How To Teach Your Teenager Responsible Credit Usage And Why It’s So Important

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How To Teach Your Teenager Responsible Credit Usage And Why It’s So Important

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The amount of debt young adults get themselves into is at an all time high according to recent studies and the problem is on the rise. They say that adults do not fully understand the consequences of their actions until 25 years of age, which means that teenagers probably need some guidance when it comes to managing their credit and why it is so very important to stay out of debt. Nearly half of all college undergraduates have four or more credit cards, some even have balances maxed out on all of them. Since the transactions they rack up on their cards are not visible like with cash, it is so easy for them to overspend and ruin their credit before their lives have even really started.

Some of this problem may be that they were simply not warned enough of the consequences of such behavior before it was too late. This life lesson is not something you want to skip out on when it comes to your children because their actions now will most likely affect them for the rest of their lives. Good credit rating will allow them to venture out into the world without having to worry about being turned down when they go to buy their first home, a new car and so much more.

So how do you go about teaching them responsibility and warning them of the consequences they will face should they mess up their credit? It’s actually not very difficult and it’s never too early or too late to start. The life lessons you teach them now may not sink in immediately, but they will inevitably stick with them forever. At an early age, help them realize the difference between things that they want and things that they need. The older we get, the hard it gets to tell which is which, especially when we have constant advertising all around us every single time we turn around. When shopping together, show that things we want are not something to be bought on a regular basis with a credit card, but are something to be saved up for. This will teach them the value of money and also show them a responsible way of spending that will go a long way when they switch from paper to plastic. Yes, we need to have toilet paper stocked in the bathroom, but that new pair of shoes can wait until the old ones are too small or warn out. Small things like that will make all the difference later in life.

There will come a time when your teen reaches the big one-eight, and the credit card offers start coming in full force through the mail in pursuit of your naive teen. There will probably be so many to choose from that they might try to apply for several of them and this is the first mistake that most teens make when they begin their credit journey. Every card that they apply for may lower their credit rating. When first starting out, a teen should accept just ONE credit card offer they receive and choose the one that does not have any annual fees. Stress to your child that having multiple credit cards will NOT help them establish credit and that it can actually hurt their credit rating.

There are currently several excellent credit cards for young adults so make sure he or she picks one that they will benefit from. A first time credit card may have a high APR, but this should not make too much of a difference since a young adult should not be carrying a balance on the card unless it is unavoidable. This brings us to the final lesson to teach your teen or young adult about their new found credit card- how to use them responsibly.

A few rules of thumb that are absolutely crucial to your teen’s success in building and keeping good credit are paying balances off in full every month, keeping the balance below 30% of the credit limit at all times, and always making the payment on time and in full every month. These are the three most important rules for your teen to abide by and they will guarantee their success in building a credit score that they can be proud of. There is another thing that will most likely tempt your teen or young adult and might have even tempted you before that is very important to avoid. Most stores like to offer 10% off of your purchase if you apply for their credit card even if you don’t get approved. Warn your child of this tactic and make sure they know that for every store card they apply for, their credit rating takes a major beating. Even though 10% off those summer clothes may seem like a sweet offer, it is not worth ruining their credit over.

I’m sure there is more that you can discuss with your son or daughter about responsible credit usage and more you could explain about why it is so very important, but this article should get you off to a pretty great start. The main thing is to show your concern and interest for helping them learn important credit lessons that will last them a lifetime and by reading this, you have already begun doing just that. Already, you are helping your young adult become one less statistic when it comes to bad credit habits.

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