, 2012 - Learning how to use credit responsibly is something that experts in raising children all agree should happen and should be hands on. There is a window of opportunity that comes before your children leave home, and parents must take advantage of it.
Your children will be bombarded with pre-approved credit offers when they go off to college, and they can find themselves in serious trouble if they are unaware how to handle it. It is important to empower children to make the right choices when they are on their own. Here are some tips to help you do just that.
• Before you introduce the concept of credit cards to your child, first introduce them to basic banking concepts and how to manage their money with savings and checking accounts. Credit cards should be regarded as secondary tools to assist with money management.
• Ask yourself if your teen is ready for a credit card. Can he manage his own money? Is he responsible with it?
• Make sure your child understands the ups and downs of having and using a credit card. Discuss late payments, debt, interest and the impact of a credit report. Teach your child that future housing prospects, insurance premiums and job offers will be affected by his credit standing.
• Look at the types of credit cards available, as well as your child's readiness, and determine which card would work best. You can have your child added to your credit card as an authorized user, get him a card with a lower limit, or get him a prepaid card.
• You will want to establish guidelines early on as to use of any card you give your child. Determine what purchases will be allowed, and what qualifies as an "emergency."
• Work with your child to help him understand that the bill should be paid in full each month, explaining the effect that minimum payments and interest will have on his bill.
• Make sure you have access to your child's card so that you can monitor not only the use of it but the payments made as well. Allow for small mistakes, but help your child to learn from those mistakes.
